Car Lease Calculator

A lease payment has two parts. The depreciation fee is (adjusted cap cost minus residual value) divided by the term in months. The finance charge is (adjusted cap cost plus residual value) times the money factor. Add them and you have the base monthly payment, before tax. Example: a $36,000 adjusted cap cost with a $24,000 residual over 36 months at a 0.00125 money factor costs $436.91 a month with 7% tax on the payment. (Full worked example below.)

How the payment is calculated

Start with the adjusted cap cost, the amount the lease is actually built on:

adjusted cap cost = selling price + fees rolled in - down payment - trade-in equity - rebates

Then the two monthly charges:

depreciation fee = (adjusted cap cost - residual value) / term in months

finance charge = (adjusted cap cost + residual value) x money factor

base monthly payment = depreciation fee + finance charge

If your state taxes the monthly payment, tax is charged on the base payment each month and added on top. The total lease cost shown here is the total of all payments plus your down payment and trade equity, the money you put in. Rebates are not your money, and fees rolled in are already inside the payments, so neither is added again.

Every variable, defined

MSRP. The sticker price. It matters because the residual value is set as a percentage of MSRP, not of the price you negotiate.

Negotiated selling price. The price you and the dealer agree on before fees and reductions. On a lease quote this is sometimes called the capitalized cost or cap cost. Every dollar you negotiate off it lowers the adjusted cap cost by a dollar.

Fees rolled in. Charges added to the lease instead of paid at signing, most often the acquisition fee the leasing company charges, plus dealer doc fees and any add-ons you accept. Rolled in does not mean free: you pay them across the term, with finance charge on top.

Down payment. Cash you pay at signing to reduce the cap cost. It lowers the monthly payment, but the total lease cost falls only by the small amount of finance charge it saves.

Trade-in equity. What your trade-in is worth beyond what you still owe on it, applied to reduce the cap cost. If you owe more than the trade is worth, that is negative equity and it raises the price instead; enter it as part of the selling price you agree to.

Rebates. Manufacturer and dealer incentives applied as a cap cost reduction. They lower the adjusted cap cost the same way a down payment does, but they are not money out of your pocket.

Residual value. What the leasing company projects the car will be worth at the end of the term, set in advance as a percentage of MSRP for your term and mileage allowance. You pay depreciation down to this number, and it is also the price at which you can usually buy the car when the lease ends. The residual percentage is set by the leasing company and is generally not negotiable.

Money factor. The finance rate of the lease, written as a small decimal like 0.00125 instead of a percentage. Covered in its own section below.

Lease term. The number of months. A longer term spreads the depreciation over more months and usually comes with a lower residual percentage, so the payment does not fall as much as the extra months suggest.

Mileage allowance. The miles per year the lease allows (10,000, 12,000 and 15,000 are typical). It does not appear in the payment formula; it changes the residual percentage the leasing company offers, and miles beyond it are charged per mile at lease end.

Tax rate on each payment. In most states, lease tax is charged on each monthly payment. Enter your rate and the tax is added to the base payment. See the tax note below if your state works differently.

The money factor

The money factor is the lease version of an interest rate, quoted as a decimal because leases are priced from it directly in the finance charge formula. To compare it with a loan rate, multiply by 2400. A money factor of 0.00125 x 2400 = 3.0, an APR equivalent (approx.) of 3.0%. It is approximate because the lease finance charge is figured on the sum of the cap cost and the residual, not on a declining loan balance.

Dealers quote payments, not money factors, and the factor in your quote can be marked up above the leasing company's base rate. Asking the dealer for the money factor, in those words, is how you check the finance charge before you sign: if the number they give you, times 2400, is well above the loan APR you could get, the lease is carrying a markup. Our money factor calculator converts in both directions and shows the markup math.

A note on lease tax

This calculator applies the tax rate you enter to each monthly payment, which is how most states tax a lease. Some states do it differently: they collect the tax upfront on the selling price or the total of the payments, and in those states a monthly tax rate does not apply and the payment itself carries no tax line. Tax treatment changes the timing of the tax more than its size, but it changes the monthly number, so check which method your state uses before comparing a dealer quote to this result. For how states tax a vehicle purchase, see the car sales tax by state guide.

Worked example 1: residual as a percentage

A car with a $40,000 MSRP, negotiated down to $38,000, with $1,000 in fees rolled in, $2,000 down, no trade-in, $1,000 in rebates, a 60% residual, a 0.00125 money factor, a 36 month term, and 7% tax on each payment:

Worked example 2: residual as a dollar amount, no monthly tax

A car with a $52,000 MSRP, negotiated to $49,500, with $1,200 in fees rolled in, $3,000 down, $1,500 of trade-in equity, $500 in rebates, a residual quoted directly as $29,900 (57.5% of MSRP), a 0.00200 money factor, a 24 month term, and a state that collects lease tax upfront, so no tax on the payment:

Entering a residual as a percentage of MSRP or as a dollar amount gives the same result whenever the two describe the same value, as the test suite for this page verifies.

What changes the answer most

Selling price. Every $1,000 off the selling price cuts the depreciation by $1,000 spread over the term, about $27.78 a month on a 36 month lease, plus a small finance charge saving. Negotiating a lease price works exactly like negotiating a purchase price. Money factor. A markup of 0.00040 (about 1% in APR equivalent terms) on a typical lease adds roughly $25 a month. It is the least visible number on a lease quote and the one most worth checking. Down payment. It moves money from the monthly line to the signing line without changing what the car costs to lease, beyond a small finance saving. Compare total lease cost, not the payment, when a dealer offers to lower the monthly number.

FAQ

Why is my dealer's payment different?
Work through the inputs in order: a higher selling price than you expected, fees or add-ons rolled in that were not in your numbers, a money factor marked up above the base rate, or tax handled upfront instead of monthly. If the adjusted cap cost, residual and money factor all match yours, the payments should match to the cent.

Can I negotiate the residual value?
No. The residual percentage is set by the leasing company for the model, term and mileage allowance. Choosing a different term or mileage allowance changes it, and that is the lever you actually have.

Is a down payment a good idea on a lease?
It lowers the payment but barely lowers the total cost, and if the car is totaled or stolen early in the lease, money you put down is generally gone rather than refunded, because the insurance settlement goes to the leasing company. Many drivers keep the down payment at zero for that reason and accept the higher monthly figure.

Does this calculator include tax?
Yes, if your state taxes the monthly payment: enter the rate and the tax is added to each payment. If your state collects lease tax upfront, enter 0 here and expect that tax in your amount due at signing instead.