Calculating Leasing Instalments: Understanding Your Monthly Car Payment

When you're deciding whether to lease or buy a vehicle, the monthly leasing rate is a crucial factor that heavily influences your decision. This article will break down how leasing rates are composed, how they are calculated, and answer common questions about using leasing calculators.

If you're already considering leasing a new car and exploring options, be sure to check out our top leasing deals (as of May 2025).

The Leasing Instalment Amount: Key Factors

To calculate the leasing rate, car dealerships and leasing banks incorporate various factors into their calculations using a car leasing calculator. Beyond the points listed below, there's also the option of full-service leasing. Opting for this will result in a higher rate, as it's an all-inclusive, worry-free package.

• Commercial Leasing: Rates are typically cheaper than private leasing due to specific tax and business advantages.
• Short-Term Leasing: Ideal if you're trying leasing for the first time or are unsure about long-term commitment.
• Vario-Leasing: Offers maximum flexibility, allowing you to choose between Vario leasing or conventional leasing based on your preferences.

For a classic car lease, the process differs, and rates cannot be determined in advance. However, for a standard lease, the following criteria are crucial for calculating the lease:

1. Deposit and Special Payment

A deposit (also known as a special payment or down payment) may be required, though not every provider insists on one. The advantage of a down payment is that it reduces the vehicle's price for the lessor, thereby lowering your monthly instalment. If you're looking to sell an old vehicle, you can also ask the dealership if its value can be used as a down payment for your lease. A special payment might also be necessary if you don't fully meet the requirements for leasing.

Leasing without a down payment naturally frees up capital for other uses. However, your leasing calculator will then show a higher monthly rate to compensate.

2. Selected Vehicle Model and Price

Your desired vehicle is the most important factor, as the more expensive the vehicle, the higher the leasing rate. Small car leasing will undoubtedly cost less than sports car leasing or convertible leasing. The vehicle's basic equipment also plays a role; if it's particularly high-quality and exclusive, this will be reflected in the rate. Therefore, consider your options carefully beforehand and consult a car leasing cost calculator.

If your leasing application has been rejected, trying again with a cheaper vehicle and a lower monthly rate might yield better results.

3. Contract Term

How long you wish to lease your vehicle is ultimately your decision, but the lessor usually offers specific terms you must choose from. When leasing a new vehicle, it's advisable not to select overly short leasing periods, as the depreciation in the first year is substantial, and a short lease term could end up being more expensive. However, leasing for too long also has drawbacks. While a longer term generally means a lower monthly instalment, you might feel you're paying for a vehicle that has significantly depreciated in value.

4. Interest Rate

The lessor determines the interest rate. Typically, you won't see a detailed breakdown of how this rate is composed. However, it usually includes a share of profits, administrative costs, and a surcharge for the risk that the leased vehicle might be difficult to sell at the end of the term. Occasionally, limited offers for 0% leasing (leasing without interest) are available. A leasing calculator can only provide an example interest rate; it's best to have the lessor provide a direct quote.

5. Optional Equipment

Carefully consider which optional equipment you want installed in your vehicle. If the equipment is particularly expensive or unusual for that type of vehicle, you'll pay a higher price for the equipment itself, and the leasing rate will also be correspondingly higher. Furthermore, the lessor might charge a higher interest rate if they anticipate the car with this specific equipment will be harder to resell later.

How to Calculate Your Leasing Rate

While you can't calculate the leasing rate down to the last cent yourself, a formula for calculating leasing will definitely give you a good estimate of the monthly instalment. The basic formula for calculating the leasing rate is as follows:

(purchase price – residual value) / term + [(purchase price + residual value) / 12] x monthly interest rate

This might sound complicated at first glance, but let's break down the formula step by step:

1. Part One (Average Depreciation): This part of the calculation focuses on the average depreciation over the entire term. You know your purchase price, and the residual value is determined at the beginning of the leasing contract. Here, all possible risks are assessed to establish a realistic value the vehicle is expected to retain at the end of the leasing period.
2. Part Two (Interest): This section accounts for the interest. These charges are determined as described earlier and reflect the interest that will accrue over the leasing period. Dividing by 12 gives you the monthly interest charge.

Together, these two values (average depreciation and monthly interest) constitute your total monthly leasing rate.

If you've come across the term leasing factor in connection with leasing offers, don't be confused. The leasing factor serves as a comparison tool for different leasing offers and can aid in your decision-making.

Example Calculation:

To make the calculation less abstract, here’s an example of how a leasing rate can be determined, with the following conditions:

(€30,000 – €12,000) / 48 + [(€30,000 + €12,000) x 0.03 / 12]

Depreciation: (€30,000 – €12,000) / 48 = €375
Interest: (€30,000 + €12,000) x 0.03 / 12 = €105
Total Monthly Cost: €375 + €105 = €480
            

Frequently Asked Questions About Leasing Instalments

What does residual value mean in leasing?

The residual value is calculated individually for what is known as residual value leasing. Factors such as the model, chosen equipment, contract term, and the estimated risk of reselling the car successfully at the end of the lease all play a role. From these factors, a residual value is determined in the contract at the beginning of the lease, which is expected to apply at the end of the term.

How high should the leasing rate be?

There's no general answer to this, as it must be tailored individually to your needs and budget. If you require a large car but have a limited budget, it makes sense to weigh your options carefully. Perhaps a station wagon is cheaper than the SUV you initially considered? Be wary of leasing rates that seem too cheap, as this might indicate either a high down payment was factored in or a high residual value is expected at the end of the term.

Does car leasing make sense for private individuals?

In addition to commercial leasing, many leasing contracts are now concluded with private individuals. A common reason is the desire to drive a new car for a specific period without the long-term commitment of ownership. You don't have to worry about selling the car, as its return has already been arranged. Whether private leasing makes sense is a personal decision, as it represents a continuous monthly financial obligation over a longer period.

How long should you lease?

This isn't an easy question to answer, as your desired ownership period is personal. However, from an economic standpoint, it doesn't make sense to lease for only 12 months, as the highest depreciation typically occurs in the first year. Leasing contracts are usually concluded for 36 or 48 months. Longer periods often become less economical, as the vehicle might no longer retain the value for which you're paying the instalment – the cost-to-value ratio might no longer be favorable.