What is an effective payment on a car lease?


An effective payment on a car lease that can bring down the monthly cost of car lease payments, takes into account any cash bonus or cash incentive the individual seeking to get out of a car lease (lease seller) offers the individual wanting to take over the car lease (lease buyer).

The effective payment may also be an upfront cash payment on the lease payments as a down payment, which is applied the total lease cost and monthly lease payments on a vehicle to create the effective payment on a car lease.

A car lease effective payment is only an approximate number, which is calculated by dividing the cash bonus/cash incentive amount, or the down payment amount, by the number of months remaining on the auto lease. Then subtract this amount from the before-tax payments owed.

It’s important for consumers to understand a car lease effective payment can from state to state in the USA, or province to province in Canada, as the tax rate will vary across each location. A consumer calculating the effective payment on a car lease should use this figure as an approximate value only. However, a more precise effective payment value on an auto lease can be calculated by using the payment including any local taxes, and subtract or add the monthly cash bonus or cash incentive or down payment.

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