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Estimate your monthly car lease payments based on MSRP, money factor, and residual value.

Understanding Your Car Lease Calculation

Calculating a car lease is more complex than a standard auto loan. Unlike a loan where you pay for the entire value of the vehicle plus interest, a lease focuses on the depreciation of the car over a set period. You are essentially paying for the portion of the car's life that you use.

Key Factors in a Lease Payment

• Gross Capitalized Cost: The agreed-upon price of the vehicle, including any dealer fees or add-ons.
• Residual Value: The estimated value of the car at the end of the lease. This is set by the leasing company and is usually a percentage of the MSRP.
• Money Factor: This is the interest rate on a lease. To find the equivalent APR, multiply the money factor by 2400.
• Capitalized Cost Reduction: This includes your down payment, trade-in value, and any manufacturer rebates.

Realistic Example:
If you lease a $40,000 car with a 60% residual after 3 years, the car is expected to be worth $24,000 at the end. Your depreciation fee is ($40,000 – $24,000) divided by 36 months, which is $444.44/month. You then add the rent charge (interest) and sales tax to find your total payment.

How to Lower Your Payment

To reduce your monthly lease cost, you can negotiate a lower vehicle price (Capitalized Cost), find a vehicle with a higher residual value (it depreciates less), or look for promotional low money factors. Increasing your down payment also lowers the monthly cost, though many experts recommend a low down payment on leases to avoid financial risk if the car is totaled early in the term.