Archive for the ‘Down Payment’ Category

How Does the Down Payment Change the Monthly Car Lease Payment?

Wednesday, August 31st, 2011

To understand how your down payment affects your monthly car lease payment, you first need to familiarize yourself with the different components that make up your down payment. Many people falsely assume that the total sum of money that they pay during the signing of the lease is used towards reducing the monthly car lease payment. This is far from true.

The portion of your down payment that is used toward the reduction of your monthly payment is called the cap reduction or capitalized cost reduction. So when one asks how the down payment changes his/her monthly car lease payment, it is essentially the cap reduction that is causing the change in his/her monthly car lease payment. The higher the cap reduction, the lower your monthly lease payment will be.

If you observe the section of your car lease agreement that provides a break down of the different fees that make up your “total amount due at lease signing,” you will find that the cap reduction is just one of multiple different fees. Some of the other fees include the first month payment, title fees, registration fees, and document preparation fees. I have scanned a sample section of this lease agreement for you to observe. Here, we see that the total due at signing was $1500 and the capitalized cost reduction was a total of $823.61. Again, this means that $823.61 went toward reducing the selling price of the car, which lead to a lower monthly car lease payment.
total amount due at lease signing

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What Are People Who Lease a Car Paying For?

Saturday, June 5th, 2010

Many people who are interested in leasing a car often wonder what exactly they would be paying for every month if they were to lease a car. When you lease a car, the bulk of your monthly payment comes from the difference between the car’s selling price and its residual value. This is known as the vehicle’s depreciation. The other two smaller components of your lease payment include the finance charge and sales tax.

To sum up, you are paying for 3 things that make up your payment every month:

  1. Depreciation Fee
  2. Finance Fee
  3. Sales Tax

You can learn more about monthly car lease payments or calculating car lease payments by visiting the links found under “Car Lease Guide.”