About the Auto Lease Calculator
An auto lease calculator works out the monthly payment from the negotiated price, residual value, money factor, and term. Leasing charges you for depreciation plus a finance cost, which is why the calculation looks nothing like a loan.
The formula
Payment = (cap cost − residual)/months + (cap cost + residual) · money factorCapitalised cost is the negotiated price. Residual value is what the car is projected to be worth at lease end. Money factor times 2,400 gives the equivalent APR.
How to use this calculator
- 1Enter your Vehicle MSRP ($). The field starts at
40000, which you can overwrite. - 2Enter your Capitalized Cost (Negotiated Price $). The field starts at
37000, which you can overwrite. - 3Enter your Residual Value (%). The field starts at
55, which you can overwrite. - 4Enter your Money Factor (e.g. 0.00125). The field starts at
0.00125, which you can overwrite. - 5Enter your Lease Term (Months). The field starts at
36, which you can overwrite. - 6Read the result straight away — it recalculates as you type, so there is no button to press. Use Share to copy a link that reopens the page with your exact numbers filled in.
Worked example
| Input | Value |
|---|---|
| Vehicle MSRP ($) | 40000 |
| Capitalized Cost (Negotiated Price $) | 37000 |
| Residual Value (%) | 55 |
| Money Factor (e.g. 0.00125) | 0.00125 |
| Lease Term (Months) | 36 |
Result
Monthly Lease: $490.42
Equiv. APR: 3.00%
Residual Value: $22000.00
Those are the values the page loads with, so you can reproduce this result yourself and then change one field at a time to see what drives the outcome.
Understanding your result
The payment has two parts. The depreciation charge covers the value the car loses during your term, and the finance charge covers the cost of the money tied up. This is why a car with a high residual value leases cheaply — you are only paying for the portion of value that disappears.
The money factor is where lease deals are commonly obscured. It is quoted as a small decimal like 0.00125, which means little until you multiply by 2,400 to get 3 percent APR. Dealers are not always forthcoming with it, and a marked-up money factor can add substantially to the payment without changing the headline price.
Things worth knowing
- Multiply the money factor by 2,400 to get the APR, and negotiate it as you would an interest rate.
- Negotiate the capitalised cost exactly as you would a purchase price. It is not fixed.
- Mileage limits are typically 10,000 to 15,000 a year, with excess charged at 15 to 30 cents per mile.
- Wear-and-tear charges at lease end can be significant. Review the standards before returning the car.
- A large upfront payment is at risk if the car is written off early, since it is not refunded.
Frequently asked questions
How is a lease payment calculated?+
Depreciation — capitalised cost minus residual value, divided by the term — plus a finance charge based on the money factor. You pay for the value lost, not the whole car.
What is a money factor?+
The lease equivalent of an interest rate, quoted as a small decimal. Multiply by 2,400 to convert to APR: 0.00125 is 3 percent. It is negotiable and often marked up.
Is leasing cheaper than buying?+
Monthly, usually yes. Over a long period, buying and keeping a car is almost always cheaper because you eventually own an asset. Leasing suits those who want a new car every few years.
What happens if I exceed the mileage limit?+
You pay an excess charge, typically 15 to 30 cents per mile, at lease end. Buying extra miles upfront is usually cheaper than paying the penalty if you know you will exceed.