Car Lease Payment Calculator
Estimated Monthly Payment
How is a Car Lease Payment Calculated?
Leasing a car is different from buying one because you are essentially paying for the vehicle's depreciation during the time you drive it, rather than the full value of the car. To use our calculator effectively, you should understand the four primary components of a lease payment.
1. Depreciation Fee
This is the largest part of your monthly payment. It represents the value the car loses over the lease term. The formula is: (Adjusted Capitalized Cost – Residual Value) / Term in Months.
2. Rent Charge (The Money Factor)
The rent charge is the cost of borrowing the money for the lease, similar to an interest rate on a loan. However, in leasing, this is expressed as a Money Factor. To convert a Money Factor to a standard APR, multiply it by 2400. For example, a money factor of 0.00125 equals a 3% APR.
3. Residual Value
This is the estimated value of the car at the end of the lease. It is set by the leasing company. A higher residual value usually results in a lower monthly payment because you are responsible for paying off a smaller portion of the car's total value.
Example Calculation
Suppose you negotiate a car price of $35,000. You put $3,000 down. The residual value is 60% ($21,000) for a 36-month lease. With a money factor of 0.00125:
- Adjusted Cap Cost: $35,000 – $3,000 = $32,000
- Monthly Depreciation: ($32,000 – $21,000) / 36 = $305.56
- Monthly Rent: ($32,000 + $21,000) * 0.00125 = $66.25
- Base Payment: $305.56 + $66.25 = $371.81
After applying a 7.5% sales tax, your final monthly payment would be roughly $399.70.
Pro Tip: Negotiate the "Cap Cost"
Many people don't realize that the MSRP (sticker price) of a leased car is often negotiable. The "Adjusted Capitalized Cost" is your starting point—the lower you negotiate this price, the lower your monthly payment will be, regardless of the residual value set by the manufacturer.