# Leasing

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Wendell Gurley
04/07/97 12:25 PM

Daniel Hussey inquired about calculating how much an A4 lease would be.
Here is some helpful lease info, as the answer to the question is:  it can
cost anything you want it to be based on a few factors.  Working in the car
business, here is what you should watch:

1)  Selling price of the car:  negotiate this first and separately, and
chisel this figure as low as you can

2)  Determine the Residual Value and Term:  compare Audi/VW Credit to your
credit union, bank etc.  figure should be as high as possible.  For
example, after 24 months, if the \$25,000 car your buying will be worth
\$15,750, the residual value is 63%.

3)  Determine the Rate Factor:  this figure is the equivalent of an APR
rate for normal financing.  It will be a factor such as .00245, and is the
cost for borrowing money.  You want this figure as low as possible.  To
convert the figure to APR for comparisons, multiply the number by 2400.
For example, .00245 x 2400 is 5.88% APR.

4)  Use the calculation method below and you can run your own "what ifs"
without needing a financial lease calculator:

Selling Price:             \$25,000       get your best price
(less downpayment)                 0       (determine how much up front
cost/downpayment you want)
-----------
Balance to finance:      \$25,000

(Less residual value)   (15,750)      (This is the 63% residual value after
24 months)
_______
\$ 9,250

Divide by # months
you are leasing:                       24
______

Basic lease payment:  \$385.42, but now you must add cost of financing and
taxes

Don't be confused here, for this portion you add the selling price to the
residual value!

Selling Price:                \$25,000

Plus Residual value:    15,750
-------------
Total:                               \$ 40,750

Multiply by the service factor (in this case .00245)  =  \$99.84

Add the Basic Lease Payment (\$385.42) and the Cost of Financing (\$99.84):
\$485.25

Now, just multiply this total by your state's sales tax, say 6%:  \$485.25 x
.06 =  \$29.12

Basic Lease Payment	\$385.42
Cost of Financing	                99.84
Sales Tax	                            29.12
-----------
Total Lease Payment:          \$514.38

This formula will work for any sales price, lease term and finance rate.
Just remember to plug in the right figures and when comparing one deal to
another, make sure factors are comparable.  For instance, dealers and
manufacturers quote low rates by increasing the down payment, extending the
term, etc.

Remember, when financing through a dealer, they usually mark up the
financing a few points before the quote the rate to you!  Shop your credit
union and save big money.

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