| Here are the definitions to help evaluate vehicle | | | | differing in price by several thousand dollars.How |
| residual values | | | | to exploit this anomaly in vehicle residual values in |
| Vehicle residual value | | | | a Lease calculationThe easy way |
| This is the value that the manufacturer, not the | | | | On the Internet, search for any manufacturer's |
| dealer, says the car will be worth at the end of | | | | web site and simply find a lease payment by |
| the lease. Sometimes it is a percent, such as | | | | focusing on any higher quality car costing a few |
| 60% of the MSRP, the price of the car. A | | | | thousand collars more than your initial choice. |
| $20,000 car with a 60% vehicle residual value | | | | Ignore the fact that the residual value is not |
| would have a residual value of $12,000.The lease | | | | given. What you're really after is a monthly lease |
| contract says you can rent this $12,000 for x | | | | payment on a Vehicle B that is the same, or |
| years by simply paying a percent, such as 4% of | | | | almost the same, as the lease payment on the |
| the $12,000, or .04 times $12,000 divided by 12 | | | | initial vehicle A that you chose.The hard way |
| months or $480/12 equals $40/month | | | | To narrow your search for a secondary choice, |
| Amortization | | | | be sure to limit it to a vehicle that has a higher |
| The $8,000 left (the $20,000 car price minus the | | | | residual value percentage. Because few car |
| $12,000 residual value) is a standard loan, just like | | | | manufacturers will provide the residual value on |
| a house mortgage, which requires a monthly | | | | the Internet, go to other sites that do offer this |
| payment for not only the interest but also a little | | | | information. To get the percentage residual value, |
| of the $8,000. This will always be a much larger | | | | divide the vehicle residual value by the MSRP and |
| payment than the interest paid on the residual | | | | you have the percent. Example: 12,000/20,000 |
| value. | | | | equals 60%.After initially deciding on what car to |
| | | | lease, get a lease proposal on a different make |
| Here is where the magic is | | | | that costs as much as $5,000 more. You can do |
| Higher quality cars, such as a BMW or Mercedes | | | | a lot of this secondary searching on the Internet. |
| or Lexus, will always have a higher relative vehicle | | | | Make sure each choice has similar features and |
| residual value than a Chevy or Pontiac or Dodge. | | | | that neither one is loaded with a lot of optional |
| That means that although the interest paid on the | | | | accessories. |
| higher quality vehicle residual value is more than | | | | |
| that paid on the lower quality car, the monthly | | | | The next step is to actually visit the second |
| payment paid on the depreciation is a lot less, so | | | | choice dealer showroom and see if Car B meets |
| that the sum of the two on a BMW can be the | | | | your needs, such as comfort, room, and any |
| same as the sum (the lease payment) on a lesser | | | | other requirements that led you to pick vehicle A |
| quality car.Use the resource box at the end of | | | | in the first place. Ignore its price, because you're |
| the article to see an actual example of two | | | | only concerned about its monthly lease payment. |
| vehicles having the same lease payment but | | | | |