car lease interest calculation

[mr_chin]

For anyone experienced in car lease, how do they calculate the interest in a car lease? Say a 2.9% APR, is that 2.9% of the MSRP (sale price, down payment, tax, and residual value) or 2.9% of the amount you're leasing/amortizing?

Doesn't make sense if it's the MSRP since you're not actually borrowing the down payment, tax and residual value.

Anyone know?

[inv4zn]

You answered your own question - it's whatever you borrow.

Final price of car - down payment/deductions = amount financed.

Let Amount Financed = P, total amount = I.

I = P(1+r/n)^nt, where r = interest rate, t = number of years, and n = # of interest calculations.

If you downpay 3000 on a 25000 car, interest over 5 years at 2.9% APR would be:

22000(1+0.029/1)^1*5 = 25380.46; and your total interest over the term of financing is $3380.46.

[mr_chin]

Originally Posted by inv4zn

You answered your own question - it's whatever you borrow.

Final price of car - down payment/deductions = amount financed.

Let Amount Financed = P, total amount = I.

I = P(1+r/n)^nt, where r = interest rate, t = number of years, and n = # of interest calculations.

If you downpay 3000 on a 25000 car, interest over 5 years at 2.9% APR would be:

22000(1+0.029/1)^1*5 = 25380.46; and your total interest over the term of financing is $3380.46.

But what if I return the car? Technically I didn't borrow the residual value. Or am I missing something here?

[inv4zn]

Oh, sorry, didn't see the lease part.

Found this article!

http://www.edmunds.com/car-leasing/c...e-payment.html