Car Lease Calculator

Understanding Car Leasing

Car leasing lets you drive a vehicle for a set term while paying only for the portion you use (depreciation) plus a financing charge (money factor). Lower monthly payments and frequent upgrades are common benefits; mileage limits and wear-and-tear standards are the trade-offs. The car lease calculator below shows the math so you can compare offers with confidence.

How to Use the Car Lease Calculator

1. Enter MSRP, negotiated selling price (cap cost), residual percentage, and term.
2. Add the money factor, drive-off fees, and any cap cost reduction.
3. Review monthly payment, depreciation, finance charge, and total of payments.
4. Compare with a purchase using the built-in side-by-side results.

Lease Formula

• Depreciation = (Capitalized Cost - Residual Amount)
• Finance Charge = (Capitalized Cost + Residual Amount) × Money Factor

Key Components

• Capitalized Cost: Negotiated selling price after incentives and cap reductions.
• Residual Value: Lender’s estimate of end-of-term value, based on MSRP.
• Money Factor: Lease rate; APR ~= money factor * 2,400.
• Term & Mileage: Months and annual miles shape depreciation and program terms.

Worked Examples

Example 1: Mid-Size Sedan

• Capitalized Cost: $34,000
• Residual: MSRP $35,000 × 0.55 = $19,250
• Depreciation: $34,000 - $19,250 = $14,750
• Finance Base: $34,000 + $19,250 = $53,250
• Finance Charge (term): $53,250 × 0.0025 × 36 = $4,793.75
• Payment: ($14,750 / 36) + ($4,793.75 / 36) approx $541.49

Example 2: Compact SUV

• Capitalized Cost: $41,000
• Residual: MSRP $42,000 × 0.62 = $26,040
• Depreciation: $41,000 - $26,040 = $14,960
• Finance Base: $41,000 + $26,040 = $67,040
• Finance Charge (term): $67,040 × 0.0019 × 36 = $4,579.34
• Payment: ($14,960 ÷ 36) + ($4,579.34 ÷ 36) ˜ $542.76

Ways to Optimize a Lease

• Negotiate the selling price first; then apply lease incentives.
• Verify residual percentage and money factor from the lender’s bulletin.
• Consider MSDs (where available) to reduce the money factor.
• Avoid large cap reductions; keep cash for flexibility and protection.

Taxes and Fees

States vary: some tax monthly payments, others tax the selling price up front, and others tax only depreciation. Registration, title, and documentation may be due at signing or financed. Adjust drive-off and cap reduction inputs to model common structures.

End-of-Lease Options

Return the car (watch for disposition and wear charges), purchase it for residual, or extend the term. If market price exceeds residual, buying can be attractive.

EV Leasing Notes

Some lenders pass through program credits that reduce payments. Compare adjusted payments to equivalent gas models and estimate charging costs with our EV tool.

Frequently Asked Questions

Further Reading

See Investopedia’s guide to the money factor and car leasing on Wikipedia.

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Reading a Lease Worksheet

Dealers and lenders generate a worksheet that shows every meaningful input used to compute a payment. Ask for it early, then verify each field against your quote. Key items to confirm include MSRP (used to calculate residual amount), selling price or capitalized cost, money factor, residual percentage, acquisition fee, cap cost reduction, registration and documentation fees, and any credits or rebates. If a figure is missing or rolled together, request a breakdown so you can recreate the payment with a calculator and ensure there are no surprises.

When you rebuild the numbers, start from the negotiated selling price. Subtract your cap cost reduction (if any), add amounts financed such as acquisition and permitted fees, and you arrive at the capitalized cost. Compute the residual amount from MSRP and the residual percentage. Depreciation equals cap cost minus residual amount; divide that by the term to get monthly depreciation. The finance charge equals (cap cost + residual amount) multiplied by the money factor; if your payment does not match within a dollar or two, ask the store to explain the difference before you sign.

Residuals and Money Factor Sources

Residual percentages and money factors are set by lenders, not by dealers. These values move over time and by model, trim, and term. A lender can publish multiple programs at once, and subvented options can improve residuals or rates for specific vehicles. Ask the dealer which lender and program they are quoting. If you are negotiating across stores, ensure that each quote uses the same term and mileage allowance, because those inputs materially change the payment even with the same selling price.

If you want a quick reasonableness test, compare the quoted money factor to an approximate APR by multiplying by 2,400. That conversion is not exact, but it helps you gauge whether the finance component is competitive. If the APR seems high relative to your credit profile, ask whether a different term, lender, or multiple security deposits could lower the rate component of the payment.

MSDs vs. Cap Cost Reductions

A cap cost reduction lowers the capitalized cost up front, reducing depreciation and payment. The tradeoff is risk: if the car is stolen or totaled, you may not recover that lump sum. Multiple security deposits (MSDs), when offered by a lender, are refundable at lease end and reduce the money factor by a fixed step per deposit. Both tactics lower the payment, but MSDs preserve your cash and reduce risk because they are held as a refundable deposit rather than applied to depreciation.

As a simple illustration, assume a program that allows up to 7 MSDs, each reducing the money factor by 0.00005. If your base money factor is 0.00200, seven deposits reduce it to 0.00165. On a vehicle with a $45,000 cap cost and $27,000 residual amount over 36 months, the finance charge component falls meaningfully, often making MSDs the more efficient lever compared to equivalent cap reductions. Run both approaches in the calculator to select the better dollar outcome for your situation.

Common Fees Explained

• Acquisition fee: Charged by the lender to open the lease; may be financed or paid at signing.
• Disposition fee: Charged if you return the vehicle at term end; not charged if you buy the vehicle or refinance with the same lender.
• Documentation fee: Dealer paperwork fee; amount varies by location.
• Registration and title: Government fees to operate the vehicle legally.
• Security deposits: Refundable hold to reduce risk or to qualify for MSD savings when offered.

Mileage Strategy

Mileage allowances commonly range from 10,000 to 15,000 miles per 12 months, with options above that for a cost. If you expect to exceed the allowance, buying extra miles at signing is usually cheaper than paying overage at term end. Track mileage quarterly so you can adjust driving habits early. If you are trending high, consider a midterm swap with a buyer who drives fewer miles if your lender supports lease transfers.

How Sales Tax Is Applied

Sales tax treatment depends on location. The three common methods are: tax each monthly payment, tax the selling price up front, or tax the depreciation portion only. A few locations include incentives or fees in the taxable base differently. Always match your calculator settings to the method your location uses, and verify the worksheet shows the taxable base and the tax rate so you can reconcile the payment to the penny.

Should You Buy the Vehicle at Term End

If market value at term end exceeds the residual amount plus fees, buying the vehicle can be a good outcome. If market value is lower, returning the vehicle limits your downside. Estimate market value from comparable listings and auction guides three months before maturity, then compare the net buyout cost to the true market value. Remember to include sales tax and any lender buyout fee in your analysis. If the numbers favor buying, secure financing ahead of time and confirm that your lender will release the title promptly after payment.

Business Leasing Considerations

Some businesses lease vehicles for predictable costs and to refresh fleets on a consistent schedule. Programs can differ for business entities, including eligibility for specialized terms, mileage allowances, and potential tax treatment. Because rules vary widely, work with a qualified professional to understand the implications for your organization. Use the calculator to compare cash flow and total cost to alternative financing structures before you sign.

Negotiation Checklist and Script

• Get a written selling price before discussing payments or trade value.
• Confirm the lender, term, residual percentage, and money factor used.
• Request the full lease worksheet and all fees; ask to itemize bundled charges.
• Compare MSDs vs. cap reduction; choose the lower total cost with acceptable risk.
• Lock the program by a clear deadline; verify there are no last-minute changes.

Script: "I want to confirm the selling price, fees, residual percentage, and money factor on the worksheet so I can match the payment in my calculator. Please send the full worksheet so we can finalize today."

Case Studies

High Residual Compact

A compact with a strong residual percentage and a low money factor often produces a lower payment than a similarly priced model with weaker residuals. Two vehicles priced within a few hundred dollars can differ by more than a hundred dollars in payment purely from residual and money factor differences. Always compare programs across a shortlist of models, not just selling prices.

Luxury SUV With MSDs

On a premium SUV, MSDs can lower the finance charge component substantially, especially for longer terms. If you plan to keep cash parked safely for the same period, MSDs can produce an effective return that exceeds many low-risk alternatives. Remember MSDs are refundable and do not carry the same loss risk as cap reductions.

Evaluating the Buyout

As maturity approaches, market values can diverge from the residual. In one scenario, elevated resale values made buying at residual and selling retail profitable. In another, weaker resale meant returning the vehicle was the rational choice. Build both paths in the calculator and add your expected transaction costs to select the better outcome.

Common Mistakes to Avoid

• Shopping payment only, not the selling price, residual, and money factor.
• Using large cap reductions that expose cash to total loss risk.
• Ignoring mileage needs and paying expensive overage at turn-in.
• Accepting bundled fees without an itemized worksheet.
• Skipping a pre-inspection and getting surprised by wear charges.

More Questions

Glossary (Extended)

• Capitalized Cost: The financed amount after discounts and cap reductions.
• Residual Amount: The lender’s estimate of the vehicle’s value at term end, based on MSRP.
• Money Factor: Lease finance rate. APR approximation = money factor * 2,400.
• Acquisition Fee: Lender fee to initialize the lease; can be financed.
• Disposition Fee: Fee charged if you return the vehicle at maturity.
• Multiple Security Deposits: Refundable deposits that reduce the money factor by program rule.
• Cap Cost Reduction: Upfront payment that lowers the capitalized cost (increases risk if the vehicle is totaled).
• Wear-and-Tear: Condition standards for acceptable cosmetic and mechanical state at return.