Car Lease Monthly Payment Calculator
Understanding How Your Car Lease Payment is Calculated
Leasing a car is significantly different from financing a purchase. Instead of paying for the entire value of the vehicle, you are essentially paying for the depreciation that occurs during the period you drive it, plus interest and taxes.
1. The Capitalized Cost (Sales Price)
The "Cap Cost" is the price you negotiate with the dealer. Just like buying a car, you should always negotiate the MSRP down. Your down payment, trade-in credit, and rebates reduce this number to the "Net Capitalized Cost."
2. Residual Value
The residual value is what the leasing company predicts the car will be worth at the end of your lease. If a $40,000 car has a 60% residual after 36 months, its residual value is $24,000. You are only responsible for paying the $16,000 difference (the depreciation) over the 36-month term.
3. The Money Factor
The money factor represents the interest rate on a lease. To convert a money factor to a standard APR, multiply it by 2,400. For example, a money factor of 0.00125 is equivalent to a 3% APR. A lower money factor means lower monthly rent charges.
Example Calculation
- MSRP: $40,000
- Negotiated Price: $38,000
- Down Payment: $2,000 (Net Cap Cost: $36,000)
- Residual (60%): $24,000
- Term: 36 Months
- Depreciation Fee: ($36,000 – $24,000) / 36 = $333.33/mo
- Rent Charge: ($36,000 + $24,000) * 0.00125 = $75.00/mo
- Base Payment: $408.33/mo + Sales Tax
Tips to Lower Your Lease Payment
To get the best deal, focus on three things: negotiating a lower sales price, looking for vehicles with high residual values (they hold their value better), and checking for manufacturer lease incentives that offer "subvented" (subsidized) money factors.