Calculate your precise monthly lease payment based on cap cost, money factor, and residual value.
Gross Capitalized Cost:
Adjusted Capitalized Cost:
Residual Value:
Monthly Depreciation Fee:
Monthly Rent Charge:
Base Monthly Payment:
Total Monthly Payment (incl. Tax):
Understanding the Mechanics of an Auto Lease
Auto leasing is often misunderstood because it uses different terminology than standard vehicle financing. Instead of interest rates and down payments, leasing relies on Money Factors and Capitalized Cost Reductions. Understanding these variables allows you to negotiate a better deal at the dealership.
Key Terms in This Calculator
MSRP: The Manufacturer's Suggested Retail Price. This is used primarily to calculate the Residual Value.
Gross Capitalized Cost: The negotiated price of the vehicle plus any added fees or taxes rolled into the lease.
Capitalized Cost Reduction: Any amount paid upfront to reduce the total amount being leased.
Residual Value: The estimated value of the car at the end of the lease term. Higher residuals result in lower monthly payments.
Money Factor: The cost of borrowing, expressed as a small decimal. To convert this to a rough APR, multiply by 2400.
How the Calculation Works
The lease payment is comprised of two main parts: the Depreciation Fee and the Rent Charge.
1. Depreciation Fee: This is the total depreciation divided by the number of months.
(Adjusted Cap Cost – Residual Value) / Lease Term
2. Rent Charge: This is effectively the interest.
(Adjusted Cap Cost + Residual Value) × Money Factor
3. Tax: Most states apply sales tax to the monthly payment, not the total value of the vehicle.
Example Calculation
Suppose you negotiate a car with a Gross Cap Cost of $30,000. You put down a $2,000 Capitalized Cost Reduction, making your Adjusted Cap Cost $28,000. If the MSRP was $32,000 and the Residual Value is 60%, your Residual is $19,200. Over a 36-month term with a 0.0015 Money Factor: