How to use the auto lease calculator
- Enter the negotiated price (the capitalized cost) and the car's MSRP.
- Enter your down payment and any trade-in value. Both lower the amount you lease.
- Add any fees rolled into the lease, such as the acquisition fee, if you aren't paying them upfront.
- Enter the residual value, as a percentage of MSRP or a dollar amount. The leasing company sets it.
- Enter the money factor or the equivalent APR.
- Enter the lease term in months and the sales tax rate on the payment.
How a lease payment is calculated
A lease payment has two parts: the value the car loses while you drive it, and a finance charge on the money tied up in the car.
Adding the cap cost and the residual, then multiplying by the money factor, works out the interest on the average amount you owe over the lease. That is where the 2,400 comes from: the average balance is (C + residual) ÷ 2, the monthly rate is APR ÷ 12, and converting the percentage to a decimal adds a factor of 100, so 2 × 12 × 100 = 2,400.
Worked example
The defaults are a car with a $37,000 MSRP negotiated to $35,000, $3,000 down, a 60% residual, a money factor of 0.00125, 36 months and 7% sales tax:
- Adjusted cap cost: $35,000 − $3,000 = $32,000
- Residual value: 60% × $37,000 = $22,200
- Depreciation fee: ($32,000 − $22,200) ÷ 36 = $9,800 ÷ 36 = $272.22
- Rent charge: ($32,000 + $22,200) × 0.00125 = $67.75
- Before tax: $272.22 + $67.75 = $339.97
- Tax: 7% × $339.97 = $23.80, so the payment is $363.77
- Over 36 months you pay $13,095.73, or $16,095.73 counting the down payment
The money factor of 0.00125 is the same as a 3% APR (0.00125 × 2,400).
What moves the payment
Starting from the defaults:
| Change | Monthly payment |
|---|---|
| Defaults | $363.77 |
| APR 6% instead of 3% (money factor 0.0025) | $436.26 |
| Residual $20,000 instead of $22,200 | $426.22 |
| $895 acquisition fee rolled in | $391.57 |
| No down payment | $456.95 |
The residual has a big effect because it decides how much depreciation you pay for, which is why cars that hold their value lease cheaply. The price you negotiate matters just as much: every $1,000 off the cap cost saves about $31 a month here. Ask the dealer for the money factor in writing, since a marked-up rate is a common hidden cost.
Before you sign
Leases charge for mileage over the yearly limit (often 10,000 to 15,000 miles) and for wear beyond normal use, and ending early can be expensive. Many states tax each monthly payment, as this calculator assumes, but some tax the down payment too or charge tax on the full price upfront. A large down payment lowers the payment but is usually lost if the car is stolen or totaled early in the lease, so many people keep it small. To compare with buying, run the same car through the car loan calculator.
Frequently asked questions
What is a money factor?
It is the lease's interest rate written as a small decimal. Multiply it by 2,400 to get the approximate APR: 0.00125 is 3%, and 0.0025 is 6%. A lower money factor means a lower rent charge each month.
What is a good residual value?
Higher is better for the person leasing, because you pay for less depreciation. On a 36-month lease, residuals in the 50% to 60% range are common, but they vary by model and are set by the leasing company, not negotiated. You can negotiate the price and sometimes the money factor.
Is the down payment worth it on a lease?
It lowers the monthly payment dollar for dollar over the term, but it doesn't reduce the total cost much, since you're prepaying depreciation. If the car is written off, gap coverage usually pays off the lease but not your down payment. A small down payment, or none, limits that risk.
Can I buy the car at the end?
Most leases let you buy the car for the residual value plus a purchase fee. That is worth considering if the car is worth more than the residual when the lease ends, or if you've driven well over the mileage limit.
Related calculators
- Car Loan Calculator — Your real monthly car payment after down payment, trade-in and sales tax, and the cost of longer terms.
- Cash Back or Low Interest Calculator — Should you take the dealer's cash-back rebate or the low-interest financing? See which costs less.
- Lease Calculator — Lease payment for any asset from its value, residual, term and rate, or the interest rate hidden in a payment.
- Payment Calculator — Monthly payment for a loan with a fixed term, or how long a fixed monthly payment takes to clear it.
Results are estimates for educational purposes and are not financial, tax or legal advice. See our disclaimer.