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How to Calculate a Car Payment Based on Sticker Price

Posted by on January 22, 2012 in New Cars - 2 Comments

The monthly payment on a lease of a car is generally 1% of the purchase price per month. See the example below, or continue reading.

When you are at a car dealership and you are curious to see how much a car will cost to least over a few years, it can be hard to get a straight answer out of your salesman, as they are protecting the purchase price of the car and they are trying to have you pay as much as possible. This is one of the main issues with dealing with car salesmen; technically they are there to help you find a car, but they are also there to help sell a car and make a commission.

So what is the easiest and quickest way to estimate a car payment based on the sticker price, or negotiated purchase price, when you are under pressure from a car dealer who is trying to make a sale? The price varies based on: length of lease, amount of miles allowed per year, the APR, and the down payment. There is also additional savings based on dealer specials or if the car manufacturer offers a lease special and offer special pre-negotiated rates. With all this in mind, follow the chart below to help you understand the value of a car in a lease:



Car Payment Estimate Example:
Car: Toyota Camry 2012
Sticker Price: $23,670
Lease terms:
– 36 Months
– 12,000 miles per year allowance
– $2,000 dollars down payment
– 0.9% APR

Estimated Monthly Payment:

$210.67 (1% of purchase price less the down payment)

How did we get this number?

Purchase price * .010 or *.011 depending on the negotiation skills. So, if we take the purchase price of $23,670, subtract the $2,000 dollars that will be made for the down payment the total purchase price is $21,670. Now, figuring that we will get an excellent deal and we follow the standard 0.9% APR that Toyota tends to apply on 36 month leases, we can assume the monthly payment is $210.67 per month. This will vary based on the dealer incentives, and the dealer will generally work off of this monthly payment as the negotiation point.



On luxury car makes, this formula is adjusted slightly: On a Lexus lease for example, you would use a *.12 or *.013 multiplier as the car doesn’t have as strong of a residual value. Therefore, the dealer is forced to make more money on the lease and assume that there will be less profit made on the sale of the used car once you return the lease. This is a logic that is used for leasing cars in general, which is why you may come to realize that certain car makes such as Jaguar and Audi are not the best cars to lease, it is wiser to purchase them.

For example:

Car Payment Estimate Example:
Car: 2012 Lexus ISF
Sticker Price: $62,450
Lease terms:
– 36 Months
– 10,000 miles per year allowance
– $8,000 dollars down payment
– 2.9% APR

Estimated Monthly Payments:

$62,450 – $8,000 = $54,000

$54,000 * 0.014 = ~$800 / mo.

This is again an estimate, as sometimes the car will lease at a lower APR, which is the driving force to the steep monthly payments. There is also a lot of other factors, such as the residual value, the annual allowed mileage, and other determining factors. The rule of thumb on luxury makes is to assume a much higher coefficient, such as 0.014 or even in some cases a 0.015 and the residual is never as good as consumer cars such as the Accord or Camry.

Update: Please see our car loan calculator for an updated chart that can help you figure out your car payment.

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  1. Posted February 15, 2012 at 9:57 am

    […] and there is a factor (varying per state) of the purchase price of the vehicle that is used to calculate the car payment due on the registration and taxes at the end of the year. […]

  2. Simon Dremport
    Posted April 18, 2012 at 7:12 pm

    Wow i never new about this, then again I have never been great with cars in anyway at all. Very cool method though thanks for the share.

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