Car Lease Monthly Payment Calculator
Understanding How Car Lease Payments Are Calculated
Leasing a car is different from buying one because you are only paying for the vehicle's depreciation during the time you drive it, plus interest and taxes. To get the most accurate estimate, you need to understand three core components: the Capitalized Cost, the Residual Value, and the Money Factor.
1. Capitalized Cost (Cap Cost)
This is essentially the "sale price" of the car. Just like buying a car, you can negotiate the MSRP down. Your "Net Cap Cost" is the negotiated price minus any down payment, trade-in credit, or dealer rebates. The lower your Cap Cost, the lower your monthly payment.
2. Residual Value
The residual value is what the leasing company estimates the car will be worth at the end of your lease term. It is usually expressed as a percentage of the original MSRP. For example, if a $40,000 car has a 60% residual value after 36 months, its residual value is $24,000. You are only responsible for paying the $16,000 difference (the depreciation).
3. Money Factor
The money factor is the lease version of an interest rate. It is written as a small decimal (e.g., 0.00125). To convert the money factor to a standard APR interest rate, multiply it by 2400. A money factor of 0.00125 is equivalent to a 3% APR.
Lease Calculation Example
Imagine you lease a car with the following terms:
- MSRP: $30,000
- Down Payment: $2,000
- Term: 36 Months
- Residual: 50% ($15,000)
- Money Factor: 0.0015
Your monthly depreciation would be ($28,000 – $15,000) / 36 = $361.11. Your monthly rent charge would be ($28,000 + $15,000) * 0.0015 = $64.50. Adding these together (plus tax) gives you your final monthly payment.