How does early lease term and lease equity work?

Ask the Hackrs
23

So if I’m understanding correctly, Pay off = Residual value + (monthly payment * no. of mos left). If that’s the case, my $5K down impacts the monthly payment piece, ultimately lowering the pay off amount (so is accounted for, for at least the remaining payments).

24

You can’t just say Payoff = Monthly Remaining * Payment + RV, it’s more complicated than that (and usually less).

Regarding the down, look at it this way:

  • if you lease a 20k car and put 0 down. You will have a RV of 10k (Assuming 50%)
    • If you crash this car the next day, you owe nothing.
  • If you lease a 20k car and put 5k down, you will STILL have an RV of 10k
    • If you crash this car the next day, you owe nothing and are REALLY pissed you can’t get your 5k back.

Now your Down did lower the monthly but exposed you to a loss of $$$ if the car is totaled.

25

Understood, thanks for the explanation. Luckily, I have avoided accidents so far and made a point to do 0 down on the M5 lease :smiley:

26

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