Interest Rate Implicit in the Lease Calculator

Estimate your monthly lease costs including depreciation, interest, and taxes.

Vehicle Details

Manufacturer's Suggested Retail Price

The price you negotiated

Estimated value at end of lease

24 Months 36 Months 48 Months 60 Months

Financials & Taxes

APR ÷ 2400 (e.g., 0.00125 = 3% APR)

Monthly Payment (Excl. Tax)

$0.00

Total Monthly Payment

$0.00

Residual Value: $0.00

Monthly Depreciation: $0.00

Monthly Rent Charge: $0.00

Monthly Sales Tax: $0.00

How Car Lease Payments are Calculated

Unlike a traditional auto loan where you pay for the entire value of the vehicle, a lease payment is primarily based on the depreciation of the car during the time you drive it. To understand your lease deal, you need to look at three main components: Depreciation, the Rent Charge (Interest), and Taxes.

The Three Pillars of a Lease Payment

1. Depreciation Fee: This is the most significant part of your payment. It is calculated by taking the "Net Capitalized Cost" (Selling price minus down payment/trade-in) and subtracting the "Residual Value" (what the car is worth at the end of the lease), then dividing that amount by the number of months in the lease.
2. Rent Charge: This is essentially the interest you pay for the leasing company's capital. It uses a unique formula: (Net Capitalized Cost + Residual Value) × Money Factor. The Money Factor is a small decimal; to see the equivalent APR, multiply the Money Factor by 2,400.
3. Sales Tax: In most states, sales tax is applied to the sum of the depreciation and rent charges every month.

Important Lease Terms to Know

• MSRP: The sticker price of the car. It is used to calculate the residual value.
• Gross Capitalized Cost: The total price of the vehicle including the selling price plus any added fees or accessories.
• Capitalized Cost Reduction: Anything that lowers the amount being financed, such as a down payment, trade-in, or manufacturer rebates.
• Residual Value: A fixed percentage of the MSRP set by the leasing company (the "lessor"). A higher residual value results in a lower monthly payment.

Example Lease Calculation

Imagine you are leasing a car with an MSRP of $40,000. Here is how the math works for a 36-month lease:

Negotiated Selling Price	$38,000
Down Payment	$3,000
Residual Value (60% of MSRP)	$24,000
Money Factor	0.0015 (3.6% APR)

In this scenario, your Net Capitalized Cost is $35,000 ($38,000 – $3,000). Your Monthly Depreciation would be ($35,000 – $24,000) ÷ 36 = $305.56. Your Rent Charge would be ($35,000 + $24,000) × 0.0015 = $88.50. Combined with tax, your total payment would be roughly $425/month.

function calculateLease() { var msrp = parseFloat(document.getElementById("msrp").value); var sellingPrice = parseFloat(document.getElementById("sellingPrice").value); var resPercent = parseFloat(document.getElementById("residualPercent").value) / 100; var term = parseFloat(document.getElementById("term").value); var moneyFactor = parseFloat(document.getElementById("moneyFactor").value); var downPayment = parseFloat(document.getElementById("downPayment").value); var tradeIn = parseFloat(document.getElementById("tradeIn").value); var taxRate = parseFloat(document.getElementById("taxRate").value) / 100; if (isNaN(msrp) || isNaN(sellingPrice) || isNaN(resPercent) || isNaN(moneyFactor)) { alert("Please enter valid numbers in all fields."); return; } // 1. Calculate Residual Value var residualValue = msrp * resPercent; // 2. Calculate Net Capitalized Cost var netCapCost = sellingPrice – downPayment – tradeIn; // Validation for negative depreciation if (netCapCost < residualValue) { alert("Warning: Your Net Capitalized Cost is lower than the Residual Value. This usually doesn't happen in standard leases. Check your down payment or selling price."); } // 3. Depreciation Fee var depreciationFee = (netCapCost – residualValue) / term; if (depreciationFee < 0) depreciationFee = 0; // 4. Finance Fee (Rent Charge) var rentCharge = (netCapCost + residualValue) * moneyFactor; // 5. Monthly Base Payment var basePayment = depreciationFee + rentCharge; // 6. Monthly Tax var monthlyTax = basePayment * taxRate; // 7. Total Payment var totalPayment = basePayment + monthlyTax; // Display Results document.getElementById("result-box").style.display = "block"; document.getElementById("basePayment").innerText = "$" + basePayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("totalPayment").innerText = "$" + totalPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("resValOut").innerText = "$" + residualValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("deprecOut").innerText = "$" + depreciationFee.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("rentOut").innerText = "$" + rentCharge.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("taxOut").innerText = "$" + monthlyTax.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); // Smooth scroll to result document.getElementById("result-box").scrollIntoView({ behavior: 'smooth', block: 'nearest' }); } @media (max-width: 600px) { #lease-calc-container div { grid-template-columns: 1fr !important; } .input-section { margin-bottom: 20px; } }