Auto Lease Calculator

How is a car lease payment calculated?

A lease payment is not a loan payment. You are not repaying the price of the car; you are paying for the value it loses while you drive it, plus a financing charge on the money the lessor has tied up. Four components make up what you pay: depreciation, the rent charge, tax, and any fees that were capitalized into the lease.

Depreciation is the larger half for most leases. It is the gap between the adjusted capitalized cost — what the lessor effectively has invested in the car after your down payment and any rebates — and the residual value the contract says the car will be worth at the end, spread evenly across the term.

The rent charge is the financing half. It is charged on the sum of the adjusted capitalized cost and the residual, which is the lease convention for approximating the average balance outstanding over the term. That is why a high-residual car leases cheaply on depreciation but not on rent charge: the residual sits on both sides of the calculation.

The car lease payment formula

Monthly depreciation = (adjusted capitalized cost - residual value) / lease term in months.

Monthly rent charge = (adjusted capitalized cost + residual value) x money factor. Note the plus sign. Using the average of the two figures, or the cap cost alone, is the single most common error in hand-rolled lease spreadsheets and it understates the rent charge by roughly half.

Base monthly payment = monthly depreciation + monthly rent charge. Tax is then applied according to your jurisdiction treatment, which is why this calculator asks rather than assumes.

Adjusted capitalized cost = gross capitalized cost - capitalized cost reductions. Gross cap cost is the negotiated selling price plus any fees or negative equity rolled in; reductions are your cash down, manufacturer rebates, lease cash and any positive trade equity you choose to apply.

What is money factor?

Money factor is the lease industry expression of an interest rate, quoted as a small decimal such as 0.00200. It is not a percentage and it is not comparable to an APR until you convert it, which is exactly why it persists as a pricing convention.

Unlike the residual, the money factor is usually negotiable. Lenders publish a base or buy-rate money factor and dealers may add a markup to it, within limits the lender sets. If you know the base figure, the money-factor diagnostic on this page will price the difference for you — but it will never invent a base rate to compare against, because no such benchmark is stored here.

A markup of 0.00050 on a $77,000 combined cap-cost-plus-residual base costs $38.50 a month, or $1,386 over 36 months. That is the practical reason to ask for the money factor in writing before signing.

Money factor to APR

APR (%) = money factor x 2400. Money factor = APR (%) / 2400. The 2400 is 12 months x 200, and the 200 rather than 100 falls out of the rent-charge convention of multiplying by the sum of cap cost and residual instead of the average.

Worked both ways: 0.00200 x 2400 = 4.80% APR, and 4.80 / 2400 = 0.00200. A 0.00125 money factor is 3.00%; 0.00250 is 6.00%; 0.00375 is 9.00%.

The conversion is exact by definition of the convention — it is not an approximation of a loan APR, and a lease APR disclosed under Regulation M can differ slightly because it also accounts for fees. Use the conversion to sanity-check a quote, not to reconcile a contract disclosure to the cent.

What is residual value?

Residual value is what the contract says the car will be worth when you hand it back. It is set by the lessor — usually the manufacturer captive finance arm — for a specific term and mileage allowance, and it is not something the dealer can change for you.

It is always a percentage of MSRP, never of the price you negotiate. This trips people up constantly: negotiating $3,000 off the sticker lowers your capitalized cost and therefore your payment, but it does not lower the residual, so the whole saving lands in the depreciation half of your payment.

A higher residual cuts depreciation and therefore the payment, which is why identically priced cars from different brands lease at very different monthly figures. It also cuts the equity you would have at the end: a high residual means the lease-end purchase price is high too.

What is capitalized cost?

Gross capitalized cost is everything being financed through the lease: the negotiated selling price, plus any fees you chose to capitalize, plus any negative equity carried over from a trade-in.

Capitalized cost reductions are everything that brings that figure down before the lease is calculated: your cash down payment, a manufacturer rebate, lease cash from the lender, and positive trade equity if you apply it.

Adjusted capitalized cost is the difference, and it is the number the whole lease is built on. Both the depreciation and the rent charge are computed from it, which is why a dollar off the selling price is worth more than a dollar of anything else on the worksheet.

Capitalizing a fee rather than paying it at signing is not free. A capitalized $895 acquisition fee on a 36-month lease at a 0.00200 money factor adds about $24.87 a month to depreciation and about $1.79 a month of rent charge — you pay the fee either way, plus financing on it.

How much does it cost to lease a car?

The honest answer is the effective monthly cost, not the advertised payment. Take every non-refundable dollar the lease will cost you — the cash you put down, the fees you pay at signing, upfront tax, all the monthly payments, and the disposition fee at the end — and divide by the term.

That is the only figure that survives comparison shopping, because the advertised payment can be pushed almost anywhere by moving cash between the drive-off and the monthly. A $299 offer with $6,999 due at signing and a $395 end fee costs $496.08 a month in reality. A $429 offer with $999 due at signing and the same end fee costs $455.81 — cheaper, despite the higher headline.

The four-number summary at the top of this page is deliberately ordered that way: the monthly payment answers what leaves your account, the effective monthly cost answers what the lease actually costs, due at signing answers what you need on the day, and the total lease cost answers what you will have spent by the time you hand the keys back.

What affects your lease payment?

Selling price is the biggest lever you control. Every $1,000 you negotiate off reduces depreciation by $1,000 / term and the rent charge by $1,000 x money factor. On a 36-month lease at 0.00200 that is about $29.78 a month, or a little over $1,072 across the term.

The residual is the biggest lever you do not control. One percentage point more residual on a $50,000 MSRP is $500 less depreciation, worth about $13.89 a month over 36 months, partly offset by $1.00 more rent charge.

The money factor moves only the rent charge. Adding 0.00050 raises the rent charge by 0.00050 x (cap cost + residual) and leaves depreciation completely untouched — useful as a diagnostic, because if a dealer changes the payment and depreciation moved, something other than the rate changed too.

A cap-cost reduction lowers the displayed payment but not the cost of the lease. Putting $1,000 down on a 36-month lease at 0.00200 cuts the payment by about $29.78 — and you spent $1,000 to do it. The sensitivity table on this page computes all four of these effects from your own numbers rather than from these illustrative figures.

Lease vs buy

The two are only comparable over the same horizon, and only if the buy side is credited with the car you still own at the end of it. A three-year lease costs you every dollar you paid; a three-year-old financed car has paid out more in cash but left you an asset, and possibly a loan balance still running.

The lease-versus-buy mode on this page therefore asks for the ownership horizon, the purchase price, loan terms, taxes and fees, and the vehicle value you expect at that horizon. It reports the estimated cost of each side and the difference between them under your assumptions, in neutral terms.

It does not tell you which to do. The answer depends on how long you actually keep cars, how many miles you drive, whether the vehicle is a business expense, and how you value not carrying resale risk — none of which is arithmetic.

Mileage and excess-mile costs

The mileage allowance is priced into the residual. A lower allowance means a higher residual and a lower payment, which is why 10,000-mile leases advertise better than 15,000-mile leases on the same car.

Total allowed miles = annual allowance x term / 12. Projected excess miles = your expected mileage over the term minus that allowance, floored at zero. The excess-mile bill is that overage multiplied by the per-mile rate in your contract.

Buying extra miles at signing is usually cheaper per mile than paying the overage at the end, but you do not get a refund for miles you did not use. The mileage module on this page shows the projected bill separately from the payment and separately from the total lease cost, so you can see the exposure without it quietly inflating the headline figures.

Lease buyout

A lease buyout means paying the contractual purchase-option price, which is normally the residual value plus a purchase-option fee, plus sales tax and registration on the purchase.

The buyout mode computes the total buyout cost, the loan payment if you finance it, the total financed cost and — only if you enter one — the difference against the current market value you supply.

That difference is presented as a difference and nothing more. A market value above the buyout cost is not automatically a profit: realising it means selling the car, paying any transaction costs, and replacing it. A market value below the buyout cost is not automatically a reason to walk away either, because handing the car back may cost you a disposition fee and any excess-wear charges.

Early lease termination

Adding up the remaining payments does not give you the cost of ending a lease early, and treating it as if it does is the most expensive mistake people make here.

Lessors calculate an early termination payoff from the contract formula, which typically involves the adjusted lease balance, the unearned rent charge, an early termination fee, any past-due amounts, and the wholesale or auction value actually realised when the car is sold. Several of those figures are not knowable in advance.

This calculator therefore does not estimate an early termination payoff. The only reliable number is an official payoff quote from the lessor, in writing, for a specific date. Use this page to understand what you are currently paying and what the lease will cost if you run it to term, and get the payoff quote separately.

Lease taxes

Lease taxation varies by jurisdiction. There is no single United States formula, and any calculator that applies one is guessing on your behalf.

Broadly, three patterns exist: tax charged on each monthly payment, tax charged once at signing on some base derived from the payments and the cap-cost reduction, and tax charged on the full vehicle price at the start of the lease. Which one applies, what the taxable base is, whether a trade-in reduces it, and whether rebates are taxable are all decided locally — sometimes at county or city level.

This page therefore asks you which treatment to apply and prints the answer alongside the result. If your worksheet shows a tax figure you cannot reproduce, use the custom upfront tax option and enter the number from the worksheet, so the rest of the calculation stays honest.

Worked example: $48,000 MSRP, 36 months

A complete lease worked end to end. Every figure below is produced by the same engine that powers the calculator above, from the inputs in the first rows, and is re-verified against it on every build.

Lease glossary

The twelve terms that appear on a lease worksheet, defined once so the rest of this page can use them without restating them.

Down payment and due at signing are not synonyms. The down payment is one line inside due at signing, which also carries the first payment, upfront fees, upfront tax and any refundable deposit.

Update history

Review