Understanding Car Leasing and How This Calculator Works
Leasing a vehicle can be a cost-effective way to drive a new car every few years with lower monthly payments compared to a traditional auto loan. However, lease math is notoriously complex. This calculator breaks down the "hidden" components of your lease contract to show you exactly where your money goes.
Key Lease Components Explained
MSRP: The Manufacturer's Suggested Retail Price. This is the starting point for negotiations. The lower the price you negotiate, the lower your payments.
Residual Value: This is the estimated value of the car at the end of the lease term. It is set by the bank and expressed as a percentage of the MSRP. A higher residual value means lower monthly payments.
Money Factor: This is essentially the interest rate on a lease. To convert the Money Factor to a standard APR, multiply it by 2400. Our calculator does this math for you.
Capitalized Cost: The negotiated price of the car minus any down payments or trade-in credits. This is the amount actually being financed.
Real-World Example Calculation
Imagine you are leasing a $40,000 SUV for 36 months:
MSRP: $40,000
Down Payment: $4,000
Residual Value: 60% ($24,000)
APR: 4.8% (Money Factor: 0.0020)
The Depreciation Fee would be ($36,000 – $24,000) / 36 = $333.33 per month. The Finance Fee would be ($36,000 + $24,000) * 0.0020 = $120.00 per month. Your total monthly payment would be approximately $453.33 (plus local sales tax).
Lease vs. Buy: Which is Better?
Leasing is generally better if you want a new car every 3 years, prefer lower monthly payments, and drive a predictable number of miles annually. Buying is better if you plan to keep the car for 5+ years, drive long distances, or want to build equity in the vehicle. Use our calculator to experiment with different down payments and interest rates to see which path fits your budget.
function calculateCarLease() {
var msrp = parseFloat(document.getElementById('car_msrp').value);
var down = parseFloat(document.getElementById('car_down').value) || 0;
var trade = parseFloat(document.getElementById('car_trade').value) || 0;
var term = parseFloat(document.getElementById('car_term').value);
var residualPerc = parseFloat(document.getElementById('car_residual').value);
var apr = parseFloat(document.getElementById('car_apr').value);
if (isNaN(msrp) || isNaN(term) || isNaN(residualPerc) || isNaN(apr) || term <= 0) {
alert("Please enter valid numeric values for all fields.");
return;
}
// 1. Calculate Residual Dollar Value
var residualDollars = msrp * (residualPerc / 100);
// 2. Calculate Adjusted Capitalized Cost
var adjCapCost = msrp – down – trade;
// Safety check – if residual is higher than cap cost (rare but possible in bad deals)
if (adjCapCost < residualDollars) {
adjCapCost = residualDollars;
}
// 3. Calculate Monthly Depreciation
var monthlyDepreciation = (adjCapCost – residualDollars) / term;
// 4. Calculate Money Factor
var moneyFactor = apr / 2400;
// 5. Calculate Monthly Finance Fee (Rent Charge)
var monthlyFinance = (adjCapCost + residualDollars) * moneyFactor;
// 6. Total Monthly Payment
var monthlyPayment = monthlyDepreciation + monthlyFinance;
// 7. Total Cost of Lease
var totalCost = (monthlyPayment * term) + down + trade;
// Display results
document.getElementById('lease_results_box').style.display = 'block';
document.getElementById('display_monthly').innerHTML = '$' + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('display_residual_dollars').innerHTML = '$' + residualDollars.toLocaleString(undefined, {minimumFractionDigits: 0, maximumFractionDigits: 0});
document.getElementById('display_money_factor').innerHTML = moneyFactor.toFixed(5);
document.getElementById('display_total_cost').innerHTML = '$' + totalCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
}