Car Lease Payment Calculator
Example: Capitalized cost (negotiated price): 34000 $ · Cap cost reduction (down payment): 2000 $ · Residual value (% of MSRP): 58 % · Money factor: 0.0025 · Lease term: 36 months · Sales tax on payment: 7 %
| Monthly lease payment | $503 |
| Monthly depreciation fee | $341 |
| Monthly finance fee | $129 |
| Residual value | $19,720 |
Worked example
On a $34,000 car with a $2,000 down payment, the adjusted cap cost is $32,000 and the residual at 58% is $19,720. Depreciation of $12,280 over 36 months is about $341 a month. The finance fee is (32,000 + 19,720) times the 0.0025 money factor, about $129 a month. Add them for $470 and apply 7% tax for a payment near $503. Seeing the $129 finance fee makes it obvious that a lower money factor is worth negotiating hard.
Frequently asked questions
What is a money factor and how does it relate to an interest rate?
The money factor is the lease equivalent of an interest rate. Multiply it by 2,400 to get an approximate APR. A 0.0025 money factor is roughly 6% APR. Dealers sometimes mark it up, so ask for the buy rate.
Why is residual value so important?
The residual is what the car is assumed to be worth at lease-end. A higher residual means less depreciation for you to pay, so it lowers the payment. Cars that hold value well tend to lease cheaper for the same price.
Does a bigger down payment on a lease make sense?
A cap cost reduction lowers the payment, but if the car is totaled or stolen early you can lose that money. Many advisors suggest putting little down on a lease and keeping cash liquid. This tool lets you test both.
Is lease tax handled this way everywhere?
Tax treatment varies by state. Many states tax the monthly payment (as modeled here); others tax the full price or the cap cost up front. Check your state rules, as it changes the effective cost.