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It’s beneficial to be armed with information that’s unique to a new vehicle lease before making a decision. This article discusses what’s involved in leasing a new car or truck. Instead of making comparisons to buying a new vehicle versus leasing a new vehicle, this article will examine the unique features of a lease and how to get the best deal possible.

The Residual Value and a New Vehicle Lease

The residual value is basically an estimate of what the vehicle will be worth at the end of the lease terms. The manufacturers suggested retail price (MSRP} and the residual value both have an affect on the total monthly payments. Naturally a lower MSRP will result in lower monthly payments. A higher residual value will also help to lower the monthly payments.

Higher Residual Values Equals Lower Monthly Payments

When shopping a new vehicle lease, don’t just focus striclty on the MSRP. A vehicle that has a higher residual value will result in lower monthly payments. To illustrate, the following example shows a vehicle with an MSRP of $29,000. Everything else being equal, we’ll examine the affects of two different residual values.

  • MSRP $29,000
  • Sales Tax 8.75%
  • Title and Registration $435
  • Lease Terms: 36 months
  • Money Factor: .003
  • Miles per Year: 15,000
  • Acquisition Fee: $500
  • Security Deposit $600
  • Total Loan: $$30,295

Residual of $17,000 = $555.91 in monthly payments

Residual of $14,000 = $636.75 in monthly payments

The above example shows a difference of $81 in monthly payments between a $17,000 residual value and a vehicle with a $14,000 residual value. At the end of the lease terms, that’s a total of $3,054.24 more. It’s important that if the lessee plans on purchasing the vehicle at the end of the lease terms that the purchase price is the actual residual value.

Mileage Limits and a New Vehicle Lease

Besides residual value, the predetermined mileage limits will also have an affect on the monthly payments. The higher the mileage limit, the higher the monthly payment. If the lessee goes over the mileage limit at the end of the lease, they will have to pay an extra per mileage fee. Generally the fee paid at the end of the lease is much higher than factoring the mileage into the lease terms.

Just like purchasing a new vehicle, a rebate, down payment or trade-in value will help to lower the monthly lease payments. Credit scores will also have an affect on the monthly payments. The money factor that’s used to calculate lease payments is based on current interest rates as well as a lessee’s credit history.

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