Lease Calculator
Calculate monthly lease payments, total lease cost, and effective interest rate. Works for car leases, equipment leases, and any closed-end lease using money factor pricing.
Monthly Lease Payment
$545.74
Equiv. APR: 3% · Residual: $19,250
Depreciation/mo
$437.5
Finance Charge/mo
$67.81
Total Lease Cost
$20,542
Total Depreciation
$15,750
About the Lease Calculator
A lease calculator computes monthly lease payments for any closed-end lease using the standard money factor and residual value framework — the same math used by dealerships and leasing companies for car leases, equipment leases, and commercial real estate leases. Understanding how lease payments are calculated is valuable for anyone negotiating a lease: it reveals exactly what you are paying for and enables you to quickly identify whether a quoted payment is fair based on the capitalized cost, residual value, and money factor the dealer or lessor is using. Lease transactions are often presented opaquely — dealers may quote only the monthly payment without disclosing the three components that determine it. Our free lease calculator makes the math transparent, showing the depreciation fee (the portion of the payment covering the asset value you consume), the finance charge (interest on the average outstanding balance), and the total lease cost including tax and fees. It also converts the money factor to an equivalent annual interest rate, making it easy to compare leasing cost against buying and financing.
Formula
Depreciation = (Cap cost - Residual) / months | Finance charge = (Cap cost + Residual) × money factor | Monthly = (Depreciation + Finance) × (1 + tax%) | Equiv. APR = money factor × 2400
How It Works
Monthly lease payment = Depreciation Fee + Finance Charge + Sales Tax. Depreciation Fee = (Capitalized Cost - Residual Value) / Term months. Finance Charge = (Capitalized Cost + Residual Value) × Money Factor. Base payment = Depreciation Fee + Finance Charge. Total with tax = Base × (1 + tax rate%). Equivalent APR from money factor = Money Factor × 2,400. Example: $35,000 cap cost, 55% residual ($19,250), 0.00125 money factor, 36-month term, 8% sales tax. Depreciation = ($35,000 - $19,250) / 36 = $437.50/month. Finance charge = ($35,000 + $19,250) × 0.00125 = $67.81/month. Base = $505.31. With 8% tax = $505.31 × 1.08 = $545.73/month. Equivalent APR = 0.00125 × 2,400 = 3%. Total lease cost = $545.73 × 36 + $895 acquisition fee = $20,541. At lease end you own nothing — the total cost funds 36 months of driving and the convenience of a new vehicle every 3 years.
Tips & Best Practices
- ✓Negotiate the selling price (cap cost) before mentioning you are interested in leasing — salespeople often raise the cap cost for lease customers. Get the lowest possible selling price first, then convert to a lease quote.
- ✓The money factor is set monthly by the manufacturer and cannot be negotiated, but dealers sometimes mark it up and pocket the difference. Ask the dealer to disclose the buy rate (base money factor) versus what they are charging you.
- ✓High-residual vehicles make the best lease deals: vehicles that hold value well (Honda, Toyota, certain German makes) have higher residuals set by the manufacturer, reducing the depreciation fee and monthly payment for the same cap cost.
- ✓Gap insurance on leases: if the leased vehicle is totalled or stolen, the insurance payout may be less than your remaining lease payments. Most manufacturer-backed leases include gap protection; third-party leases may not — check before signing.
- ✓Mileage negotiation: negotiate mileage upfront. Standard leases offer 10,000-12,000 miles/year. Excess mileage at $0.20-0.30/mile adds up fast. Adding 3,000 extra miles per year upfront costs about $20-30/month more — far cheaper than paying overage at lease end.
- ✓Lease-end purchase option: the residual value in your contract is the price to buy the vehicle at lease end. If the car is worth more than the residual (common in used car markets), purchasing and reselling can generate profit. If worth less, simply return it.
Who Uses This Calculator
Car shoppers evaluating whether a dealer-quoted lease payment matches the disclosed money factor and residual value. Business owners calculating the monthly cost of equipment or vehicle fleet leases before signing. Consumers comparing the total cost of leasing versus financing the same vehicle. People learning how to evaluate lease deals independently without relying on dealer math. Anyone negotiating a lease who wants to model the impact of different cap cost reductions, money factors, or residual values.
Optimised for: USA · Canada · UK · Australia · Calculations run in your browser · No data stored
Frequently Asked Questions
How is a lease payment calculated?
Lease payment = Depreciation Fee + Finance Charge + Tax. Depreciation = (Cap cost - Residual) / months. Finance charge = (Cap cost + Residual) × Money Factor. The money factor × 2400 converts to approximate APR.
What is money factor in a lease?
Money factor is a small decimal (e.g., 0.00125) used by dealers to calculate the finance charge. Multiply by 2,400 to convert to APR equivalent (0.00125 × 2400 = 3% APR). Dealers sometimes obscure this — always ask for the money factor.
What is residual value in a lease?
The residual value is the car's estimated worth at lease end, expressed as a percentage of MSRP. Higher residual = lower monthly payment (less depreciation to finance). Residuals are set by the manufacturer's captive finance arm, not the dealer.
Should I put a down payment on a lease?
Financially, a large down payment (cap reduction) on a lease is risky: if the car is totalled in month 2, you lose that money permanently. Many experts recommend $0 down on leases and keeping that cash invested or in emergency savings.
What is the difference between a closed-end and open-end lease?
Closed-end (standard consumer auto lease): the leasing company bears residual value risk; you return the car at term end. Open-end (fleet/business leases): you are responsible for any gap between residual value and actual market value at return.