Car Lease Payment Calculator

How the Lease Payment Formula Works

A lease payment is made up of three main parts:

• Depreciation charge – how much value the vehicle is expected to lose over the lease term.
• Finance charge – the interest you pay to use the lender’s money, based on the money factor.
• Sales tax – applied differently depending on your state or country.

The calculator first estimates the adjusted capitalized cost (often shortened to “cap cost”). This is similar to the “amount financed” on a loan, after your down payment, trade-in credit, and certain fees.

Key variables:

• C = adjusted capitalized cost
• R = residual value at lease end
• T = lease term in months
• MF = money factor
• Tax = sales tax rate (as a decimal)

Core formulas in MathML form:

The calculator uses these relationships to estimate your monthly bill and the total you will pay over the life of the lease, including any cash you put down at signing.

Understanding Money Factor, APR, and Residual Value

Money factor is the leasing version of an interest rate. Dealers usually quote it as a small decimal, such as 0.00150 or 0.00200. To compare a money factor to a loan APR, multiply by about 2,400:

Approximate APR (%) = Money Factor × 2,400

Example: a money factor of 0.00200 is roughly a 4.8% APR (0.00200 × 2,400 = 4.8).

Residual value is the expected value of the vehicle when your lease ends. It is often expressed as a percentage of MSRP (for example, 60% after 36 months). Higher residual values usually mean lower payments, because you are financing less depreciation.

Typical patterns (actual offers vary by brand and model):

• Common terms: 24, 36, or 39 months.
• Typical money factors: around 0.00100–0.00300 (about 2.4% to 7.2% APR).
• Residuals: roughly 45%–65% of MSRP for 36-month leases on new vehicles.

Worked Example: Putting the Numbers Together

Suppose you are leasing a car with these terms:

• Vehicle price: $30,000
• Residual value (after 36 months): $18,000
• Lease term: 36 months
• Money factor: 0.00200 (about 4.8% APR)
• Down payment: $1,000
• Trade-in credit: $2,000
• Fees due at signing added to cap cost: $0 (for simplicity)
• Sales tax: 5%

Step 1: Adjusted capitalized cost:

C = $30,000 - $1,000 - $2,000 = $27,000

Step 2: Monthly depreciation:

($27,000 - $18,000) ÷ 36 = $9,000 ÷ 36 ≈ $250 per month

Step 3: Monthly finance charge:

($27,000 + $18,000) × 0.00200 = $45,000 × 0.002 = $90 per month

Step 4: Base monthly payment:

$250 + $90 = $340 per month

Step 5: Add tax (if your area taxes each payment at 5%):

$340 × 1.05 ≈ $357 per month

Your estimated monthly payment would be about $357, plus $3,000 due at signing (down payment and trade-in credit) and any up-front fees that are not rolled into the cap cost.

Comparing Lease Scenarios

The table below illustrates how changing the term or money factor can affect your estimated monthly payment, using the same $30,000 vehicle and $18,000 residual.

In general, lower money factors and higher residual values reduce your monthly payment. Longer terms tend to lower the payment but keep you in the car (and warranty) for more years, which may or may not fit your needs.

How to Interpret Your Results

When you run your own numbers:

• Check the money factor against the approximate APR. If it looks much higher than current auto loan rates for your credit tier, you may be able to negotiate a better rate or look for a different offer.
• Look at depreciation vs. finance charges. High depreciation means the vehicle is expected to lose value quickly; high finance charges mean you are paying more interest than necessary.
• Compare total lease cost (payments plus cash at signing) to buying the same vehicle with an auto loan for the same period. In some cases, a low-rate loan may cost less overall.
• Consider mileage limits and fees from the actual lease contract. This calculator does not include excess mileage charges, which can significantly increase your real cost if you drive more than allowed.

Tips to Lower Your Lease Payment

• Negotiate the vehicle price. A lower selling price reduces the capitalized cost directly.
• Aim for a lower money factor. Strong credit and manufacturer lease incentives can reduce the rate and cut your monthly finance charge.
• Keep the term reasonable. Very long terms may lower the payment, but you could end up out of warranty or paying for more maintenance while still making payments.
• Be cautious with large down payments. A big upfront payment lowers your monthly bill, but if the car is totaled or stolen early in the lease, you may not recover that cash even if you have gap coverage.
• Use trade-in equity wisely. Applying positive equity from a trade-in can reduce payments, but compare this to selling the car privately if it would net you more cash.

Assumptions and Limitations of This Calculator

This tool is designed for quick estimates and makes a few simplifying assumptions:

• Approximate finance formula. The finance charge calculation uses the common lease approximation (C + R) × MF. Actual lender calculations may differ slightly.
• Tax treatment. The default approach assumes tax is applied to each monthly payment. Some regions tax the full lease amount or use other methods, so your real tax bill may not match this estimate.
• Fees and add-ons. Only the fees you enter are included. Items like license, registration, documentation, and dealer add-ons may be structured differently by each dealer.
• Excludes mileage, wear, and disposition fees. Potential excess mileage charges, excess wear-and-tear fees, and any end-of-lease disposition fee are not included in the calculation.
• No guarantee of approval or rate. Actual money factors, residuals, and terms depend on the vehicle, lender programs, and your credit profile.

Use the output as an educational estimate rather than an exact quote. Always review a dealer’s official lease worksheet and contract before signing.

Content last reviewed: 2024. For more detailed planning, consider comparing these results with a standard auto loan or a lease vs. buy analysis from a qualified financial professional.