Auto Lease Calculator
Calculate monthly car lease payments based on vehicle MSRP, negotiated capitalized cost, residual value, and lease money factor.
Lease Summary
How Car Lease Payments Are Calculated
A car lease payment consists of two core components: Depreciation Fee (the value the vehicle loses over the lease term) and Finance Fee (the rent charge charged by the leasing company for financing the car).
The Mathematical Formula:
- Net Capitalized Cost = Negotiated Vehicle Price − Down Payment − Trade-in Equity.
- Residual Value = MSRP × Residual Percentage (predetermined by the lessor).
- Monthly Depreciation = (Net Cap Cost − Residual Value) / Lease Term (Months).
- Monthly Finance Fee = (Net Cap Cost + Residual Value) × Money Factor.
- Base Monthly Payment = Monthly Depreciation + Monthly Finance Fee.
Money Factor to APR Conversion: To convert a dealer's lease money factor (e.g., 0.0025) into a familiar annual percentage rate (APR), multiply the money factor by 2,400 (0.0025 × 2,400 = 6.0% APR).
Down Payment Caution: In auto leasing, placing a large down payment (capitalized cost reduction) lowers your monthly payment but puts your cash at severe risk. If the vehicle is totaled or stolen during the lease, insurance GAP coverage pays off the lender, but your upfront down payment is generally lost forever. Compare lease terms with purchase financing on our Auto Loan Calculator.
Frequently asked questions
How is a car lease payment calculated?
Lease payment = Depreciation Fee + Finance Fee (Money Factor × (Cap Cost + Residual Value)) + Sales Tax.
How is a car lease payment calculated?
It has three parts: depreciation ((capitalised cost - residual value) / term), rent charge ((cap cost + residual) x money factor), and tax. Depreciation is what you consume; the rent charge is interest on the money the lessor has tied up. Understanding the split shows exactly where a payment can be negotiated.
What is a money factor and how does it relate to APR?
The money factor is the lease equivalent of an interest rate, expressed as a small decimal. Multiply it by 2,400 to get the approximate APR - so 0.00125 is about 3%. Dealers sometimes quote it without explaining the conversion, which makes an expensive lease look cheap.
Is leasing cheaper than buying?
Over a single term, leasing usually has lower monthly payments because you pay only for depreciation. Over the long run, buying and keeping a car past the loan is almost always cheaper, because you stop paying entirely. Leasing repeatedly means a permanent car payment. Mileage limits and wear charges also shift the comparison.