A lease is a long rental of a new car. You do not pay for the whole vehicle; you pay for the part of its value you use up during the lease, plus a finance charge, plus fees and tax. That is why a lease payment is usually lower than a loan payment on the same car, and also why you own nothing at the end. This car lease calculator rebuilds a quote from its parts — MSRP, negotiated price, residual value, money factor, term and fees — so you can check a dealer's number, see which inputs drive it, and compare offers on the same footing.
How to use the car lease calculator
- Enter the MSRP and the negotiated price. The price is what you pay for the car; the MSRP sets the residual.
- Enter the residual percentage and the lease term. Both come from the lessor's quote.
- Enter the money factor (or the APR, which the calculator converts), then the down payment, trade-in equity, tax and fees.
- Choose how the acquisition fee is paid and enter the miles per year in the contract to see total cost per mile.
Car lease formulas
Residual R = MSRP × residual %
Depreciation = (C − R) ÷ n
Finance charge = (C + R) × money factor
Payment = (depreciation + finance charge) × (1 + tax rate)
APR ≈ money factor × 2,400
The finance charge is computed on the sum of the cost and the residual because, on average, you are borrowing the average of those two values over the term. This is the standard way leases are quoted in the United States. Tax rules differ: some places tax the monthly payment (as here), others tax the whole price up front, so check yours.
Worked example
A car with a $36,000 MSRP is negotiated to $34,000. You put $2,000 down, finance a $795 acquisition fee, pay $400 in other fees at signing, and sign a 36-month lease with a 60% residual and a 0.0025 money factor. Sales tax on the payment is 6%.
- Adjusted cap cost: 34,000 − 2,000 + 795 = $32,795.00. Residual: 36,000 × 0.60 = $21,600.00.
- Depreciation: (32,795 − 21,600) ÷ 36 = $310.97.
- Finance charge: (32,795 + 21,600) × 0.0025 = $135.99; the money factor is equal to a 6.0% APR.
- Monthly payment with 6% tax: $473.78.
- Due at signing: $2,873.78. Total cost over the lease: $19,455.98.
Monthly payment by residual and money factor
For a $36,000 MSRP, a $34,000 price, 36 months and nothing down, before tax and fees. Computed with the formula above.
| Residual | MF 0.0010 (2.4%) | MF 0.0020 (4.8%) | MF 0.0030 (7.2%) |
|---|---|---|---|
| 50% | $496.44 | $548.44 | $600.44 |
| 55% | $448.24 | $502.04 | $555.84 |
| 60% | $400.04 | $455.64 | $511.24 |
| 65% | $351.84 | $409.24 | $466.64 |
Money factor to APR
| Money factor | Approximate APR |
|---|---|
| 0.0008 | 1.92% |
| 0.0015 | 3.60% |
| 0.0020 | 4.80% |
| 0.0025 | 6.00% |
| 0.0030 | 7.20% |
| 0.0040 | 9.60% |
What moves a lease payment
- Negotiated price. Every $1,000 off the price lowers depreciation by $1,000 ÷ n and the finance charge a little. This is where you have the most leverage.
- Residual value. A higher residual leaves less to depreciate. Cars that hold their value lease cheaply.
- Money factor. A change of 0.0005 is about 1.2 percentage points of APR and adds roughly (C + R) × 0.0005 to each payment.
- Mileage. Higher allowances lower the residual, and driving over the allowance usually carries a per-mile charge at the end.
To weigh the lease against financing the same car, use the lease vs buy calculator or compare with a loan payment from the auto loan calculator.
Frequently asked questions
How is a car lease payment calculated?
Add two parts. The depreciation part is (adjusted cap cost − residual value) ÷ term. The finance part is (adjusted cap cost + residual value) × money factor. Sales tax, where charged on payments, is applied to that sum. On the worked example on this page, depreciation is $310.97 and the finance charge $135.99, a base of $446.96 before tax.
What is a money factor?
A money factor is the lease’s finance charge expressed as a small decimal, such as 0.0025. Multiply it by 2,400 to get an approximate APR (0.0025 × 2,400 = 6%). It is worth asking for the money factor in writing so you can compare leases.
What is residual value?
Residual value is the lessor’s estimate of what the car will be worth at the end of the lease, often stated as a percentage of MSRP. A higher residual means less depreciation to pay for and a lower payment. It is set by the lessor and is generally not negotiable, while the selling price is.
Is a big down payment on a lease a good idea?
It lowers the monthly payment, but the money is at risk. If the car is totaled or stolen early, a down payment can be lost unless gap cover repays it. Many drivers prefer to put down little and pay a slightly higher monthly amount.
Should I lease or buy?
It depends on how long you keep cars, how many miles you drive and what else you could do with the cash. Compare the total cost of both paths with the Lease vs Buy Car Calculator.