Car Lease Payment Calculator
Estimate your monthly car lease payments by entering the vehicle details below.
How to Calculate Your Car Lease Payment
Leasing a car can be an attractive alternative to buying, offering lower monthly payments and the ability to drive a new vehicle every few years. However, car lease math is notoriously complex. Unlike a standard loan, where you pay down a balance, a lease is essentially paying for the depreciation of the vehicle over the time you use it, plus interest.
Understanding the Key Lease Variables
To use our car lease calculator effectively, you need to understand several key terms that dealerships use:
- MSRP: The Manufacturer's Suggested Retail Price. This is the "sticker price."
- Negotiated Sale Price: Also known as the Gross Capitalized Cost. Never pay MSRP; you should negotiate the sale price of the car just as if you were buying it.
- Residual Value: This is the estimated value of the car at the end of the lease. It is usually expressed as a percentage of the MSRP. A higher residual value means lower monthly payments.
- Money Factor: This is the lease version of an interest rate. To convert a Money Factor to a standard APR, multiply it by 2400. (e.g., 0.00125 * 2400 = 3.0%).
- Lease Term: The duration of the lease, typically 24, 36, or 48 months.
Realistic Example: The 36-Month Lease
Imagine you are leasing a SUV with an MSRP of $40,000. You negotiate the price down to $37,000. The bank sets a residual value of 60% ($24,000) and a money factor of 0.0015 (3.6% APR). You put $2,500 down.
- Depreciation: ($34,500 Adjusted Cap Cost – $24,000 Residual) / 36 months = $291.67/mo
- Rent Charge: ($34,500 + $24,000) * 0.0015 = $87.75/mo
- Total (before tax): $379.42 per month.
How the Calculation Works
The monthly payment consists of three main parts: the Depreciation Fee, the Rent Charge, and Sales Tax.
1. The Depreciation Fee
This is the largest part of the payment. It covers the loss in value of the car. The formula is:
(Adjusted Capitalized Cost – Residual Value) / Term in Months.
2. The Rent Charge
This is the interest you pay to the leasing company for "borrowing" their asset. The formula is unique:
(Adjusted Capitalized Cost + Residual Value) * Money Factor. Note that you add the values together before multiplying by the money factor.
3. Sales Tax
In most states, sales tax is applied to the monthly payment rather than the total price of the vehicle. If your monthly payment is $400 and your tax rate is 8%, you will pay an additional $32 in tax each month.
Tips for Getting a Better Lease Deal
To lower your monthly payment, focus on these three levers:
- Negotiate the Sale Price: The lower the "Cap Cost," the lower the depreciation.
- Check for Incentives: Manufacturers often offer "Lease Cash" or rebates that act as an additional down payment.
- Watch the Money Factor: If you have excellent credit, ensure the dealer isn't "marking up" the interest rate provided by the lender.
Frequently Asked Questions
What is a good money factor?
A "good" money factor depends on the current market interest rates. Generally, anything below 0.002 (4.8% APR) is considered competitive in a standard economy, though "subvented" (subsidized) leases from manufacturers can be as low as 0.0001.
Should I put money down on a lease?
Most experts recommend putting as little money down as possible (Gap insurance usually covers the car if totaled, but your down payment is gone). Instead, keep that cash in a high-yield savings account and use it to cover the slightly higher monthly payments.