Lease With Negative Equity Calculator

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 With Negative Equity?

Lease With Negative Equity refers to a vehicle leasing arrangement where the lessee owes more on their current vehicle than its market value, and this negative amount is rolled into the new lease agreement.

2. How Does the Calculator Work?

The calculator uses the lease payment formula adjusted for negative equity:

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

Where:

$ Vehicle\ Price $ — The negotiated price of the new vehicle
$ Residual\ Value $ — The estimated value at lease end
$ Negative\ Equity $ — The amount owed above current vehicle value
$ Lease\ Term $ — Duration of the lease in months
$ Finance\ Charges $ — Interest costs based on the interest rate

Explanation: The calculator factors in the negative equity from your previous vehicle and spreads this additional cost over the lease term.

3. Importance of Negative Equity Calculation

Details: Accurately calculating lease payments with negative equity is crucial for understanding the true cost of rolling over negative equity into a new lease and making informed financial decisions.

4. Using the Calculator

Tips: Enter the vehicle price, residual value, negative equity amount, lease term, and interest rate. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What exactly is negative equity in leasing?
A: Negative equity occurs when you owe more on your current vehicle loan than the vehicle's current market value.

Q2: Is it advisable to roll negative equity into a new lease?
A: While possible, it increases your monthly payments and overall cost. It's generally better to pay down negative equity first if possible.

Q3: How does negative equity affect my lease payments?
A: Negative equity increases your monthly payments as this amount is added to your new vehicle's capitalized cost.

Q4: Can all dealerships handle negative equity in leases?
A: Most can, but policies vary. Some lenders have limits on how much negative equity can be rolled into a new lease.

Q5: Are there alternatives to rolling negative equity into a lease?
A: Yes, including paying the difference upfront, trading in when you have positive equity, or keeping your current vehicle longer.