Feb 272011
 
Car Lease Payment

Car Lease Payment

The advertised Car Lease Payment is not always what it appears to be. Every month, Monthly Car Lease ranks the Top-25 Car Lease specials.  These rankings are based on a ratio called, LVR or Lease Value Ratio. The LVR tells us how much car we’re getting for our monthly car lease payment. But, the advertised payment alone, might not be enough to give us the true picture of how good of a lease deal we got from our dealer. Unfortunately, those advertised monthly car lease payments you read online or in your local newspaper don’t always mention added on costs.

What does Your Car Lease Payment Really Mean?

Don’t be fooled by the Advertised Print

Most car lease payments under $200 most certainly include a down payment and in some cases, an acquisition fee. The down payment reduces the capitalized cost and is therefore usually called, a Cap Reduction. By listing the cap reduction on the bottom of the add, in fine print, any dealer or car maker can make a loan or lease payment look really attractive. But, the reality is, the money you pay up front needs to be considered as part of your total costs. To get your actual or real monthly payment, you need to figure in all of the upfront costs and divide by the number of months of your Lease Term.

Average Payment is What Counts

Monthly Car Lease adds the down payment to the total cost of lease payments and divides that result by the term of the lease. So, if a car leases for $200 a month for 36 months with $2,000 down, the total cost of the lease is $9,200 ($200 x 36) + $2,000 = $9,200. From there, we take the total cost divided by the lease term: $9,200 / 36 = $255.55. One important thing to look for and ask: Does the $2,000 include your first month payment of $200?  If so, then you can deduct the $200 from the down payment since you will be making that payment as part of your 24/36/48 month Lease Term.  Other questions to ask: Are there any other fees involved? Security Deposits? Acquisition Fees? Most car leases these days do not require deposits anymore. On some of the more expensive Luxury Car Leases like BMW, Audi and Mercedes you might see an additional acquisition fee.  Though some of these costs are refundable, it’s important to realize that you’re still out the money you forked over for 2-4 years. To me, down payments and extra fees defeat the purpose of a car lease which is to preserve monthly cash flow and keep as much disposable money in your bank accounts as you possibly can. Average Monthly Car Payment is the most important figure in determining your Lease Deal.

Simplify the Lease Payment Calculation

Put No Money Down

As I’ve mentioned numerous times, there is never really any reason to make a down payment on a lease. Usually, you can expect the down payment to reduce the cost of your monthly payment by only the total amount divided by the number of months of your term. Interest does not play much of a factor with cap reductions on a lease, so a down payment serves very little purpose other than to perhaps give you a psychological edge in feeling better about your monthly payment commitment. Either way, you’re going to pay for it, so why not keep as much of your cash as you can and pay it out slowly over the term of the car lease?  February Car Lease Specials has quite a few reasonable lease deals with no advertised monthly lease specials at all; especially from Honda and Acura. This certainly makes it easy to see the real value of your car lease payment.

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