Estimate a monthly car lease payment from the vehicle price, residual value, money factor and term, and see how the payment splits between depreciation and finance charges.
How a lease payment is calculated
When you lease, you pay for the part of the car's value you use up during the lease, plus a finance charge. The payment has three parts:
Depreciation fee = (Adjusted cap cost − residual value) ÷ months
Finance fee = (Adjusted cap cost + residual value) × money factor
Payment = (depreciation fee + finance fee) × (1 + sales tax)
- Adjusted capitalized cost: the negotiated price minus your down payment or trade-in.
- Residual value: what the car is expected to be worth at the end, set by the leasing company as a percentage of MSRP.
- Money factor: the lease's interest rate in a different format. Multiply by 2,400 to get an approximate APR.
Worked example
A car with a $35,000 MSRP is negotiated to $33,000. You put $2,000 down, so the adjusted cap cost is $31,000. The 36-month residual is 58% of MSRP ($20,300) and the money factor is 0.0025.
- Depreciation fee: ($31,000 − $20,300) ÷ 36 = $297.22
- Finance fee: ($31,000 + $20,300) × 0.0025 = $128.25
- Payment before tax: $425.47; with 7% tax: $455.26 a month
Over the lease you would pay about $18,389 including the down payment, and you would return the car at the end.
How to get a better lease deal
- Negotiate the price just as you would when buying. A lower cap cost lowers the payment directly.
- Ask for the money factor and compare it with current loan rates.
- Look for high residual values. Cars that hold their value lease more cheaply.
- Be careful with large down payments. If the car is totaled early, that money is usually lost.
- Choose realistic mileage. Overage charges often run 15 to 30 cents per mile.
Frequently asked questions
Is leasing cheaper than buying?
Monthly payments are usually lower, but you have nothing to sell at the end. Buying and keeping a car for many years is generally cheaper overall. Compare with the auto loan calculator.
Why is sales tax handled this way?
Most states tax each lease payment. Some tax the full price upfront instead, so check your state's rules.
Related tools
Results are estimates for planning and education only. They are not financial, tax, legal or medical advice. Check important numbers with a qualified professional.