Car Lease Calculator

What the car lease calculator does

A lease payment looks simple on the dealer's sheet, but it is built from several moving parts, and this tool pulls them apart so you can see where the money goes. You enter the MSRP, the negotiated price, the lease term, the sales tax, the residual factor, the money factor, and any fees or reductions, and it returns your monthly payment before and after tax, along with the depreciation fee, the lease charge, the net capitalized cost, and the residual value.

Seeing the breakdown is the point. A lease has more levers than a loan, and once you can see each one, you can tell a fair deal from a padded one.

Why a lease payment is built differently

When you buy with a loan, you pay for the whole car. When you lease, you pay only for the part of the car you use up during the lease, plus a charge for borrowing. That is the whole idea. A lease covers the car's expected drop in value over your term, the depreciation, plus a rent charge, plus taxes and fees. You are paying to drive it, not to own it, and at the end you hand it back rather than keeping it. That is why a lease payment is usually lower than a loan payment on the same car, and also why the payment is not money toward owning anything.

How to use it

1. MSRP. The sticker price, which sets the residual value.
2. Negotiated Selling Price. The price you actually agree, the lease's starting point.
3. Lease Term. The length of the lease in months.
4. Sales Tax. The tax rate that applies to the payment.
5. Residual Factor. The car's expected value at lease end, as a percentage of MSRP.
6. Money Factor. The lease's version of an interest rate, written as a small decimal.
7. Fees and reductions. Registration, dealer fee, down payment, trade-in, and any other reductions.

Press Calculate for the full breakdown, or Reset to clear it.

The pieces of the payment

The tool builds the payment the way a leasing company does. First it works out the net capitalized cost, which is the negotiated price plus fees, minus your down payment, trade-in, and any other reductions. That is the lease's effective price. Then it finds the residual value, the MSRP times the residual factor, which is what the car is predicted to be worth when you give it back. The gap between those two, the net cap cost minus the residual, is the value you use up, and splitting that over the months gives the monthly depreciation fee, usually the biggest part of the payment. On top sits the rent charge, then the tax, and the total is your monthly payment.

The money factor, and turning it into a rate

The money factor is the lease's interest rate in disguise, written as a small decimal like 0.00125 instead of a percentage, which makes it hard to judge. There is a simple way to read it: multiply the money factor by 2,400 and you get the rough equivalent APR. So 0.00125 is about 3 percent, and 0.00250 is about 6 percent. This is worth doing every time, because a money factor that looks like a tiny number can hide a rate you would never accept on a loan. The rent charge in your payment comes from this money factor applied to the cap cost and residual together, so a higher money factor quietly lifts every monthly payment.

An example with real numbers

Say the MSRP is 35,000, you negotiate the price to 32,000, the term is 36 months, sales tax is 7 percent, the residual factor is 60 percent, the money factor is 0.00125, and you have 800 in fees and 2,000 down.

• Net capitalized cost = 32,000 plus 800 fees minus 2,000 down = 30,800
• Residual value = 35,000 times 60 percent = 21,000
• Monthly depreciation fee = (30,800 minus 21,000) divided by 36 = about 272
• Rent charge = (30,800 plus 21,000) times 0.00125 = about 65 a month
• Payment is about 337 before tax, and about 361 with tax

The money factor of 0.00125 works out to roughly 3 percent, so the rate is reasonable. And notice the depreciation fee of about 272 is most of the payment, which is true of most leases: you are mainly paying for the value the car loses while you have it.

What you can and cannot negotiate

Knowing which levers move helps you focus. The negotiated selling price, the cap cost, is the main thing you can push on, just like buying, so negotiate that before you ever talk about the monthly payment. The money factor can sometimes be lowered, and it is always worth asking whether you are being given the base rate or a marked-up one. The residual value, on the other hand, is set by the leasing company and is generally fixed, though a higher residual works in your favour because it lowers the depreciation you pay for. A couple of honest reminders: a lease almost always limits your mileage, with a fee for every mile over, and ending a lease early can be expensive, so go in knowing how far you drive and how long you can commit.

Questions people ask

How is a lease payment calculated?

It is the monthly depreciation, the value the car loses over your term, plus a rent charge from the money factor, plus tax. The depreciation is the net cap cost minus the residual value, spread over the months.

What is a money factor and how do I read it?

It is the lease's interest rate, written as a small decimal. Multiply it by 2,400 to get the rough APR, so 0.00125 is about 3 percent. It is the fairest way to judge whether the financing cost is reasonable.

What is the residual value?

It is what the leasing company predicts the car will be worth at the end of the lease, set as a percentage of MSRP. A higher residual lowers your payment because there is less depreciation to pay for.

Do I own the car at the end of a lease?

No, unless your lease has a purchase option and you take it. Otherwise you return the car, which is why a lease payment is lower than a loan payment but does not build any ownership.

References

1. Federal Trade Commission (FTC), Financing or Leasing a Car. https://consumer.ftc.gov/financing-or-leasing-car
2. Consumer Financial Protection Bureau (CFPB), What should I know about leasing versus buying a car? (cap cost, residual value, and how the payment is built). https://www.consumerfinance.gov/ask-cfpb/what-should-i-know-about-leasing-versus-buying-a-car-en-815/