How are my lease payments determined?
There are a number of factors considered when determining how much a lease will cost. The most important things to consider are length of the lease, depreciation of the vehicle, and cost of the vehicle.
- Capitalized Cost - The first step is determining the real cost of the vehicle - the price less elements such as the down payment or purchase incentives, but with necessary fees and charges such as destination and documentation added in
- Residual Value - The next step is calculating the net value the vehicle will still hold at the end of the lease. After this residual value is determined, you subtract it from the capitalized cost to get the amount of depreciation that will be realized over the life of the lease.
- Time factor of Money - This is the financial cost of borrowing money over the life of the loan. Depending on external market conditions this number will vary.
After these 3 primary numbers are calculated, you will have a good idea what your lease payments will look like.
What are closed and open end leases?
These are leases which allow you to purchase the leased vehicle at the end of your contract, but they rely on different processes to determine the final price
- Closed End Lease - The market value at the end of the lease determines the residual value, and that is the price you pay to buy out your lease
- Open End Lease - The market value helps determine the purchase price, and as a customer you are responsible for any difference between the residual and actual value when buying outright
Are used vehicle loans and new vehicle loans the same?
Yes and no - the end result is the same, but there are slightly different requirements and processes. When a customer takes out a used vehicle loan a slightly larger down payment is often required, and the interest rate can be a little bit higher too. It makes sense, because lenders are more hesitant lending for a used vehicle because it's collateral, the used vehicle, is worth less than a new one.
Questions? Get in touch today!
If you have any questions about automotive financing or leasing, contact us today! We have a team of finance specialists waiting to answer your questions and help you find your next new Audi or pre-owned vehicle. We will help you finance parts, service, and extra too. We can't wait to hear from you!