Lease Calculator
Estimate your monthly car lease payment from the price, residual value, money factor, term and sales tax.
Lease Calculator — input your values
What does this financial calculator do?
This lease calculator estimates the monthly payment for a car lease using the standard industry formula: you pay the vehicle's depreciation during the term plus a finance charge based on the money factor, with sales tax added on top.
The breakdown shows the residual value, the monthly depreciation and finance portions, and the total cost including any down payment. It also converts the money factor to an approximate APR so you can compare leasing against financing.
Formula and variables
The finance charge is computed on the average of the capitalized cost and the residual value.
| Symbol | Meaning |
|---|---|
| C | Adjusted capitalized cost (negotiated price − down payment) |
| R | Residual value (MSRP × residual %) |
| n | Lease term in months |
| MF | Money factor (interest rate ÷ 2400) |
Worked example
A $40,000 MSRP vehicle negotiated to $36,000, with a 55% residual, 0.0025 money factor, 36 months, 7% tax and no down payment.
- Residual: 55% × $40,000 = $22,000.
- Depreciation: ($36,000 − $22,000) ÷ 36 = $388.89/month.
- Finance charge: ($36,000 + $22,000) × 0.0025 = $145.00/month.
- Pretax payment: $533.89.
- With 7% tax: $571.26/month.
Answer: Monthly lease payment ≈ $571.26 for 36 months.
Tips and common mistakes
Tips
- Negotiate the selling price before discussing the payment — a lower price shrinks both the depreciation and finance portions.
- Money factors are negotiable: a 0.0020 factor equals 4.8% APR versus 6% at 0.0025.
- Watch the residual value: a higher residual means a lower payment, but a higher buyout if you want to keep the car.
- Weigh mileage limits and excess-wear charges before choosing a lease over a purchase.
Common mistakes to avoid
- Negotiating only the monthly payment instead of the price, money factor and residual independently.
- Confusing the money factor with a percentage — convert with × 2400 before comparing to an APR.
- Ignoring that taxes, fees and the down payment at signing are real cash costs beyond the monthly payment.
Lease Calculator — frequently asked questions
What is a money factor?
The money factor is the lease equivalent of an interest rate, expressed as a small decimal. Multiply it by 2400 to get the approximate APR: 0.0025 × 2400 = 6%.
What is the residual value?
The projected value of the vehicle at the end of the lease, set by the manufacturer as a percentage of MSRP. It determines both your monthly depreciation cost and the price to buy the car at lease end.
Why is my lease payment lower than a loan payment?
You finance only the depreciation during the lease term, not the full vehicle price. That is also why you own nothing at the end — the residual covers the value you never paid for.
Is leasing cheaper than buying?
Payments are lower, but over the long run buying usually costs less because you keep the car's remaining value. Leasing makes sense if you want a new car every few years and drive few miles.
What happens at the end of a lease?
You return the car (subject to mileage and condition charges), buy it for the residual value, or trade it into another lease. Your contract may include a purchase option fee.
How does sales tax work on leases?
Most states apply the tax to each monthly payment rather than the full price, which is one of leasing's tax advantages. A few states tax the entire lease value upfront.