Car Lease Monthly Payment Calculator
Estimate your monthly lease payment based on price, residual value, and money factor.
How Car Lease Payments are Calculated
Leasing a vehicle is often more complex than a standard loan because you are essentially paying for the vehicle's depreciation over a set period, rather than the full value of the car. To use our calculator effectively, you should understand the primary components that dictate your monthly bill.
1. Gross Capitalized Cost
This is the "selling price" of the vehicle. Just like buying a car, you can and should negotiate the capitalized cost. A lower cap cost directly translates to a lower monthly payment.
2. Residual Value
The residual value is the estimated worth of the car at the end of the lease term. This value is set by the bank or leasing company and is usually expressed as a percentage of the MSRP. For example, if a $40,000 car has a 60% residual after 36 months, the residual value is $24,000.
3. Money Factor
The money factor is the lease's version of an interest rate. It is expressed as a very small decimal. To convert a money factor to a standard APR (Annual Percentage Rate), multiply it by 2,400. For instance, a money factor of 0.00125 is equivalent to a 3% APR.
4. Depreciation Fee
This is the largest portion of your payment. It is calculated as: (Net Capitalized Cost – Residual Value) / Lease Term. You are paying for the portion of the car's value that you "use up" during the lease.
5. Rent Charge (Finance Fee)
This is the interest paid to the leasing company. The formula is unique: (Net Capitalized Cost + Residual Value) × Money Factor. Interestingly, both the cap cost and the residual are added together to determine the base for interest calculation.
Example Calculation
Imagine you lease a car with a negotiated price of $35,000, a $3,000 down payment, a residual value of $20,000, a 36-month term, and a money factor of 0.0015.
- Net Cap Cost: $35,000 – $3,000 = $32,000
- Depreciation: ($32,000 – $20,000) / 36 = $333.33
- Rent Charge: ($32,000 + $20,000) × 0.0015 = $78.00
- Base Payment: $333.33 + $78.00 = $411.33
After adding local sales tax, you arrive at your final monthly commitment.