Auto Lease Calculator
Calculate your estimated monthly lease payment for a vehicle.
Estimated Monthly Payment
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Understanding Your Auto Lease Payment
Leasing a car can be an attractive option for many drivers, offering lower monthly payments compared to financing a purchase. However, understanding how those payments are calculated is crucial to avoid surprises. This auto lease calculator helps demystify the process by breaking down the key components that determine your monthly lease cost.
Key Components Explained:
- Vehicle Price: This is the Manufacturer's Suggested Retail Price (MSRP) or negotiated selling price of the vehicle you intend to lease.
- Capitalized Cost Reduction (Down Payment): This is any upfront payment you make to reduce the vehicle's price (capitalized cost) at the beginning of the lease. This can include a traditional down payment, trade-in value, or manufacturer rebates. Reducing the capitalized cost directly lowers your depreciation and financing charges.
- Residual Value: This is the estimated value of the vehicle at the end of the lease term. It's usually expressed as a percentage of the original MSRP. A higher residual value means the car is expected to hold its value better, resulting in a lower monthly payment. This percentage is set by the leasing company and is not negotiable.
- Money Factor: This is essentially the interest rate for your lease, expressed as a decimal (e.g., 0.00125). To convert it to an approximate Annual Percentage Rate (APR), you multiply it by 2400 (e.g., 0.00125 * 2400 = 3% APR). A lower money factor means lower financing costs.
- Lease Term: This is the duration of the lease agreement, typically ranging from 24 to 48 months. Longer terms generally mean lower monthly payments but result in paying more interest over the life of the lease and often mean the car will be out of warranty sooner.
How the Calculation Works:
The monthly lease payment is primarily composed of two main parts: the depreciation cost and the finance charge (rent charge).
1. Calculate Adjusted Capitalized Cost:
Adjusted Capitalized Cost = Vehicle Price – Capitalized Cost Reduction
2. Calculate Depreciation Cost:
Depreciation Cost = (Adjusted Capitalized Cost – Residual Value)
*Note: Residual Value here is the actual dollar amount, calculated as (MSRP * Residual Percentage / 100)*. For simplicity in the calculator, we use the provided Residual Value percentage against the Vehicle Price directly for depreciation calculation as a common approximation, but a precise calculation would use MSRP.
3. Calculate Monthly Depreciation:
Monthly Depreciation = Depreciation Cost / Lease Term
4. Calculate Finance Charge (Rent Charge):
Finance Charge = (Adjusted Capitalized Cost + Residual Value) * Money Factor
5. Calculate Monthly Finance Charge:
Monthly Finance Charge = Finance Charge / Lease Term
6. Calculate Total Monthly Payment:
Total Monthly Payment = Monthly Depreciation + Monthly Finance Charge
Adjusted Capitalized Cost = Vehicle Price – Capitalized Cost Reduction
2. Calculate Depreciation Cost:
Depreciation Cost = (Adjusted Capitalized Cost – Residual Value)
*Note: Residual Value here is the actual dollar amount, calculated as (MSRP * Residual Percentage / 100)*. For simplicity in the calculator, we use the provided Residual Value percentage against the Vehicle Price directly for depreciation calculation as a common approximation, but a precise calculation would use MSRP.
3. Calculate Monthly Depreciation:
Monthly Depreciation = Depreciation Cost / Lease Term
4. Calculate Finance Charge (Rent Charge):
Finance Charge = (Adjusted Capitalized Cost + Residual Value) * Money Factor
5. Calculate Monthly Finance Charge:
Monthly Finance Charge = Finance Charge / Lease Term
6. Calculate Total Monthly Payment:
Total Monthly Payment = Monthly Depreciation + Monthly Finance Charge
Taxes and Fees: Remember that this calculator provides an estimate. Your actual monthly payment may be higher due to sales tax (applied to the monthly payment in most states), acquisition fees, disposition fees, registration fees, and other dealer-added charges. Always review the lease contract carefully.
When is Leasing a Good Option?
- You prefer driving a new car every few years.
- You want lower monthly payments than financing.
- You don't drive excessively high mileage (stay within the lease's mileage limits).
- You are careful with vehicle condition to avoid excess wear and tear charges.
- You don't want the hassle of selling a used car.
Use this calculator to compare different vehicles and lease terms to find the best option for your budget.