Quote:
Originally Posted by LeaseCompare
Lease Payment Calculation Formula:
(Cap Cost – Residual Value) / Term = Depreciation
(Cap Cost + Residual Value) X Base Rate = Interest
Depreciation + Interest = Base Monthly Payment
Terms Used in Lease Formula:
CAP COST = Vehicle Purchase Price (amount financed)
RESIDUAL VALUE = MSRP (window sticker) X Residual %
TERM = Length of Lease in Months (3 years = 36 months)
BASE RATE = Dealer’s Buy Rate (dealer can mark this up for profit)
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Thank you for posting that very useful information! I hope you won't be offended if I ask you a basic question, namely, why is the interest calculated based on the cap cost PLUS the residual value?
I thought that the leasor should be paying interest on the cap cost only since the leasor is borrowing the cost of the car (ie., the cap cost). To include the cap cost and the residual value seems like double-counting.