Auto Lease Payment Calculator
How to Calculate Your Car Lease Payment
Leasing a vehicle is often more complex than a standard purchase because you are only paying for the vehicle's depreciation during the time you drive it, rather than the total value. To understand your lease, you need to look at three main components: Depreciation, Rent Charge, and Taxes.
Key Leasing Terms Explained
- Gross Capitalized Cost: This is the negotiated price of the car plus any added fees or previous lease balances.
- Residual Value: This is the estimated value of the car at the end of the lease. For example, if a $35,000 car has a 60% residual after 3 years, it is worth $21,000.
- Money Factor: This is the lease version of an interest rate. You can find the Money Factor by dividing the APR by 2400.
- Cap Cost Reduction: The sum of your down payment, trade-in value, and any manufacturer rebates that lower the amount you need to finance.
The Realistic Lease Example
Imagine you are looking at a sedan with an MSRP of $35,000. You negotiate the price down to $32,000. You put $2,000 down. The bank sets a 60% residual value ($21,000) and an APR of 4.5%.
Your adjusted capitalized cost is $30,000 ($32,000 – $2,000). Over 36 months, the car depreciates by $9,000 ($30,000 – $21,000). This results in a $250 base depreciation payment. When you add the rent charge (interest) and sales tax, your final payment would likely land between $380 and $420 depending on your local tax laws.
Tips for a Better Lease Deal
Always negotiate the Sale Price (Capitalized Cost) just as if you were buying the car. Many consumers mistakenly only negotiate the monthly payment. Additionally, try to minimize your down payment on a lease; if the car is totaled shortly after leaving the lot, that down payment is often lost as insurance pays the leasing company, not you.