Free Lease Calculator
Calculate monthly car lease payments with residual value and money factor. See total lease cost, equivalent APR, and compare terms.
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Typically 50-60% for 36-month lease
≈ 3.0% APR
Monthly Payment
$519.44
Residual Value
$22,000
Total Lease Cost
$20,700
Formula
Monthly Payment = Depreciation + Finance Charge = (Cap Cost – Residual) ÷ Months + (Cap Cost + Residual) × Money FactorHow Car Lease Payments Work
Unlike a car loan where you pay for the full vehicle price, a lease only charges you for the depreciation — the difference between the car's price and what it'll be worth at the end of the lease. This is why lease payments are typically 30-40% lower than loan payments on the same vehicle.
Your monthly lease payment has two components: the depreciation charge and the finance (rent) charge. The depreciation is straightforward math, while the finance charge is calculated using a money factor — the leasing world's version of an interest rate.
Understanding Key Lease Terms
- MSRP (Sticker Price) — the manufacturer's suggested retail price, used as the baseline for all lease calculations
- Capitalized Cost — the negotiated selling price minus your down payment; this is what you're actually financing
- Residual Value — the projected value at lease end, set by the leasing company (not negotiable)
- Money Factor — the interest component; multiply by 2,400 to see the equivalent APR
- Cap Cost Reduction — your down payment, which lowers the capitalized cost and monthly payment
Tips for Getting the Best Lease Deal
The best lease deals come from vehicles with high residual values and manufacturer lease incentives. Check manufacturer websites for advertised lease specials — these often include discounted money factors and bonus cash that dealers can't beat.
Always negotiate the selling price first, just as you would if buying. Many people make the mistake of only negotiating the monthly payment, which lets the dealer hide costs. Get the cap cost as low as possible, then verify the money factor matches what the manufacturer offers.
Putting a large down payment on a lease is generally not recommended. If the car is totaled or stolen, insurance pays the leasing company — not you. You'd lose your entire down payment. Keep it minimal and accept a slightly higher monthly payment instead.
Lease vs. Buy: Running the Numbers
To truly compare leasing versus buying, look at the total cost over 6 years. Two 3-year leases might cost $18,000-$22,000 total with nothing to show at the end. A 6-year loan on the same car might cost $28,000-$32,000 total, but you own a car worth $12,000-$15,000. Factor in maintenance savings (leased cars are under warranty) and your personal driving needs to make the right choice.
Frequently Asked Questions
How is a car lease payment calculated?
A lease payment has two parts: depreciation (the value your car loses during the lease) and a finance charge (interest). Depreciation = (Capitalized Cost – Residual Value) ÷ Months. Finance Charge = (Cap Cost + Residual) × Money Factor. Your monthly payment is the sum of both, plus tax.
What is a money factor and how do I convert it to APR?
The money factor is the lease equivalent of an interest rate, expressed as a small decimal like 0.00125. To convert to APR, multiply by 2,400. So 0.00125 × 2,400 = 3.0% APR. A good money factor is generally below 0.0030 (7.2% APR).
Is it better to lease or buy a car?
Leasing gives you lower monthly payments and a new car every 2-3 years, but you never build equity. Buying costs more monthly but you own the car outright after paying it off. Leasing makes sense if you drive under 12,000-15,000 miles/year and prefer always having a warranty.
What is residual value and why does it matter?
Residual value is what the car is projected to be worth at lease end, expressed as a percentage of MSRP. A higher residual means lower monthly payments because you're financing less depreciation. Trucks and SUVs that hold value well (55-60% residual) lease cheaper than cars that depreciate fast (45-50%).
Can I negotiate a car lease?
Yes — you can negotiate the selling price (capitalized cost), money factor, and sometimes mileage allowance. You cannot negotiate the residual value, which is set by the leasing company. Lowering the cap cost by even $1,000 saves roughly $28/month on a 36-month lease.