Lease Payment Calculator
Use this calculator to estimate your monthly lease payments and the total cost of leasing a vehicle. Understanding these figures can help you budget effectively and compare different lease offers.
Lease Calculation Results:
Monthly Depreciation: $0.00
Monthly Finance Charge: $0.00
Base Monthly Payment (Before Tax): $0.00
Monthly Sales Tax: $0.00
Total Monthly Payment (After Tax): $0.00
Total Lease Cost: $0.00
Understanding Vehicle Leasing
Leasing a vehicle is essentially a long-term rental agreement. Instead of buying a car outright or financing its full purchase price, you pay for the depreciation of the vehicle during the time you use it, plus a financing charge and various fees. This often results in lower monthly payments compared to purchasing, but you don't own the car at the end of the term.
Key Leasing Terms Explained:
- Vehicle Price (MSRP / Capitalized Cost): This is the agreed-upon price of the vehicle, similar to the purchase price. It's the starting point for calculating depreciation.
- Capitalized Cost Reduction (Upfront Payment): Any money you pay upfront to reduce the total amount being financed in the lease. This is similar to a down payment but specifically for a lease.
- Residual Value Percentage: The estimated value of the vehicle at the end of the lease term, expressed as a percentage of the original MSRP. A higher residual value means less depreciation and potentially lower monthly payments.
- Lease Term (Months): The duration of your lease agreement, typically 24, 36, or 48 months.
- Money Factor: This is the financing charge in a lease, similar to an interest rate but expressed as a small decimal (e.g., 0.0025). To convert it to an approximate annual interest rate, multiply by 2400.
- Sales Tax Rate: The percentage of sales tax applied to your monthly lease payment, which varies by state and local regulations.
- Acquisition Fee: A fee charged by the leasing company for setting up the lease.
- Documentation Fee: A fee charged by the dealership for processing paperwork.
How the Calculator Works:
The calculator determines your monthly lease payment by combining two main components: depreciation and finance charges. It first calculates the total depreciation over the lease term (the difference between the adjusted capitalized cost and the residual value) and divides it by the number of months. Then, it calculates the monthly finance charge based on the average lease balance and the money factor. These two amounts, along with sales tax, make up your total monthly payment. Finally, it sums up all monthly payments and upfront fees to give you the total lease cost.
Example Lease Scenario:
Let's say you're looking to lease a car with an MSRP of $35,000. You negotiate a capitalized cost reduction of $2,000. The leasing company sets the residual value at 55% after a 36-month lease term. The money factor is 0.002, and your state's sales tax rate is 7%. There's an acquisition fee of $595 and a documentation fee of $150.
- Adjusted Capitalized Cost: $35,000 – $2,000 = $33,000
- Residual Value Amount: $35,000 * 0.55 = $19,250
- Total Depreciation: $33,000 – $19,250 = $13,750
- Monthly Depreciation: $13,750 / 36 = $381.94
- Average Lease Balance: ($33,000 + $19,250) = $52,250
- Monthly Finance Charge: $52,250 * 0.002 = $104.50
- Base Monthly Payment: $381.94 + $104.50 = $486.44
- Monthly Sales Tax: $486.44 * 0.07 = $34.05
- Total Monthly Payment: $486.44 + $34.05 = $520.49
- Total Lease Cost: ($520.49 * 36) + $2,000 + $595 + $150 = $18,737.64 + $2,745 = $21,482.64
This example demonstrates how each component contributes to your overall lease cost, helping you understand where your money is going.