Quickly Figure Out if Your Lease Deal is Good
What you need to do is figure out your "real" monthly payment per $10,000 worth of vehicle.
This formula DOES NOT INCLUDE taxes, and other fees like registration and doc fees, because each state has different rates and I want to make sure everyone can use this same formula no matter where you live.
This formula also assumes a 36 month lease with 12K miles/year for mainstream cars, and 10K miles per year for luxury vehicles.
(I will show you how to figure out the "real" monthly payment below, and also figure out the formula for higher or lower mileage)
By doing this, you can compare any two lease deals no matter what car you're looking at or how much price difference there is.
Any lease that costs less than $125/month per $10,000 worth of vehicle is considered a good lease deal. Anything below $105 per $10K is a fantastic deal.
The formula is actually very simple, but can confuse a lot of people:
IF ("Real" Monthly Payment / MSRP ) * 10,000 is less than $125, then it's a good lease deal
For example, if the "real" monthly payment is $300 on a vehicle with MSRP of $25,000, your monthly cost per $10k would come out to $120 ($300 divided by $25,000, then multiplied by 10,000). This would be considered a good lease deal since it falls under $125 per month per $10K worth of vehicle.
Let's take a look at a real lease deal from Hyundai for the 2017 Sonata. I took this from the manufacturer's web site, and highlighted the important parts needed to calculate whether this is a good lease deal or not.
This is a 36 month lease with 12K miles per year on a car with an MSRP of $22,785. The lease payment is $199 per month with $2,399 down payment and a lease acquisition fee of $595.
1. Figure out the "Real" Monthly Payment
In order to do a fair comparison, we need to first figure out the "real" monthly payment by rolling the acquisition fee and down payment into it. With most lease deals, the acquisition fee IS NOT included in the down payment figure (we need to add this). However, the first month's payment is usually included (so we need to subtract this).
In the example above, we take the advertised down payment ($2,399), subtract the first-month's payment (-$199), then add the acquisition fee ($595), which totals a real down payment of $2,795. We then divide this by the term of the lease (36 months), which calculates out to $77.64. This figure is the "hidden" cost of this lease deal, which we need to add to the advertised monthly payment of $199/month. So, the "real" monthly lease payment is equivalent to ($199 + $77.64) = $277 per month (I rounded up).
2. Figure out the Monthly Cost Per $10K Worth of VehicleTo figure out the cost per $10,000 worth of vehicle, you simply divide the "real" monthly payment by MSRP, then multiply that by 10,000.
Here's what it looks like in our example:
"Real" monthly payment ($277) divided by MSRP ($22,785) = 0.012157. Then multiply this by 10,000 and you get $121.57.
This lease deal comes out to $121.57/month per $10,000 worth of vehicle. Since it's under $125, it's considered a good lease deal.
The very best lease deals I've seen hover around the $100 per $10k mark. These don't come around too often, but you will find deals in the $110 to $125 range pretty regularly.
What About Leases with More or Less Annual Mileage?
Most lease deals include 12,000 miles per year on mainstream cars and 10,000 miles for most luxury models, but if you want to calculate with more or less miles, you need to add or subtract $4 to the $125 cutoff point for every 1,000 mile difference on mainstream cars, and $8 for every 1,000 mile difference on luxury vehicles.
So, if you're looking at a typical mainstream car like a Honda or Toyota, and you want to calculate for 15,000 miles per year instead of 12,000, just add $12 to the monthly formula ($4 x 3(for 3,000 miles). Instead of $125 being the cutoff for a good deal, it will be $136.. If you want to calculate for 10,000 miles instead, just subtract $8 ($4 x 2 (for 2,000 miles) from $125, so your new cutoff point is $117 per $10K worth of vehicle.
If you're looking at a luxury lease deal, like on a BMW or Mercedes, and you want 12,000 miles per year instead of the typical 10,000, just add $16 to the cutoff point. Instead of $125, a good lease deal would be $141 per $10K worth of vehicle. Some luxury lease deals have only 7,500 miles allotted per year, in that case you need to subtract $20 from the cutoff point ($8 x 2.5 (for 2,500 miles), so the new cutoff point would be $105 per $10K worth of vehicle.
Here's a handy table showing the cutoff points for a good deal on both Mainstream and Luxury vehicles.
|7.5K Miles||10K Miles||12K Miles||15K Miles|
This is a quick and easy way to see if your lease is a good deal or not. As long as it falls below $125 per $10k worth of car, you're looking at a pretty decent lease deal.
The good news is that you can usually beat most advertised Lease Deals when you start shopping around. For the example I used on the 2017 Hyundai Sonata, you may be able to get that deal down to the 110 range simply by shopping around (the advertised lease rates assume a minimal discount from the dealer, but a lot of dealers will go way below this, you just need to shop around, I recommend you get quotes from TrueCar and Edmunds to quickly see some good deals.
Lease CalculatorI get a lot of people asking me to review their lease deal or check to make sure they're getting the formula right. Unfortunately, I'm finding I don't have the time to answer each one, so I created this simple calculator. Just enter the MSRP, monthly payment, down payment (if any), and acquisition fee to come up with the lease score. Make sure taxes and other dealer fees such as doc fee, registration, etc ARE NOT INCLUDED!
Assumes 36 month, 12,000 miles annual lease terms
|Monthly Payment: $|
|Down Payment: $|
If down payment DOES NOT include Acquisition Fee:
|Enter it here:||$|
My Recommendation for Car ShoppersTrueCar No-Haggle, CarsDirect, and Ryde Shopper are the quickest way to see the lowest car prices in your area. These sites show you no-haggle prices from dealers closest to you - and the deals are usually really good. This should be the first step you take when negotiating your car price. Follow this up with my checklist to make sure you squeeze out every last bit of savings.
- Gregg Fidan
Each week, I'll keep you up-to-date on the latest car deals and news that might affect your purchase. This includes...
- Best Rebates, Incentives, and Lease Deals
- Latest Car Buying Scams and Tricks
- The Best & Worst Time to Buy a Car
- Which Cars You Should Avoid