How to Calculate Finance Rate on Car

Car Lease Payment Calculator

Estimated Monthly Payment

Depreciation Fee:

Finance Fee (Rent):

Sales Tax:

Total Cost of Lease:

function calculateLease() { var msrp = parseFloat(document.getElementById('msrp').value); var downPayment = parseFloat(document.getElementById('downPayment').value); var leaseTerm = parseFloat(document.getElementById('leaseTerm').value); var residualPercent = parseFloat(document.getElementById('residualPercent').value); var moneyFactor = parseFloat(document.getElementById('moneyFactor').value); var salesTax = parseFloat(document.getElementById('salesTax').value); if (isNaN(msrp) || isNaN(leaseTerm) || isNaN(residualPercent) || leaseTerm <= 0) { alert("Please enter valid numbers in all fields."); return; } var capitalizedCost = msrp – downPayment; var residualValue = msrp * (residualPercent / 100); // 1. Depreciation Fee = (Cap Cost – Residual) / Term var depreciationFee = (capitalizedCost – residualValue) / leaseTerm; // 2. Finance Fee = (Cap Cost + Residual) * Money Factor var financeFee = (capitalizedCost + residualValue) * moneyFactor; var basePayment = depreciationFee + financeFee; // 3. Tax var monthlyTax = basePayment * (salesTax / 100); var totalMonthly = basePayment + monthlyTax; var totalCost = (totalMonthly * leaseTerm) + downPayment; document.getElementById('finalPayment').innerHTML = "$" + totalMonthly.toFixed(2); document.getElementById('depreciationPart').innerHTML = "$" + depreciationFee.toFixed(2); document.getElementById('financePart').innerHTML = "$" + financeFee.toFixed(2); document.getElementById('taxPart').innerHTML = "$" + monthlyTax.toFixed(2); document.getElementById('totalLeaseCost').innerHTML = "$" + totalCost.toFixed(2); document.getElementById('leaseResult').style.display = "block"; }

How Car Lease Payments are Calculated

Understanding a car lease can be complex because the math differs significantly from a standard auto loan. When you lease, you are essentially paying for the vehicle's depreciation over a set period, rather than the full purchase price.

Key Leasing Terms You Must Know

• Gross Capitalized Cost: The negotiated price of the vehicle plus any added fees or taxes.
• Residual Value: The estimated value of the car at the end of the lease. High residual values lead to lower monthly payments because there is less depreciation to cover.
• Money Factor: This represents the interest rate. To convert a money factor to an APR, multiply it by 2400. For example, a 0.00125 money factor equals a 3% APR.
• Capitalized Cost Reduction: This is your down payment, trade-in value, or rebates that lower the amount being financed.

The Formula

Your lease payment is composed of three main parts:

1. Depreciation Fee: (Net Capitalized Cost – Residual Value) ÷ Lease Term.
2. Finance Fee (Rent): (Net Capitalized Cost + Residual Value) × Money Factor.
3. Sales Tax: Most states apply sales tax to the monthly payment rather than the total price of the car.

Example Calculation

Imagine a car with an MSRP of $40,000, a 36-month lease, a 60% residual value, and a $0 down payment with a 0.0015 money factor.

• Residual Value: $24,000 (60% of $40,000)
• Monthly Depreciation: ($40,000 – $24,000) / 36 = $444.44
• Monthly Finance Fee: ($40,000 + $24,000) * 0.0015 = $96.00
• Total Base Payment: $540.44 (plus local taxes)

Tips for a Better Lease Deal

To lower your monthly payment, focus on negotiating the Gross Capitalized Cost just as you would negotiate the sale price of a car. Additionally, look for "Lease Specials" where manufacturers offer high residual values or subsidized money factors (often called "subvented" leases) to move specific inventory.