Leasing a car offers a way to drive a new vehicle with lower monthly payments compared to financing, but it's crucial to understand how the payment is calculated. This calculator helps demystify the process by breaking down the key components that contribute to your monthly lease cost, based on common industry practices. Edmunds' approach emphasizes transparency and provides an estimate for your potential monthly payment.
Key Components of a Lease Payment:
MSRP (Manufacturer's Suggested Retail Price): The sticker price of the vehicle.
Negotiated Selling Price: This is the price you and the dealership agree upon. It's the starting point for calculating the depreciating portion of your lease. A lower selling price means a lower monthly payment.
Residual Value: This is the estimated value of the car at the end of your lease term. It's usually expressed as a percentage of the MSRP. A higher residual value means the car is expected to retain more of its value, leading to lower depreciation and thus a lower monthly payment. This percentage is set by the leasing company.
Annual Mileage Limit: The maximum number of miles you can drive per year without incurring excess mileage charges. Higher mileage limits generally result in higher payments because the car will depreciate more.
Lease Term: The duration of your lease agreement, typically in months (e.g., 24, 36, 48 months). A longer lease term means the vehicle's depreciation is spread over more payments, potentially lowering the monthly amount, but you'll also be driving the car for a longer period.
Money Factor: This is essentially the interest rate of your lease, expressed as a small decimal. It's often a more complex way of representing the Annual Percentage Rate (APR) on a loan. To approximate an APR, you can multiply the money factor by 2400. A lower money factor means less interest paid.
Capital Cost Reduction (CCR): This is similar to a down payment in a loan. Any amount you pay upfront that reduces the capitalized cost (the price of the car you're leasing) will lower your monthly payments. This includes things like a cash down payment, trade-in equity, or manufacturer rebates.
Sales Tax Rate: In most states, sales tax is applied to your monthly lease payment. The rate varies significantly by location. Some states tax the entire capitalized cost upfront, while others tax only the monthly payments. This calculator assumes tax is applied to the monthly payment.
How the Monthly Payment is Estimated:
The estimated monthly lease payment is generally calculated using the following formula:
This is the cost of financing the lease. Note: This is a simplified calculation; some leases may apply the finance charge to the depreciated amount plus residual value, or apply it differently based on CCR.
This is the sales tax applied to the sum of the depreciation and finance charges. The exact way sales tax is applied can vary by state.
Adjustments:
The Capital Cost Reduction is subtracted from the initial negotiated selling price *before* calculating depreciation and finance charges, effectively lowering the base amount. The calculation above incorporates CCR implicitly by reducing the selling price used in the depreciation and finance charge calculations.
Disclaimer: This calculator provides an estimate based on common leasing practices. Actual lease offers may vary due to dealership specific fees, bank fees, credit score, specific lease programs, and regional tax laws. Always review your lease contract carefully.
function calculateLease() {
var msrp = parseFloat(document.getElementById("MSRP").value);
var sellingPrice = parseFloat(document.getElementById("sellingPrice").value);
var residualValuePercent = parseFloat(document.getElementById("residualValue").value);
var annualMileage = parseFloat(document.getElementById("annualMileage").value);
var leaseTerm = parseInt(document.getElementById("leaseTerm").value);
var moneyFactor = parseFloat(document.getElementById("moneyFactor").value);
var capCostReduction = parseFloat(document.getElementById("capCostReduction").value);
var salesTaxRate = parseFloat(document.getElementById("salesTaxRate").value);
var resultElement = document.getElementById("result");
var resultSpan = resultElement.querySelector("span");
if (isNaN(msrp) || msrp <= 0 ||
isNaN(sellingPrice) || sellingPrice <= 0 ||
isNaN(residualValuePercent) || residualValuePercent 100 ||
isNaN(annualMileage) || annualMileage < 0 ||
isNaN(leaseTerm) || leaseTerm <= 0 ||
isNaN(moneyFactor) || moneyFactor < 0 ||
isNaN(capCostReduction) || capCostReduction < 0 ||
isNaN(salesTaxRate) || salesTaxRate 100) {
resultSpan.textContent = "Invalid input. Please check your numbers.";
return;
}
// Adjust selling price by capital cost reduction
var adjustedSellingPrice = sellingPrice – capCostReduction;
if (adjustedSellingPrice < 0) adjustedSellingPrice = 0; // Cannot be negative
// Calculate Residual Value in dollars
var residualValueDollars = msrp * (residualValuePercent / 100);
// Monthly Depreciation
var monthlyDepreciation = (adjustedSellingPrice – residualValueDollars) / leaseTerm;
// Monthly Finance Charge (Rent Charge)
// Simplified calculation: (Adjusted Selling Price + Residual Value) * Money Factor
var monthlyFinanceCharge = (adjustedSellingPrice + residualValueDollars) * moneyFactor;
// Total Monthly Payment before Tax
var totalMonthlyBeforeTax = monthlyDepreciation + monthlyFinanceCharge;
// Monthly Sales Tax
var monthlySalesTax = totalMonthlyBeforeTax * (salesTaxRate / 100);
// Final Estimated Monthly Payment
var estimatedMonthlyPayment = totalMonthlyBeforeTax + monthlySalesTax;
if (isNaN(estimatedMonthlyPayment) || estimatedMonthlyPayment < 0) {
resultSpan.textContent = "Calculation error. Please verify inputs.";
} else {
resultSpan.textContent = "$" + estimatedMonthlyPayment.toFixed(2);
}
}