Type Formula Lease For Free

helping my sister a value at an auto lease and I thought I would share what we learned about that because the lease calculations are interesting so if repaired this spreadsheet which you can download at the website and as usual inputs are in yellow that means you can change all those and get the right answer the point of this spreadsheet is if you're considering the lease I want it to be able to compute or verify the monthly payment on the lease so that's right here and are my hypothetical example it all boils down to a monthly payment and of course the dealerships or traditionally dealerships will emphasize the monthly payment but we want to know how that's derived because we want to know the price we're paying for the car we want to know the interest rate that we're paying on the lease all of that can be understood it's we're typically not enough just to negotiate a monthly payment because sometimes we don't know what the drivers of that are okay so we start with the MSRP manufactured subjected retail price so I've just got a hypothetical in here of 32,000 and then a lease term typically there's different different ways to go different programs we have 36 months or I've got a 48 month assumption in here now here's a piece we need we need to evaluate the lease we need to know the residual we can know it in percentage terms or dollars terms because we could figure it out with one of the other I've just got an assumption of 50% residual and so you can see that 50% multiplied by the 32,000 gives us the $16,000 residual why does that matter for two reasons the residual under the lease is what we have what we could buy the car for at the end of the lease term we have an option so we have the option but not the up we have the right but not the obligation to purchase this car at the end of 48 months for $16,000 so the residual is a market estimate of the resale value of the car and the future some cars would have greater resale value in the future so you can see if we're thinking about buying this car at the end of the lease we want the lowest residual possible except for the second reason which is that our lease pays for the depreciation so the lower the residual the more were paying and depreciation or for the depreciation component of the lease so if we don't want to buy the car we really want the highest residual possible but we definitely want to know the residual now here's the most negotiated item what's called capitalized cost don't be thrown it's just the price of the car I know we're not buying it releasing it but it's still the price that we're paying and in finance we know we always want to know the price that we're paying for something we cannot be cut we cannot just rely on the monthly payment because we without knowing about the price we're paying so the capitalized cost also called the cap cost is the negotiated price and we typically unless that cars really in a man we want that the cap cost to be lower than the MSRP and as close as...