Leasing a car is different from a traditional loan. Instead of paying for the entire value of the vehicle, you are essentially paying for the depreciation that occurs during the time you drive it, plus a finance fee called the "Money Factor."
The Three Core Components:
Depreciation Fee: This is the loss in the car's value over the lease term. It's calculated by taking the Gross Capitalized Cost (negotiated price minus down payments) and subtracting the Residual Value (what the car is worth at the end), then dividing by the number of months.
Finance Fee (Rent Charge): This is the interest you pay for the leasing company's capital. The formula is unique: (Capitalized Cost + Residual Value) × Money Factor.
Sales Tax: In most states, sales tax is applied to the monthly payment rather than the total price of the car.
Example Calculation:
If you negotiate a car price to $30,000, have a residual value of 60% ($18,000), and a lease term of 36 months:
Finance Charge: Assuming a 4.8% APR (Money Factor of 0.0020), ($30,000 + $18,000) × 0.0020 = $96.00/mo
Base Payment: $333.33 + $96.00 = $429.33/mo
Tips for a Lower Lease Payment:
To get the best deal, focus on negotiating the sale price (Gross Cap Cost) just as you would if you were buying the car. Also, look for cars with high residual values; vehicles that hold their value better usually have lower monthly lease payments because you are paying for less depreciation.
function calculateLease() {
var msrp = parseFloat(document.getElementById("msrp").value) || 0;
var salePrice = parseFloat(document.getElementById("salePrice").value) || 0;
var downPayment = parseFloat(document.getElementById("downPayment").value) || 0;
var tradeIn = parseFloat(document.getElementById("tradeIn").value) || 0;
var residualPercent = parseFloat(document.getElementById("residualPercent").value) || 0;
var term = parseFloat(document.getElementById("leaseTerm").value) || 36;
var apr = parseFloat(document.getElementById("apr").value) || 0;
var taxRate = parseFloat(document.getElementById("salesTax").value) || 0;
if (msrp <= 0 || salePrice <= 0 || residualPercent <= 0) {
alert("Please enter valid numbers for MSRP, Sale Price, and Residual Value.");
return;
}
// 1. Calculate Net Capitalized Cost
var capCost = salePrice – downPayment – tradeIn;
// 2. Calculate Residual Value in Dollars
var residualValue = msrp * (residualPercent / 100);
// 3. Calculate Monthly Depreciation
var monthlyDepreciation = (capCost – residualValue) / term;
if (monthlyDepreciation < 0) monthlyDepreciation = 0;
// 4. Calculate Money Factor (APR / 2400)
var moneyFactor = apr / 2400;
// 5. Calculate Monthly Finance Charge (Rent Charge)
var monthlyFinance = (capCost + residualValue) * moneyFactor;
// 6. Subtotal and Tax
var basePayment = monthlyDepreciation + monthlyFinance;
var monthlyTax = basePayment * (taxRate / 100);
var totalMonthly = basePayment + monthlyTax;
// 7. Total Lease Cost (Payments over term + down payments)
var totalCost = (totalMonthly * term) + downPayment + tradeIn;
// Display Results
document.getElementById("leaseResult").style.display = "block";
document.getElementById("monthlyPaymentTotal").innerText = "$" + totalMonthly.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("depreciationPart").innerText = "$" + monthlyDepreciation.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("financePart").innerText = "$" + monthlyFinance.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("taxPart").innerText = "$" + monthlyTax.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById("totalLeaseCost").innerText = "$" + totalCost.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
// Smooth scroll to result
document.getElementById("leaseResult").scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}