Car Lease Calculator
Estimate your monthly car lease payments precisely.
How Car Lease Payments Are Calculated
Leasing a car is different from buying one. Instead of paying for the entire value of the vehicle, you are essentially paying for the depreciation of the car during the time you drive it, plus interest and taxes.
1. The Depreciation Fee
This is the largest part of your lease payment. It is calculated by taking the "Adjusted Capitalized Cost" (the price you negotiated minus your down payment) and subtracting the "Residual Value" (what the car is worth at the end of the lease). This total is then divided by the number of months in the lease term.
2. The Rent Charge (Interest)
The rent charge is the cost of financing. In leasing, this is often expressed as a Money Factor. To convert a standard Interest Rate (APR) to a Money Factor, you divide the APR by 2400. Unlike a loan, the rent charge is calculated by adding the Adjusted Cap Cost to the Residual Value and multiplying by the Money Factor.
Practical Example:
- MSRP: $35,000
- Sale Price: $32,000
- Down Payment: $2,000
- Term: 36 Months
- Residual (60%): $21,000
- Money Factor: 0.0025 (Approx 6% APR)
In this scenario, the car loses $9,000 in value over 3 years. Your monthly depreciation is $250. The rent charge (interest) would be approximately $132.50. After adding tax, your payment would be roughly $411/month.
Common Leasing Terms to Know
- MSRP: The Manufacturer's Suggested Retail Price.
- Capitalized Cost: The negotiated price of the car. Always negotiate this just like a purchase!
- Cap Cost Reduction: Any down payment, trade-in, or rebates that lower the amount being financed.
- Residual Value: The predicted value of the car at the end of the lease, set by the bank.
- Money Factor: The interest rate on the lease. Multiply by 2400 to get the APR.
Lease Calculator FAQ
Should I put money down on a lease?
Generally, no. In the event the car is stolen or totaled shortly after you leave the lot, your down payment is often not recoverable from insurance. It is usually better to keep that cash in a savings account.
What is a good Money Factor?
A "good" money factor depends on current market rates and your credit score. Always compare the money factor provided by the dealer against current APRs for new car loans.
Can I negotiate the residual value?
No. Residual values are set by the leasing company (the bank) and are not negotiable at the dealership level. To get a lower payment, you must negotiate the sales price (Cap Cost) or find a car with a higher residual percentage.