11 Calculating the After Tax Nominal and Real Interest Rates

Estimate your monthly auto lease payment including depreciation, rent charges, and sales tax.

Estimated Monthly Payment: $0.00

---

Gross Cap Cost:

Residual Value:

Depreciation Fee:

Rent Charge (Interest):

Total Tax:

function calculateLease() { var msrp = parseFloat(document.getElementById('msrp').value) || 0; var salesPrice = parseFloat(document.getElementById('salesPrice').value) || 0; var downPayment = parseFloat(document.getElementById('downPayment').value) || 0; var tradeIn = parseFloat(document.getElementById('tradeIn').value) || 0; var leaseTerm = parseFloat(document.getElementById('leaseTerm').value) || 1; var residualPercent = parseFloat(document.getElementById('residualPercent').value) || 0; var moneyFactor = parseFloat(document.getElementById('moneyFactor').value) || 0; var salesTax = parseFloat(document.getElementById('salesTax').value) || 0; // 1. Calculate Gross Capitalized Cost var capCost = salesPrice – downPayment – tradeIn; // 2. Calculate Residual Value var residualValue = msrp * (residualPercent / 100); // 3. Monthly Depreciation var monthlyDepreciation = (capCost – residualValue) / leaseTerm; if (monthlyDepreciation < 0) monthlyDepreciation = 0; // 4. Monthly Rent Charge (Interest) // Formula: (Cap Cost + Residual Value) * Money Factor var monthlyRentCharge = (capCost + residualValue) * moneyFactor; // 5. Pre-tax Payment var basePayment = monthlyDepreciation + monthlyRentCharge; // 6. Monthly Tax var monthlyTax = basePayment * (salesTax / 100); // 7. Total Monthly Payment var totalMonthlyPayment = basePayment + monthlyTax; // Display Results document.getElementById('monthlyResult').innerText = '$' + totalMonthlyPayment.toFixed(2); document.getElementById('resCapCost').innerText = '$' + capCost.toFixed(2); document.getElementById('resResidualVal').innerText = '$' + residualValue.toFixed(2); document.getElementById('resDepreciation').innerText = '$' + monthlyDepreciation.toFixed(2); document.getElementById('resRentCharge').innerText = '$' + monthlyRentCharge.toFixed(2); document.getElementById('resTax').innerText = '$' + monthlyTax.toFixed(2); document.getElementById('lease-result').style.display = 'block'; }

Understanding How a Car Lease is Calculated

Leasing a car is different from buying because you are only paying for the vehicle's depreciation during the time you drive it, plus interest and fees. To get the best deal, you must understand the components of the lease formula.

Key Lease Terms Explained

• Gross Capitalized Cost: This is the negotiated price of the car. Just like buying a car, you should negotiate the "Sales Price" before mentioning a lease.
• Residual Value: This is what the leasing company predicts the car will be worth at the end of your lease. A higher residual value means a lower monthly payment because you are paying for less depreciation.
• Money Factor: This represents the interest rate. To convert the Money Factor to a standard APR, multiply it by 2400 (e.g., 0.0015 * 2400 = 3.6% APR).
• Cap Cost Reductions: These are "down payments" that reduce the initial amount financed. While they lower monthly payments, many experts suggest keeping down payments low on leases in case the car is totaled early in the term.

Realistic Example Calculation

Imagine you are leasing a SUV with an MSRP of $40,000. You negotiate the price down to $38,000. You put $2,000 down, leaving a Cap Cost of $36,000.

If the bank sets the 3-year residual value at 60%, the car will be worth $24,000 at the end of the lease ($40,000 * 0.60). Your total depreciation over 36 months is $12,000 ($36,000 – $24,000), or $333.33 per month.

Add the rent charge (interest) and sales tax to this base depreciation to find your final monthly out-of-pocket cost.

SEO Tips for Leasers

To find the best deals, search for "high residual value cars 2024" or "lease specials near me." Always check if there are hidden "acquisition fees" or "disposition fees" which are standard in the industry but vary by manufacturer.