Enter APR (e.g., 4.5) or Money Factor (e.g., 0.00187)
Estimated Monthly Payment:
Base Monthly Depreciation:
Monthly Rent Charge:
Residual Value (Buyout):
Total Lease Cost:
Understanding Your Car Lease: How the Math Works
Leasing a vehicle can be an attractive alternative to buying, offering lower monthly payments and the ability to drive a new car every few years. However, car lease math is notoriously complex. Unlike a standard loan, a lease focuses on the depreciation of the vehicle over a specific period.
Key Lease Components Explained
MSRP: The Manufacturer's Suggested Retail Price. This is the starting point for negotiations.
Gross Capitalized Cost: The negotiated price of the vehicle plus any fees or taxes rolled into the lease.
Capitalized Cost Reduction: This includes your down payment, trade-in value, and manufacturer rebates that lower the amount being financed.
Residual Value: This is what the car is expected to be worth at the end of the lease. High residual values lead to lower monthly payments because you are paying for less depreciation.
Money Factor: This is essentially the interest rate for a lease. To convert a Money Factor to APR, multiply it by 2400. To convert APR to Money Factor, divide by 2400.
A Realistic Example
Let's say you want to lease a SUV with an MSRP of $40,000. You negotiate the price down to $38,000. You have a $3,000 down payment. The bank sets a 36-month residual value at 55% ($22,000). Your interest rate (APR) is 4.8%.
Depreciation: ($38,000 negotiated price – $3,000 down) – $22,000 residual = $13,000. Over 36 months, that is $361.11 per month.
Rent Charge: ($35,000 adjusted cap cost + $22,000 residual) * 0.002 (4.8 / 2400) = $114 per month.
Base Payment: $361.11 + $114 = $475.11 + tax.
Pro Tips for Lower Lease Payments
To get the best deal, focus on three things: negotiating a lower Sale Price, finding a vehicle with a high Residual Value, and ensuring the dealer isn't marking up the Money Factor beyond the base rate offered by the finance company.
function calculateLease() {
var msrp = parseFloat(document.getElementById('msrp').value);
var salePrice = parseFloat(document.getElementById('salePrice').value);
var downPayment = parseFloat(document.getElementById('downPayment').value) || 0;
var tradeIn = parseFloat(document.getElementById('tradeIn').value) || 0;
var term = parseInt(document.getElementById('leaseTerm').value);
var residualRate = parseFloat(document.getElementById('residualRate').value);
var aprInput = parseFloat(document.getElementById('apr').value);
var taxRate = parseFloat(document.getElementById('taxRate').value) || 0;
if (isNaN(msrp) || isNaN(salePrice) || isNaN(aprInput) || salePrice <= 0) {
alert("Please enter valid numbers for the vehicle price and money factor.");
return;
}
// Determine if input is Money Factor or APR
var moneyFactor = 0;
if (aprInput < 1) {
moneyFactor = aprInput; // User likely entered money factor directly
} else {
moneyFactor = aprInput / 2400; // User entered APR percentage
}
// 1. Calculate Residual Value
var residualValue = msrp * (residualRate / 100);
// 2. Adjusted Capitalized Cost
var adjCapCost = salePrice – downPayment – tradeIn;
if (adjCapCost < residualValue) {
alert("Down payment/Trade-in is too high. Adjusted Capitalized Cost cannot be lower than the Residual Value.");
return;
}
// 3. Monthly Depreciation
var monthlyDepreciation = (adjCapCost – residualValue) / term;
// 4. Monthly Rent Charge (Interest)
var monthlyRent = (adjCapCost + residualValue) * moneyFactor;
// 5. Total Base Payment
var basePayment = monthlyDepreciation + monthlyRent;
// 6. Tax Calculation
var monthlyTax = basePayment * (taxRate / 100);
var finalPayment = basePayment + monthlyTax;
// 7. Total Lease Cost
var totalCost = (finalPayment * term) + downPayment + tradeIn;
// Display Results
document.getElementById('leaseResults').style.display = 'block';
document.getElementById('resMonthly').innerText = '$' + finalPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resDepreciation').innerText = '$' + monthlyDepreciation.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resRent').innerText = '$' + monthlyRent.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resResidualVal').innerText = '$' + residualValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('resTotalCost').innerText = '$' + totalCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}