Lease Calculator

Demystifying Car Lease Payments

This calculator helps you estimate your monthly payment for a car lease. By inputting the vehicle's price, down payment, residual value, lease term, and money factor, it provides a clear breakdown of the costs involved. It's an essential tool for anyone considering leasing a new car.

The Lease Payment Formula Explained

A lease payment is made up of two main parts: the depreciation charge and the finance charge.

1. Depreciation Charge: This covers the car's loss in value over the lease term.
   • Capitalized Cost = Negotiated Price - Down Payment
   • Residual Value = MSRP * Residual %
   • Monthly Depreciation = (Capitalized Cost - Residual Value) / Lease Term (months)
2. Finance Charge (Rent Charge): This is the interest you pay.
   • Monthly Finance Charge = (Capitalized Cost + Residual Value) * Money Factor
3. Total Monthly Payment = Monthly Depreciation + Monthly Finance Charge

How to Use the Calculator

• MSRP: The manufacturer's suggested retail price.
• Negotiated Price: The price you agree on with the dealer.
• Down Payment: Any cash you pay upfront.
• Residual Value (%): The predicted value of the car at the end of the lease, expressed as a percentage of MSRP. The dealer provides this.
• Lease Term (months): The length of the lease.
• Money Factor: The interest rate for the lease. It's a small decimal (e.g., 0.00125). To convert an APR to a money factor, divide by 2400.

Real-World Example

• MSRP: $30,000
• Negotiated Price: $28,000
• Down Payment: $2,000
• Residual Value: 60% of MSRP = $18,000
• Lease Term: 36 months
• Money Factor: 0.0015 (equivalent to 3.6% APR)

Calculation:

• Capitalized Cost = $28,000 - $2,000 = $26,000
• Monthly Depreciation = ($26,000 - $18,000) / 36 = $222.22
• Monthly Finance Charge = ($26,000 + $18,000) * 0.0015 = $66.00
• Total Monthly Payment (pre-tax): $222.22 + $66.00 = $288.22

Frequently Asked Questions (FAQ)

• Is it better to lease or buy? Leasing typically offers lower monthly payments and allows you to drive a new car every few years. Buying builds equity and you own the car at the end. The better choice depends on your personal financial situation and preferences.
• What happens at the end of a lease? You usually have three options: return the car, buy the car for its residual value, or lease a new car.
• Is the down payment the only upfront cost? No. You will also likely have to pay the first month's payment, an acquisition fee, and other taxes and registration fees when you sign the lease.