Car Lease Calculator
Updated · By the CalculatorDash editorial team · How we check our maths
Quick answer
A lease payment has two parts: depreciation, (capitalised cost − residual value) ÷ months, and a finance charge, (capitalised cost + residual) × money factor. On a $40,000 car negotiated to $38,000 with $2,000 down, a 58% residual and a 0.0025 money factor over 36 months, the payment is about $504 before tax.
How this calculator works
When you lease, you pay for the part of the car's value you use up, plus a finance charge. The dealer sets a residual value, the car's expected worth at the end of the lease as a percentage of MSRP, and a money factor, which is the lease's interest rate in disguise.
Three numbers drive the payment and all three are negotiable or shoppable: the capitalised cost (the price you agree), the money factor (dealers sometimes mark it up) and the down payment. A higher residual lowers the payment because you are using up less of the car.
Putting a large amount down on a lease is risky: if the car is written off early, insurance pays the leasing company and your down payment is usually gone. Many people prefer to keep the down payment small.
The formula
- Capitalised cost
- negotiated price − down payment and rebates
- Residual
- MSRP × residual %
- Depreciation fee
- (capitalised cost − residual) ÷ months
- Finance fee
- (capitalised cost + residual) × money factor
- Payment
- (depreciation + finance fee) × (1 + tax)
Worked example
A $40,000 MSRP car negotiated to $38,000 with $2,000 down has a $36,000 capitalised cost. A 58% residual is $23,200. Depreciation is $12,800 ÷ 36 = $355.56 a month and the finance fee is $59,200 × 0.0025 = $148, so the payment is $503.56, or about $539 with 7% tax. The lease costs about $21,400 in total including the down payment.
Tips
- 01Ask for the money factor in writing and multiply it by 2,400 to compare it with a loan APR.
- 02Negotiate the price as if you were buying; the residual is fixed, but the capitalised cost isn't.
- 03Check the mileage allowance. Excess miles are often charged per mile at the end of the lease.
Frequently asked questions
How is a lease payment calculated?
Payment = (capitalised cost − residual) ÷ months + (capitalised cost + residual) × money factor, plus any sales tax on the payment.
What is a money factor?
The interest rate on a lease, written as a small decimal. Multiply it by 2,400 to get the approximate APR: 0.0025 is about 6%.
Is it better to lease or buy?
Leasing gives lower payments and a new car every few years, but you never own it and you pay to drive. Buying costs more monthly but is usually cheaper if you keep the car for many years.
Should I put money down on a lease?
A down payment lowers the monthly payment but doesn't save much money overall, and it can be lost if the car is totalled. Many advisers suggest keeping it small.