Understanding Your Car Lease: How Payments Are Calculated
Leasing a vehicle can be more complex than a traditional auto loan. While a loan is based on the total price of the car, a lease is essentially paying for the depreciation of the vehicle during the time you drive it, plus interest and fees. Use our Car Lease Payment Calculator to break down the numbers before you head to the dealership.
Key Lease Components Explained
To use the calculator effectively, you need to understand the variables that determine your monthly check:
Gross Capitalized Cost: This is the "negotiated price" of the car. Just like buying a car, you can and should negotiate the MSRP down.
Residual Value: This is the estimated value of the car at the end of the lease. It is usually set by the bank and expressed as a percentage of the MSRP. A higher residual value results in lower monthly payments.
Money Factor: This is the lease version of an interest rate. To convert the money factor to a standard APR, multiply it by 2400 (e.g., 0.0015 x 2400 = 3.6% APR).
Lease Term: The duration of the lease, typically 24, 36, or 48 months.
A Realistic Lease Example
Let's look at a typical scenario for a mid-sized SUV:
MSRP: $40,000
Negotiated Price: $38,000
Down Payment: $2,000
Residual Value (55%): $22,000
Term: 36 Months
Money Factor: 0.00125 (3% APR)
In this case, the total depreciation is $14,000 ($36,000 Adjusted Cap Cost minus $22,000 Residual). Dividing that by 36 months gives a base depreciation payment of $388.89. The rent charge (interest) is calculated by adding the Cap Cost and Residual and multiplying by the money factor, adding roughly $72.50. Your total estimated payment would be $461.39 per month (plus taxes).
How to Lower Your Lease Payment
If the calculated payment is too high, consider these strategies:
Negotiate the Sale Price: The lower the capitalized cost, the less depreciation you pay.
Choose High-Residual Vehicles: Brands that hold their value well (like Toyota, Subaru, or Porsche) often have lower lease payments because the residual value is higher.
Improve Your Credit: A better credit score allows you to access a lower Money Factor from the leasing company.
function calculateLease() {
var msrp = parseFloat(document.getElementById("msrp").value);
var downPayment = parseFloat(document.getElementById("downPayment").value) || 0;
var tradeIn = parseFloat(document.getElementById("tradeIn").value) || 0;
var leaseTerm = parseFloat(document.getElementById("leaseTerm").value);
var residualPercent = parseFloat(document.getElementById("residualPercent").value);
var moneyFactor = parseFloat(document.getElementById("moneyFactor").value);
if (isNaN(msrp) || isNaN(leaseTerm) || isNaN(residualPercent) || isNaN(moneyFactor) || leaseTerm <= 0) {
alert("Please enter valid numbers in all fields.");
return;
}
// 1. Calculate Adjusted Capitalized Cost
var adjCapCost = msrp – downPayment – tradeIn;
// 2. Calculate Residual Value
var residualValue = msrp * (residualPercent / 100);
// 3. Calculate Monthly Depreciation
var monthlyDepreciation = (adjCapCost – residualValue) / leaseTerm;
// 4. Calculate Monthly Rent Charge (Interest)
// Formula: (Adj Cap Cost + Residual Value) * Money Factor
var monthlyRentCharge = (adjCapCost + residualValue) * moneyFactor;
// 5. Total Payment
var totalPayment = monthlyDepreciation + monthlyRentCharge;
// Display Results
document.getElementById("resGrossCap").innerText = "$" + adjCapCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resResidual").innerText = "$" + residualValue.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resDepreciation").innerText = "$" + monthlyDepreciation.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resRent").innerText = "$" + monthlyRentCharge.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("resTotal").innerText = "$" + totalPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + "/mo";
document.getElementById("result").style.display = "block";
}