Car Lease Calculator
Lease payment $455.33 a month.
| Building the payment | Amount |
|---|---|
| Negotiated price + fees = gross cap cost | $38,000 |
| Less cap cost reduction | − $2,000 |
| Net cap cost | $36,000 |
| Residual value 58% of $40,000 MSRP | $23,200 |
| Depreciation fee ($36,000 − $23,200) ÷ 36 | $355.56 (83% of the payment) |
| Rent charge ($36,000 + $23,200) × 0.00125 | $74.00 |
| Base payment | $429.56 |
| Sales tax on the payment | + $25.77 |
| Monthly payment | $455.33 |
| Total over the term payments + money down | $18,392 |
A lease payment is two charges added together. The depreciation fee is the value you use up, spread over the term. The rent charge is the lessor's return on the money tied up — interest by another name. Seeing them split is what makes a quote auditable: a dealer can present any payment they like, but these two figures have to reconcile against the cap cost, residual, and money factor. The money factor is the interest rate wearing a disguise; multiply it by 2,400 for the APR, and always ask for it as a number rather than accepting a payment. The 2,400 is 2 × 12 × 100 — the 2 is there because rent is charged on cap cost plus residual, roughly twice the average balance. Not included: disposition fee at lease end (typically $350–$500), excess mileage charges, and wear-and-tear assessments.
Calculate a lease payment from cap cost, residual, and money factor — with the depreciation and rent charges split out so a quote can be audited.
How to use this calculator
- Enter the MSRP and the negotiated price separately. The residual is a percentage of MSRP, so both matter.
- Add any cap cost reduction — down payment, rebates, trade equity — and the fees being rolled in.
- Enter the residual percentage the lender has set for your term and mileage.
- Enter the rate as a money factor or an APR — the toggle converts between them so you can check a dealer's number either way.
The formula
Depreciation fee = (Net cap cost − Residual) ÷ Term · Rent charge = (Net cap cost + Residual) × Money factor
Base payment = Depreciation + Rent · APR = Money factor × 2,400
Worked example — a $40,000 MSRP car over 36 months
Negotiated to $37,000, $1,000 in fees, $2,000 down, a 58% residual and a 0.00125 money factor (3% APR).
- Gross cap cost: 37,000 + 1,000 = $38,000
- Net cap cost: 38,000 − 2,000 = $36,000
- Residual: 58% of 40,000 MSRP = $23,200
- Depreciation fee: (36,000 − 23,200) ÷ 36 = $355.56
- Rent charge: (36,000 + 23,200) × 0.00125 = $74.00
- Base payment: $429.56, plus 6% tax = $455.33
Notice the split: 83% of this payment is depreciation and only 17% is interest. On a lease you are buying the car's value loss, which is why residual value matters more than the rate does.
The money factor, decoded
The single most useful thing to know about leasing is that the money factor is an interest rate in disguise. Multiply by 2,400 and you have the APR:
| Money factor | APR | Read as |
|---|---|---|
| 0.00042 | 1.0% | Heavily subsidised promotional rate |
| 0.00125 | 3.0% | Good — strong credit |
| 0.00208 | 5.0% | Average |
| 0.00292 | 7.0% | Weaker credit, or a marked-up rate |
| 0.00417 | 10.0% | Expensive — question it |
Dealers can mark the money factor up above the lender's buy rate, and the small decimal makes the markup hard to see — 0.00125 to 0.00208 looks trivial and is a 2% rate increase. Ask for the money factor explicitly. A dealer who will not give you one is telling you something.
Why residual value drives everything
On a lease you pay for the depreciation you use, so the residual — what the lender predicts the car will be worth at the end — decides most of your payment. Two cars at the same price can lease for wildly different amounts:
| Residual | Value at lease end | Depreciation to pay | Monthly depreciation fee |
|---|---|---|---|
| 50% | $20,000 | $16,000 | $444 |
| 58% | $23,200 | $12,800 | $356 |
| 65% | $26,000 | $10,000 | $278 |
The residual is set by the lender and is not negotiable — but it is worth knowing, because it explains why a brand with strong resale value leases cheaply while an equally priced car that depreciates hard does not. It is also why a longer lease has a lower residual and often a higher payment than you would expect.
Money down on a lease is money at risk
A cap cost reduction lowers your monthly payment, which feels like the same trade-off as a down payment on a purchase. It is not.
On a purchase, a down payment buys equity — it is still your money, sitting in the car. On a lease you never own the car, so a cap cost reduction is simply prepaid rent. If the car is stolen or written off in month four, insurance settles with the leasing company for the car's value, the lease terminates, and your down payment is gone. You have no equity to recover because you never had any.
The usual advice is therefore a zero-down lease with a higher monthly payment. You pay slightly more overall, and you are not exposed to losing a lump sum in an event you do not control.
What this calculator does not include
- Disposition fee at lease end, typically $350–$500 unless you buy the car or lease again from the same brand.
- Excess mileage, usually 15–25¢ per mile over the allowance. On a 10,000-mile-a-year lease driven 15,000, that is $750–$1,250 a year at the end.
- Wear-and-tear charges for damage beyond the agreement's definition of normal.
- Early termination, which is expensive and often costs nearly as much as running the lease to the end.
How we calculate this
Gross cap cost is the negotiated price plus fees; net cap cost subtracts the cap cost reduction. Residual value is a percentage of MSRP, not of the negotiated price — that distinction is worth several hundred dollars a month on an expensive car. The depreciation fee is (net cap cost − residual) ÷ term. The rent charge is (net cap cost + residual) × money factor, charged on the sum rather than the difference because the lessor's capital is tied up in the whole vehicle. Base payment is the two added; most states then tax the monthly payment rather than the car's full value. Money factor × 2,400 gives the APR equivalent.
Sources
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Frequently asked questions
How is a car lease payment calculated?
It is two charges added together. The depreciation fee is (net cap cost − residual) ÷ term, covering the value you use up. The rent charge is (net cap cost + residual) × money factor, which is the lessor's interest. Add them for the base payment, then add sales tax on top in most states.
What is a money factor and how do I convert it to APR?
The money factor is the lease world's interest rate, written as a small decimal like 0.00125. Multiply it by 2,400 to get the APR — 0.00125 is 3%. Always ask the dealer for the money factor as a number. If they quote you only a payment, you cannot tell whether the rate is competitive or marked up.
Why multiply the money factor by 2400?
Because 2,400 is 2 × 12 × 100. The 12 annualises a monthly figure and the 100 converts to a percentage. The 2 is there because the rent charge is levied on cap cost plus residual — roughly twice the average outstanding balance — so the money factor is about half what a straight monthly rate would be.
What is residual value in a lease?
What the leasing company predicts the car will be worth at the end of the term, expressed as a percentage of MSRP. It is set by the lender, not negotiable, and it drives the payment enormously: a higher residual means less depreciation to pay for, so a lower payment. This is why some cars lease far better than others at the same price.
Should I put money down on a lease?
Generally no. A cap cost reduction lowers the payment, but if the car is written off or stolen early in the term, that money is gone — insurance pays the leasing company, not you. Since you never own the car, money down on a lease is prepaid rent at risk. Most advisers suggest a zero-down lease with a higher payment instead.
What is capitalized cost?
The lease equivalent of the purchase price. Gross cap cost is the negotiated price plus any fees rolled in; net cap cost subtracts your down payment, rebates, and trade equity. Crucially, the negotiated price is negotiable on a lease exactly as it is on a purchase — negotiate the price first, then discuss lease terms.
What fees come with a lease?
An acquisition fee at the start, typically $600–$1,000, and a disposition fee at the end, usually $350–$500, unless you buy the car or lease again from the same brand. There are also excess mileage charges of roughly 15–25 cents per mile over the allowance, and wear-and-tear assessments. None of those end-of-lease charges are in this calculator.
Can I negotiate a lease?
The price, yes — always. The money factor sometimes, if the dealer has marked it up above the buy rate. The residual, no; it is set by the lender. The most common leasing mistake is negotiating only the monthly payment, which lets a dealer hide a marked-up money factor or an inflated cap cost inside a number that sounds fine.