Car Lease Ratings Explained
How Car Lease Ratings Work
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The Car Lease Ratings on this website are based on a simple formula. The car lease ratings number I use is called the LVR or Lease Value Ratio. This number simply tells us how much car we are getting for our money. Face it; do we really care what about all of these lease terms and jargon such as Depreciation, Residual Value, Capital Cost, MSRP? The bottom line about our Leasing is Cash-Flow and how much car we get for our monthly outlay. LVR (lease value ratio) is the average monthly payment divided by the MSRP (Manufacture Suggested Retail Price of the Car). Note, that the advertised monthly payment is different from the average monthly payment. The average monthly payment includes any additional down payments or costs we paid to negotiate the lease. Keep in mind, that car leases do not require a downpayment. The down payment, or cap. cost reduction is simply a way to reduce our monthly, fixed payments. In essence, though, we still have to make that payment whether it’s up front or not, so that has to be figured into our total costs, or considered part of our monthly payments, right? So, the monthly car lease ratings uses the LVR to determine best lease offers from top-to-bottom.
LVR Car Lease Ratings Example
Let’s say we lease a 2010 Honda Accord LX with the following figures:
Manufacturers Suggested Retail Price (MSRP): $22,565
Lease Term: 36 Months
Monthly Payment: $199
In order to determine our Average Monthly Payment we take our $199 monthly payment x 36 Months and add that to the $2,100 we put down on the lease to come up with our Total Cost: $9,264
Our average monthly payment is simply our total cost divided by the months we are leasing the car.
Thus, our average monthly payment for the Honda Accord example is $257.33
What I really care about when I lease a car is how much my total cost is per month to drive it. Therefore, we have to include all of our payments, not just the advertised monthly payment. It is really costing us $257.33 per month to lease the car, rather than the advertised payment of $199.00. Local Car Advertisements always try to entice us with low monthly payments, but they usually put that down payment down near the very bottom, so it is not so noticeable.
The final number is the LVR (Lease Value Ratio). This is the average monthly payment divided by the MSRP The lower number, the better. The LVR indicates how much car we are getting for our cash outlay.
In the example of the Honda Accord, our LVR is 1.14% ($257.33 / $22,565)
As you will learn in our monthly top-20 car lease ratings, 1.14% is a decent, but not great LVR. We have seen car leases with LVRs as low as 1.03%.
Check CarLeaseTips.com each and every month to see the top Car Leases based on these described, Car Lease Ratings.