1. What is Negative Equity in Car Leasing?

Negative equity occurs when you owe more on your current vehicle than it's worth. When leasing a new car, this amount gets rolled into the new lease, increasing your monthly payments.

2. How Does the Calculator Work?

The calculator uses the standard lease payment formula:

Where:

• \( CapCost \) — Vehicle price plus any negative equity, fees, taxes
• \( Residual \) — Estimated value at lease end
• \( Term \) — Lease duration in months
• \( MoneyFactor \) — Lease interest rate (divide APR by 2400)

Explanation: The first part calculates monthly depreciation, the second part calculates monthly finance charge.

3. Understanding Lease Payment Components

Details: Negative equity increases the capitalized cost, which directly increases both the depreciation and finance portions of your payment.

4. Using the Calculator

Tips: Include all costs (vehicle price, taxes, fees, negative equity) in capitalized cost. Money factor is typically 0.0010-0.0040 (equivalent to 2.4%-9.6% APR).

5. Frequently Asked Questions (FAQ)

Q1: How does negative equity affect my lease?
A: It increases your monthly payment by spreading the owed amount over the lease term plus interest.

Q2: What's a good money factor?
A: Below 0.0020 (4.8% APR) is good. Manufacturer subvented leases often have lower rates.

Q3: Can I negotiate the residual value?
A: Residuals are usually set by the leasing company, but you can sometimes find leases with higher residuals.

Q4: Is rolling negative equity into a lease a good idea?
A: Generally not recommended as it increases your payments and risk, but sometimes unavoidable.

Q5: How can I minimize negative equity impact?
A: Consider longer terms, higher residual vehicles, or paying down the negative equity upfront.