Percentage of MSRP the vehicle is expected to be worth at lease end.
Represents the financing interest rate. Divide by 2400 to approximate APR (e.g., 0.00150 * 2400 = 3.6% APR).
Applied to monthly payments.
Estimated Monthly Lease Payment:
$0.00
Understanding Vehicle Lease Costs
Leasing a vehicle offers a way to drive a new car with lower monthly payments compared to financing a purchase. However, understanding the components of a lease agreement is crucial to avoid surprises and negotiate the best terms. This calculator helps demystify the monthly payment by breaking down the key factors involved.
Key Components of a Lease Payment:
Depreciation Cost: This is the difference between the vehicle's initial price (MSRP) and its expected value at the end of the lease term (Residual Value). You essentially pay for the portion of the car's value you use during the lease.
Financing Cost (Rent Charge): This is the interest you pay on the lease. It's calculated using the Money Factor (MF), which is a small decimal representing the monthly interest rate. The financing cost is applied to the average balance of the vehicle's value over the lease term.
Taxes: In most states, sales tax is applied to the monthly lease payment, not the entire vehicle price.
Fees: Lease agreements often include various fees, such as an acquisition fee (for setting up the lease) and a dealer or documentation fee. These are often rolled into the capitalized cost, affecting your depreciation and financing costs, or sometimes paid upfront.
How the Calculation Works:
The total monthly lease payment is calculated in stages:
Calculate the Residual Value:
Residual Value = Vehicle Price (MSRP) * (Residual Value Percentage / 100)
Example: $35,000 (MSRP) * (55% / 100) = $19,250
Calculate the Depreciation Amount:
Depreciation Amount = Vehicle Price (MSRP) – Residual Value
Example: $35,000 – $19,250 = $15,750
Calculate the Monthly Depreciation Cost:
Monthly Depreciation = Depreciation Amount / Lease Term (Months)
Example: $15,750 / 36 months = $437.50
Calculate the Financing Cost (Rent Charge): This is a bit more complex as it involves the money factor. The formula typically looks at the sum of the capitalized cost (price minus down payment plus fees) and the residual value, then multiplies by the money factor. A simplified approach for monthly rent charge:
Total Monthly Payment = Base Monthly Payment + Monthly Sales Tax
Example: $517.67 + $38.82 = $556.49
Important Considerations:
Capitalized Cost Reduction (Cap Cost Reduction): This is the amount of your down payment that reduces the Capitalized Cost (the price the dealer agrees to lease the car for). A higher cap cost reduction leads to lower monthly payments.
Money Factor vs. APR: A Money Factor (MF) is typically used in lease contracts. To approximate the Annual Percentage Rate (APR), multiply the MF by 2400. For example, an MF of 0.00150 is roughly equivalent to a 3.6% APR (0.00150 * 2400 = 3.6).
Lease Fees: Be aware of all fees. Some are negotiable, while others are standard.
Mileage Limits: Leases come with annual mileage limits. Exceeding these limits results in per-mile charges at the end of the lease, which can be substantial.
Wear and Tear: Excessive wear and tear beyond normal use can also incur charges.
Negotiation: The MSRP, money factor, and residual value (though less negotiable) are often points of negotiation.
Use this calculator as a guide to estimate your potential monthly lease payment. Always review the specific terms and conditions of any lease offer carefully.
function calculateLeaseCost() {
var vehiclePrice = parseFloat(document.getElementById("vehiclePrice").value);
var residualValuePercentage = parseFloat(document.getElementById("residualValuePercentage").value);
var moneyFactor = parseFloat(document.getElementById("moneyFactor").value);
var leaseTerm = parseInt(document.getElementById("leaseTerm").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var acquisitionFee = parseFloat(document.getElementById("acquisitionFee").value);
var dealerFee = parseFloat(document.getElementById("dealerFee").value);
var salesTaxRate = parseFloat(document.getElementById("salesTaxRate").value);
var monthlyPayment = 0;
// Input validation
if (isNaN(vehiclePrice) || vehiclePrice <= 0 ||
isNaN(residualValuePercentage) || residualValuePercentage 100 ||
isNaN(moneyFactor) || moneyFactor <= 0 ||
isNaN(leaseTerm) || leaseTerm <= 0 ||
isNaN(downPayment) || downPayment < 0 || // Down payment can be 0
isNaN(acquisitionFee) || acquisitionFee < 0 || // Fees can be 0
isNaN(dealerFee) || dealerFee < 0 ||
isNaN(salesTaxRate) || salesTaxRate < 0) {
alert("Please enter valid positive numbers for all fields. Ensure percentages are between 0 and 100.");
document.getElementById("monthlyPayment").textContent = "$0.00";
return;
}
// 1. Calculate Residual Value
var residualValue = vehiclePrice * (residualValuePercentage / 100);
// 2. Calculate Depreciation Amount
var depreciationAmount = vehiclePrice – residualValue;
// 3. Calculate Monthly Depreciation
var monthlyDepreciation = depreciationAmount / leaseTerm;
// 4. Calculate Capitalized Cost (Price agreed upon for the lease)
// This is typically MSRP, less down payment, plus fees.
var capitalizedCost = vehiclePrice – downPayment + acquisitionFee + dealerFee;
// 5. Calculate Monthly Rent Charge (Financing Cost)
// Simplified formula: (Capitalized Cost + Residual Value) * Money Factor
var monthlyRentCharge = (capitalizedCost + residualValue) * moneyFactor;
// 6. Calculate Base Monthly Payment (before tax)
var baseMonthlyPayment = monthlyDepreciation + monthlyRentCharge;
// 7. Calculate Monthly Sales Tax
var monthlySalesTax = baseMonthlyPayment * (salesTaxRate / 100);
// 8. Calculate Total Monthly Payment
monthlyPayment = baseMonthlyPayment + monthlySalesTax;
document.getElementById("monthlyPayment").textContent = "$" + monthlyPayment.toFixed(2);
}