Lease Calculator With Negative Equity

Lease Payment Formula:

\[ Lease\ Payment = \frac{(Vehicle\ Price - Residual\ Value) + Negative\ Equity}{Lease\ Term} + Finance\ Charges \]

Vehicle Price ($):

Residual Value ($):

Negative Equity ($):

Lease Term (months):

months

Interest Rate (%):

Monthly Lease Payment:

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1. What is Lease Payment With Negative Equity?

Lease Payment With Negative Equity calculates your monthly lease payment when you have negative equity from a previous vehicle. Negative equity occurs when you owe more on your current vehicle than it's worth, and this amount is rolled into your new lease.

2. How Does the Calculator Work?

The calculator uses the lease payment formula:

\[ Monthly\ Payment = \frac{(Vehicle\ Price - Residual\ Value) + Negative\ Equity}{Lease\ Term} + (Vehicle\ Price + Residual\ Value) \times Monthly\ Interest\ Rate \]

Where:

$ Vehicle\ Price $ — The negotiated price of the new vehicle
$ Residual\ Value $ — The estimated value of the vehicle at lease end
$ Negative\ Equity $ — The amount owed above the current vehicle's value
$ Lease\ Term $ — Duration of the lease in months
$ Monthly\ Interest\ Rate $ — Annual interest rate divided by 12

Explanation: The formula accounts for both the depreciation of the new vehicle and the additional cost of negative equity from your previous vehicle.

3. Importance of Negative Equity Calculation

Details: Calculating lease payments with negative equity is crucial for understanding the true cost of rolling over debt into a new lease. It helps consumers make informed decisions about whether to pay off negative equity upfront or include it in the new lease.

4. Using the Calculator

Tips: Enter the vehicle price in dollars, residual value in dollars, negative equity amount, lease term in months, and annual interest rate as a percentage. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is negative equity in auto leasing?
A: Negative equity occurs when you owe more on your current vehicle loan than the vehicle is worth. This amount can be rolled into a new lease, increasing your monthly payments.

Q2: How does negative equity affect my lease payment?
A: Negative equity increases the total amount financed in your lease, which raises your monthly payments proportionally over the lease term.

Q3: Should I roll negative equity into a new lease?
A: While convenient, rolling negative equity into a new lease increases your monthly payments and puts you at risk of being "upside down" again. Paying it off separately is often better.

Q4: Are there limits to how much negative equity can be rolled in?
A: Most lenders have limits (typically 110-125% of the new vehicle's value) on how much negative equity can be included in a new lease.

Q5: Can I avoid negative equity in the future?
A: To avoid negative equity, make larger down payments, choose shorter loan terms, and select vehicles that hold their value well over time.