Auto Lease Calculator

Calculate your monthly auto lease payment, total lease cost, depreciation, and finance charges. Understand the true cost of leasing vs buying a vehicle.

Lease Details

$

Manufacturer's suggested retail price

$

Your negotiated purchase price (cap cost)

$

Cap cost reduction paid upfront

%

Predicted value at lease end (% of MSRP)

MF

Lease interest rate (APR / 2400)

mo
%

Enter your lease details

See monthly payment, total cost, and a full breakdown

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Pro Tip

Always negotiate the vehicle price (cap cost) before discussing the lease. Dealers may try to focus on the monthly payment, but reducing the cap cost lowers your payment the most. Also, never put more than $2,000 down on a lease to limit your risk.

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Understanding Auto Leases

An auto lease is essentially a long-term rental agreement. Instead of paying for the full value of the vehicle, you only pay for the depreciation that occurs during the lease term, plus finance charges and taxes. At the end of the lease, you return the vehicle or purchase it at the predetermined residual value.

The capitalized cost (cap cost) is the negotiated price of the vehicle. Just like buying, you should negotiate this price down from the MSRP. The net cap cost is the cap cost minus any down payment, trade-in, or manufacturer rebates. This is the amount the lease is based on.

The residual value is what the leasing company predicts the vehicle will be worth at the end of the lease, expressed as a percentage of MSRP. Higher residual values mean lower monthly payments because you are paying for less depreciation. Vehicles that hold their value well (like many Honda, Toyota, and Lexus models) tend to have higher residuals.

The money factor is the leasing equivalent of an interest rate. It is a small decimal number (typically between 0.0010 and 0.0040). To convert a money factor to an approximate APR, multiply by 2,400. For example, a money factor of 0.00125 equals about 3% APR. Lower money factors mean lower finance charges.

Leasing vs. buying involves trade-offs. Leasing typically offers lower monthly payments, the ability to drive a new car every few years, and warranty coverage for the full term. However, you build no equity, face mileage limits (typically 10,000-15,000 miles per year), must maintain the vehicle to avoid wear-and-tear charges, and continuous leasing is more expensive long-term than buying and keeping a vehicle.

Auto Lease Payment Formula

Monthly Lease Payment

Monthly Payment = Depreciation + Finance Charge + Tax

Where:

Depreciation = (Net Cap Cost - Residual Value) / Term

Finance Charge = (Net Cap Cost + Residual Value) x Money Factor

Tax = (Depreciation + Finance Charge) x Tax Rate

Net Cap Cost = Negotiated Price - Down Payment

Residual Value = MSRP x Residual %

Money Factor = Leasing interest rate (APR / 2400)

Example

For a $35,000 MSRP vehicle negotiated to $32,000, $2,000 down, 55% residual, 0.00125 money factor, 36 months, 6.25% tax:

  • • Net Cap Cost = $32,000 - $2,000 = $30,000
  • • Residual Value = $35,000 x 55% = $19,250
  • • Monthly Depreciation = ($30,000 - $19,250) / 36 = $298.61
  • • Monthly Finance Charge = ($30,000 + $19,250) x 0.00125 = $61.56
  • • Monthly Pre-Tax = $298.61 + $61.56 = $360.17
  • • Monthly Tax = $360.17 x 6.25% = $22.51
  • • Monthly Payment = $360.17 + $22.51 = $382.68

Frequently Asked Questions

What is a money factor and how does it relate to APR?
A money factor is the leasing equivalent of an interest rate, expressed as a small decimal (e.g., 0.00125). To convert it to an approximate APR, multiply by 2,400. So a money factor of 0.00125 equals about 3% APR. When comparing lease offers, always ask for the money factor and convert it to APR to understand the true financing cost.
What is a good residual value for a lease?
A higher residual value is better for the lessee because it means lower depreciation and lower monthly payments. Residual values of 55-65% for a 36-month lease are considered strong. Luxury and popular models that hold their value well tend to have the highest residuals. The residual is set by the leasing company and is not negotiable.
Should I put a large down payment on a lease?
Financial experts generally advise against large down payments on leases. If the car is totaled or stolen early in the lease, you may lose your down payment since gap insurance only covers the lease balance. A smaller down payment (or just the first month and fees) keeps your risk lower. Instead of a large down payment, negotiate a lower cap cost.
What happens if I exceed the mileage limit?
Most leases include a mileage allowance of 10,000-15,000 miles per year. Exceeding this limit results in per-mile charges at lease end, typically $0.15 to $0.30 per mile. On a 36-month lease, going 5,000 miles over at $0.20/mile would cost $1,000. If you drive a lot, negotiate a higher mileage allowance upfront, which is cheaper than paying excess charges.
Is leasing or buying better financially?
Buying is almost always cheaper in the long run if you keep the vehicle for many years. However, leasing can make sense if you want a new car every 2-3 years, prefer lower monthly payments, want full warranty coverage, or use the vehicle primarily for business (lease payments may be tax deductible). The worst financial choice is leasing repeatedly without ever owning.