Example 1. Life cycle of a 60-month lease. This graph shows the typical situation in which the vehicle’s value is less than the residual value at the end of the lease term. The vehicle’s value may be above or below the residual value at lease-end. The graph shows the life cycle of a 60-month lease, with dollar values on the Y-axis and the number of months in the lease on the X-axis. There are 3 lines. The first is a downward straight line that shows the lease balance declining from $24,000 to $8,400. This amount is identified as the lease depreciation. The second line is a downward-curving concave line that shows the value of the vehicle declining from about $19,000 to about $8,000 at the 60-month point. This second line is always below the lease balance line. The third line is a horizontal line at $8,400. It represents the lease residual value at 60 months when the lease ends.
Lease Inputs:
Initial capitalized cost $24,000.00
Residual value $8,400.00
Term 60 months
Monthly payment $363.68
Note: The Constant Yield (Actuarial) method is used for the lease amortization.