Determine the true annual percentage rate (APR) and money factor of your lease.
Effective Annual Rate (APR):0.00%
Money Factor:0.00000
Total Lease Cost:$0.00
Total Finance Charges:$0.00
Net Capitalized Cost:$0.00
Understanding the Effective Lease Rate
When leasing equipment or a vehicle, the "interest rate" is rarely stated explicitly. Instead, dealers and leasing companies often use terms like "Money Factor" or simply provide a monthly payment based on the price and residual value. The Effective Lease Rate Calculator helps you translate these figures into a standard Annual Percentage Rate (APR) so you can compare the cost of leasing against traditional financing.
Key Inputs Explained
Gross Capitalized Cost: The agreed-upon value of the vehicle or equipment before any deductions. This is essentially the selling price.
Cap Cost Reduction: Any amount paid upfront that reduces the amount being financed. This includes cash down payments, trade-in credits, or rebates.
Residual Value: The estimated value of the asset at the end of the lease term. This is often the purchase option price if you choose to buy the asset when the lease expires.
Money Factor: A fractional number used in lease calculations. To convert a Money Factor to an approximate APR, multiply it by 2,400.
How the Calculation Works
Unlike a simple loan, a lease involves paying for the depreciation of an asset plus a finance charge (rent charge). The mathematical formula involves solving for the internal rate of return (IRR) based on the cash flows: the initial net cost versus the stream of monthly payments and the final residual value.
The core equation balances the Net Capitalized Cost against the Present Value (PV) of the monthly payments and the PV of the Residual Value. This calculator uses an iterative method to find the precise interest rate that makes these values equal.
Is a Lower Money Factor Better?
Yes. A lower Money Factor indicates lower finance charges. However, always check the Gross Capitalized Cost. A dealer might offer a low rate but inflate the price of the asset, negating your savings. Using the Effective Lease Rate allows you to see the "all-in" cost of the financing structure.
function calculateLeaseRate() {
// 1. Get Inputs
var price = parseFloat(document.getElementById("elr_assetPrice").value);
var down = parseFloat(document.getElementById("elr_capReduction").value);
var residual = parseFloat(document.getElementById("elr_residual").value);
var pmt = parseFloat(document.getElementById("elr_monthlyPmt").value);
var term = parseFloat(document.getElementById("elr_term").value);
// 2. Validate Inputs
if (isNaN(price) || isNaN(residual) || isNaN(pmt) || isNaN(term) || term <= 0) {
alert("Please enter valid positive numbers for all fields.");
return;
}
if (isNaN(down)) down = 0;
var netCapCost = price – down;
// Basic Logic Check
if (netCapCost <= 0) {
alert("Down payment cannot exceed the Asset Price.");
return;
}
// 3. Iterative Solver (Binary Search) to find Monthly Rate (r)
// Equation: NetCapCost = (Pmt * (1 – (1+r)^-N)) / r + Residual / (1+r)^N
// If r approaches 0, PV = Pmt * N + Residual.
var minRate = 0.0000001;
var maxRate = 1.0; // 100% monthly, effectively infinite for this context
var guessRate = 0;
var epsilon = 0.0000001; // Precision
var found = false;
var iterations = 0;
// Check if rate is essentially 0 or negative (Total payments < financed amount)
var totalPayments = (pmt * term) + residual;
if (totalPayments <= netCapCost) {
guessRate = 0;
found = true;
} else {
// Binary search for interest rate
while (iterations < 100) {
guessRate = (minRate + maxRate) / 2;
// Calculate PV of payments + PV of residual
// PV_annuity = Pmt * (1 – (1+r)^-n) / r
var pvPayments = (pmt * (1 – Math.pow(1 + guessRate, -term))) / guessRate;
var pvResidual = residual / Math.pow(1 + guessRate, term);
var calculatedPV = pvPayments + pvResidual;
var diff = calculatedPV – netCapCost;
if (Math.abs(diff) netCapCost) {
minRate = guessRate;
} else {
maxRate = guessRate;
}
iterations++;
}
}
// 4. Calculate Outputs
var monthlyRate = guessRate;
var annualRate = monthlyRate * 12;
var moneyFactor = annualRate / 24; // Money Factor is usually APR / 2400, or Monthly / 200… wait.
// Standard convention: Money Factor * 2400 = APR %.
// So Money Factor = (APR/100) / 24 = APR_decimal / 24.
// Or Money Factor = MonthlyRate_decimal / 2 (approx method used in dealerships? No, precise is Rate/2400).
// Let's stick to standard: Money Factor = APR / 2400.
// APR is e.g. 5.0 (percent). annualRate is 0.05.
// Money Factor = (annualRate * 100) / 2400 = annualRate / 24.
var mf = annualRate / 24;
var totalLeaseCost = (pmt * term) + down; // Total out of pocket over lease
var totalFinanceCharges = (pmt * term) + residual – netCapCost;
if (totalFinanceCharges < 0) totalFinanceCharges = 0;
// 5. Display Results
document.getElementById("elr_display_apr").innerText = (annualRate * 100).toFixed(2) + "%";
document.getElementById("elr_display_mf").innerText = mf.toFixed(5);
document.getElementById("elr_display_totalCost").innerText = "$" + totalLeaseCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("elr_display_charges").innerText = "$" + totalFinanceCharges.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("elr_display_netCap").innerText = "$" + netCapCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("elr_result").style.display = "block";
}