Car Lease Calculator

How to use the car lease calculator

Enter the car's MSRP (sticker price) and the price you have negotiated, the lease term and the residual value percentage from the leasing company. Enter the financing cost either as a money factor — the way most US lease contracts state it — or as an APR. Then add your down payment, any trade-in equity, the acquisition and dealer fees that are added to the lease, and the sales tax rate on monthly payments.

The calculator shows your monthly payment broken into its three parts — depreciation, rent charge and tax — plus the total cost of the lease, the buyout price at the end and a lease worksheet like the one on a dealer's contract.

How a lease payment is calculated

A lease charges you for the part of the car's value you use up, plus a finance charge for the money tied up in the car:

The rent charge formula looks odd but is a neat shortcut: adding the starting and ending values approximates twice the average balance, and the money factor is the monthly rate divided by two. That is why APR ≈ money factor × 2,400 (× 12 months × 2 × 100 for a percentage).

Worked example

A car has an MSRP of $40,000; you negotiate it to $37,500 for a 36-month lease with a 58% residual and a money factor of 0.0025 (about 6% APR). There is a $695 acquisition fee, you put $2,000 down and sales tax is 7%.

• Adjusted cap cost = 37,500 + 695 − 2,000 = $36,195
• Residual value = 58% × 40,000 = $23,200
• Depreciation fee = (36,195 − 23,200) ÷ 36 = $360.97
• Rent charge = (36,195 + 23,200) × 0.0025 = $148.49
• Tax = (360.97 + 148.49) × 7% = $35.66 → payment $545.12

Over the lease you pay about $21,624 including the down payment. Had you accepted the full $40,000 sticker price, the payment would be $626.11 — about $2,900 more over three years. A dealer-marked-up money factor of 0.0035 (8.4% APR) would add about $64 a month.

How to get a better lease deal

Negotiate the price

The capitalized cost is negotiable exactly as when buying. Every $1,000 off the price cuts a 36-month payment by roughly $30.

Ask for the buy rate

Leasing companies set a base money factor for each credit tier, and dealers may add a mark-up. Ask for the money factor in writing and convert it to APR to compare with an auto loan.

Favour high residuals

Cars that hold their value have higher residuals, so you pay for less depreciation. Two cars with the same price can have very different lease payments for this reason.

Keep the down payment small

A cap cost reduction lowers the payment, but it is pre-paid depreciation. If the car is written off early, gap coverage pays the lender — not you — and that down payment is usually lost. Many experts suggest paying only the first month and fees at signing.

Lease or buy?

Leasing gives lower payments, a new car every few years and no resale hassle, but you have mileage limits (often 10,000–15,000 miles a year), wear-and-tear charges and nothing to show at the end. Buying costs more per month at first, but after the loan is paid off you own an asset and pay nothing. For this example, financing the same car at 6% over 36 months (price plus 7% tax and the $695 fee, less $2,000 down — $38,820 borrowed) would cost about $1,181 a month — but you would own a car worth around $23,000 at the end. Compare running costs with the fuel cost calculator and value loss with the depreciation calculator.

Lease structures and taxes differ by country and US state — many states also tax the down payment (cap cost reduction), which this calculator does not add, some tax the full price upfront, and UK personal contract hire quotes fixed monthly rentals including VAT. Results here are estimates, not a lease quote.