Calculate your lease payment
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Depreciation fee / month
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Rent charge / month
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Sales tax / month
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Monthly payment
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Total cost of lease (incl. down)
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Short answer: A lease payment = (cap cost − residual) ÷ months + (cap cost + residual) × money factor, plus tax. On a $40,000 car negotiated to $37,000 with $2,000 down, a 58% residual, 6% APR (money factor 0.0025) and 36 months, that's $473 a month before tax, about $506 with 7% tax.
The lease terms, decoded
| Term | What it means |
|---|---|
| Capitalized cost | The price of the car in the lease. Negotiate it exactly as if you were buying. |
| Cap cost reduction | Down payment, rebates or trade-in credit that lower the cap cost. |
| Residual value | What the leasing company expects the car to be worth at the end, set as a % of MSRP. |
| Money factor | The lease's interest rate in decimal form. APR ÷ 2,400 = money factor. |
| Depreciation fee | The value you use up, spread across the months. |
| Rent charge | The finance charge, effectively the interest you pay. |
Where the payment actually goes
In the example above, $328 of the $473 pre-tax payment is depreciation and $146 is rent charge, the lease's interest. Over 36 months that rent charge adds up to about $5,240.
Two levers move the payment most. Every $1,000 knocked off the negotiated price saves about $30 a month on a 36-month lease. And because the rent charge is calculated on cap cost plus residual, a dealer marking up the money factor by even 0.0004 (about 1% APR) adds roughly $23 a month here, around $840 over the lease. Ask for the "buy rate" money factor.
Taxes vary: most states tax each monthly payment, as this calculator does, but a few tax the full price upfront. Thinking about buying instead? Compare with the car loan calculator and see how much car you can afford.
Frequently asked questions
How is a car lease payment calculated?
Monthly payment = depreciation fee + rent charge (+ sales tax). Depreciation fee = (adjusted cap cost − residual value) ÷ months. Rent charge = (adjusted cap cost + residual value) × money factor.
How do I convert a money factor to APR?
Multiply the money factor by 2,400. A money factor of 0.0025 equals a 6% APR. To go the other way, divide the APR by 2,400.
What is a good residual value?
Higher is better for the person leasing, because you only pay for the value the car loses. Residuals are set by the leasing company for each model and term, so you can't negotiate them, but you can choose models and terms with strong residuals.
What can I negotiate on a lease?
The selling price (capitalized cost) is the big one, just as when buying. You can also ask about the money factor, since dealers sometimes mark it up above the lender's base rate, and about fees. The residual percentage is fixed by the lender.
Is putting money down on a lease a good idea?
Often not. A down payment lowers the monthly payment, but if the car is totaled or stolen early, gap coverage typically pays the lender, not your down payment back. Many people prefer to keep the cash and accept a slightly higher payment.
Disclaimer: Estimates for planning only. Excludes acquisition, disposition and dealer fees, which vary. Not financial advice.