Leasing a car can be an attractive option for drivers who want to drive a new vehicle every few years without the long-term commitment of ownership. However, understanding the components of a lease payment is crucial to ensure you're getting a fair deal. This calculator helps demystify the process.
Key Components of a Lease Payment:
MSRP (Manufacturer's Suggested Retail Price): This is the advertised price of the vehicle. In lease terms, it's often referred to as the "Gross Capitalized Cost" before certain reductions.
Down Payment (Cap Cost Reduction): This is an upfront payment you make to reduce the amount you'll finance over the lease term. It directly lowers your capitalized cost.
Residual Value: This is the estimated wholesale value of the car at the end of your lease term. It's usually expressed as a percentage of the MSRP. A higher residual value generally leads to a lower monthly payment. Factors like make, model, and lease term influence this.
Money Factor: This is essentially the interest rate of your lease, expressed as a small decimal. To convert it to an approximate annual interest rate (APR), you can multiply it by 2400 (e.g., a money factor of 0.00125 is roughly equivalent to a 3% APR).
Lease Term: The duration of your lease agreement, typically ranging from 24 to 48 months.
Sales Tax Rate: The applicable sales tax in your state or locality. Crucially, sales tax is often applied to the monthly payment in many states, not just the down payment.
How the Calculation Works:
The monthly lease payment is calculated based on two main parts: the depreciation cost and the finance charge (rent charge).
Depreciation Cost: This is the amount the car is expected to lose in value over your lease term.
Depreciable Amount = Car's MSRP – Residual Value of Car Monthly Depreciation = Depreciable Amount / Lease Term (in months)
Finance Charge (Rent Charge): This is the cost of borrowing money to cover the depreciation and residual value.
Adjusted Capitalized Cost = Car's MSRP – Down Payment Monthly Finance Charge = (Adjusted Capitalized Cost + Residual Value of Car) * Money Factor
Base Monthly Payment: This is the sum of the monthly depreciation and the monthly finance charge.
Base Monthly Payment = Monthly Depreciation + Monthly Finance Charge
Total Monthly Payment (Including Tax): Sales tax is applied to the base monthly payment (and sometimes other fees, depending on the state).
Total Monthly Payment = Base Monthly Payment * (1 + Sales Tax Rate / 100)
The calculator also estimates the Total Estimated Cost, which is the sum of all monthly payments plus the down payment, giving you a clearer picture of the overall financial commitment.
When to Use This Calculator:
When comparing lease offers from different dealerships.
When negotiating the price of a leased vehicle.
To understand the financial implications of different lease terms or down payments.
To estimate the total cost of a lease before signing any paperwork.
Remember, this calculator provides an estimate. Actual lease payments may vary due to additional fees, dealer discretion, and specific lease contract terms.
function calculateLease() {
var carPrice = parseFloat(document.getElementById("carPrice").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var residualValuePercent = parseFloat(document.getElementById("residualValue").value);
var moneyFactor = parseFloat(document.getElementById("moneyFactor").value);
var leaseTerm = parseInt(document.getElementById("leaseTerm").value);
var salesTaxRate = parseFloat(document.getElementById("salesTaxRate").value);
var monthlyPaymentElement = document.getElementById("monthlyPayment");
var totalLeaseCostElement = document.getElementById("totalLeaseCost");
// Input validation
if (isNaN(carPrice) || carPrice <= 0) {
alert("Please enter a valid Car's MSRP.");
return;
}
if (isNaN(downPayment) || downPayment < 0) {
alert("Please enter a valid Down Payment.");
return;
}
if (isNaN(residualValuePercent) || residualValuePercent 100) {
alert("Please enter a valid Residual Value percentage between 1 and 100.");
return;
}
if (isNaN(moneyFactor) || moneyFactor <= 0) {
alert("Please enter a valid Money Factor.");
return;
}
if (isNaN(leaseTerm) || leaseTerm <= 0) {
alert("Please enter a valid Lease Term in months.");
return;
}
if (isNaN(salesTaxRate) || salesTaxRate 100) {
alert("Please enter a valid Sales Tax Rate percentage between 0 and 100.");
return;
}
// Calculations
var residualValue = carPrice * (residualValuePercent / 100);
var adjustedCapitalizedCost = carPrice – downPayment;
// Ensure adjustedCapCost doesn't go below residual value conceptually for payment calculation
// although the calculation below inherently handles this by spreading depreciation.
// For clarity, if ACC is less than residual, it implies a positive equity at end of term.
// The formula remains valid.
var monthlyDepreciation = (carPrice – residualValue) / leaseTerm;
var monthlyFinanceCharge = (adjustedCapitalizedCost + residualValue) * moneyFactor;
var baseMonthlyPayment = monthlyDepreciation + monthlyFinanceCharge;
var totalMonthlyPayment = baseMonthlyPayment * (1 + salesTaxRate / 100);
var totalLeaseCost = (totalMonthlyPayment * leaseTerm) + downPayment;
// Display results
monthlyPaymentElement.textContent = "$" + totalMonthlyPayment.toFixed(2);
totalLeaseCostElement.textContent = "Total Estimated Cost: $" + totalLeaseCost.toFixed(2);
}