Free Car Lease Calculator
Calculate your monthly payment and total lease cost
How Car Lease Payments Are Calculated
Your monthly lease payment consists of two parts: the depreciation fee (paying for the car's value loss) and the finance charge (interest on the money). Understanding this formula helps you negotiate better deals.
The Lease Payment Formula
Monthly Depreciation = (Capitalized Cost - Residual Value) ÷ Lease Term
Finance Charge = (Capitalized Cost + Residual Value) × Money Factor
Monthly Payment = Depreciation + Finance Charge + Tax
Key Lease Terms Explained
- Capitalized Cost (Cap Cost) - The negotiated price of the vehicle plus fees. This is your main negotiation point—aim for invoice price or below.
- Residual Value - The car's estimated value at lease end, expressed as a percentage of MSRP. Higher residual = lower payments. Set by manufacturer, not negotiable.
- Money Factor - The lease interest rate as a decimal. Multiply by 2,400 to get APR. Example: 0.00125 × 2,400 = 3% APR.
- Lease Term - Length of lease in months. 36 months is typically the sweet spot for best residual values.
Money Factor to APR Conversion
Dealers often quote money factor instead of APR to make rates seem lower. Here's how to convert:
| Money Factor | APR |
|---|---|
| 0.00083 | 2.0% |
| 0.00125 | 3.0% |
| 0.00167 | 4.0% |
| 0.00208 | 5.0% |
| 0.00250 | 6.0% |
| 0.00292 | 7.0% |
Tips for Getting the Best Lease Deal
- Negotiate the cap cost - Always negotiate the selling price before discussing monthly payments
- Avoid putting money down - If the car is totaled, you lose your down payment
- Check manufacturer incentives - Loyalty rebates, conquest offers, and special programs can reduce your cost
- Compare money factors - Better credit scores get lower money factors
- Consider lease term carefully - 36 months usually offers the best balance of payments and residual