Lease Calculator
Lease Summary
Monthly Payment
$0.00
Due at Signing
$0.00
Total Lease Cost
$0.00
Depreciation/mo
$0.00
Finance Charge/mo
$0.00
Total Finance
$0.00
Payment Schedule
| Month | Payment | Depreciation | Finance Charge | Balance |
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What is a Car Lease and How This Calculator Helps
A car lease is essentially a long-term rental agreement. Instead of buying a car, you pay to use it for a fixed period, typically 24 to 48 months. You make monthly payments, but unlike a loan, these payments cover the vehicle's depreciation over the lease term, not its full purchase price. This calculator demystifies the process by breaking down all the components of a lease, allowing you to estimate your monthly payment and total costs accurately. By adjusting variables like MSRP, selling price, down payment, and residual value, you can see how different factors impact your payment and find a lease that fits your budget.
How Monthly Lease Payments are Calculated
Calculating a lease payment involves three main components: depreciation, finance charges, and taxes. The formula is a straightforward addition of these parts.
- Depreciation: This is the largest part of your payment. It's the difference between the vehicle's negotiated price (Capitalized Cost) and its predicted value at the end of the lease (Residual Value), divided by the number of months in the term.
Monthly Depreciation = (Capitalized Cost - Residual Value) / Lease Term. - Finance Charge: This is the interest you pay. It's calculated using a "money factor," which is similar to an APR. The formula is:
Monthly Finance Charge = (Capitalized Cost + Residual Value) * Money Factor. - Sales Tax: This is calculated based on your local tax rate. In most states, tax is applied to the sum of the monthly depreciation and finance charge. In others, you may have to pay tax upfront on the full capitalized cost.
Your base monthly payment is the sum of the monthly depreciation and the monthly finance charge. The final payment includes the sales tax on top of that base amount.
Residual Value and Money Factor Explained
Residual Value is one of the most critical factors in a lease. It is the leasing company's estimate of what the car will be worth at the end of the lease term. It's usually expressed as a percentage of the MSRP. A higher residual value is better for you, as it means the car is expected to depreciate less, resulting in lower monthly depreciation charges and a smaller payment.
The Money Factor (or lease factor) is the interest rate. It's expressed as a small decimal, like 0.00125. To get a rough idea of the equivalent Annual Percentage Rate (APR), you simply multiply the money factor by 2400. In this example, 0.00125 x 2400 = 3% APR. A lower money factor means you'll pay less in finance charges over the life of the lease.
Taxes, Fees, and Due at Signing
Your "Due at Signing" amount is the total cash you need to pay on the day you sign the lease. This typically includes your first month's payment, any down payment (also known as a "capitalized cost reduction"), an acquisition fee (charged by the leasing company to set up the lease), a documentation fee (charged by the dealer for paperwork), and sometimes taxes and registration fees. Our calculator lets you choose whether to pay these fees upfront or roll them into the capitalized cost, which will increase your monthly payment slightly but reduce the amount due at signing.
Extra Payments and Lease-End Options
While you can make a large down payment to lower your monthly payments, it's often not recommended on a lease. If the vehicle is stolen or totaled, your insurance will reimburse the leasing company for the car's value, but you will likely not get your down payment back. At the end of your lease, you generally have three options: 1) Return the vehicle and walk away (you may have to pay disposition and mileage overage fees). 2) Purchase the vehicle for its residual value. 3) Lease or buy a new vehicle from the same dealer.
Frequently Asked Questions
- What is a car lease?
- A car lease is a long-term rental agreement that allows you to use a vehicle for a set period and mileage for a fixed monthly payment. You do not own the car at the end of the lease.
- How do you calculate a lease payment?
- A lease payment is primarily calculated from three parts: the depreciation fee (the difference between the car's initial value and its expected value at lease-end), a finance fee (interest), and sales tax.
- What is residual value?
- Residual value is the estimated wholesale value of the vehicle at the end of the lease term. A higher residual value typically leads to a lower monthly payment.
- What is a money factor?
- The money factor, also known as a lease factor, represents the interest rate you'll pay during the lease. To convert it to an equivalent APR, multiply the money factor by 2400.
- How do taxes and fees affect lease payments?
- Taxes can be applied to the monthly payment or paid upfront on the capitalized cost, while fees (like acquisition or documentation) can be paid upfront or rolled into the lease, increasing your monthly payment.
- How accurate is this calculator?
- This calculator provides a very close estimate based on standard leasing formulas. However, final figures can vary slightly based on the leasing company's specific calculations, so it should be used for estimation purposes only.
Disclaimer: The calculations provided are estimates only. Consult your dealer or leasing company for the actual terms and final costs of your lease agreement.
