How to use this calculator
- Enter the Negotiated car price and any Down payment & trade-in.
- Set the Residual value as a percentage of the price, the Interest rate (APR) and the Lease term in months.
- Add your Sales tax percentage.
- Read the Monthly lease payment and the Total cost of the lease, then change the residual or term to compare deals.
How a lease payment is calculated
When you lease, you pay for the part of the car's value you use up, plus a charge for financing the whole thing. The first part is depreciation: the price you pay minus what the car is expected to be worth at the end (the residual value), spread over the term.
Payment = [(C − R) / n + (C + R) · MF] × (1 + tax)- C = capitalized cost: negotiated price minus down payment and trade-in
- R = residual value: price × residual percentage
- n = lease term in months
- MF = money factor = APR ÷ 2,400
- tax = sales tax rate applied to the monthly payment
The second part is the finance charge, often called the rent charge. Lenders express it as a money factor, which is simply the APR divided by 2,400. Sales tax is then added to the monthly total.
Example: a $38,000 car for 36 months
With $3,000 down, a 58% residual, 6% APR and 7% tax, the capitalized cost is $35,000 and the residual is $22,040. Depreciation is $360 a month and the finance charge $142.60, so the payment with tax is $537.78.
Over 36 months plus the down payment you spend about $22,360, and at the end you own nothing: you return the car or pay the residual to buy it.
What moves the payment most
The residual is the biggest lever. Lowering it from 58% to 50% in the same example pushes the payment up to $620.01, because you are now paying for more of the car's value. A higher residual is good for your payment, but make sure it is not set by inflating the price.
The term matters too. A 24-month lease on the same car costs $730.38 a month since the depreciation is spread over fewer months. Use the auto loan calculator to compare with buying the same car.
How to decide between leasing and buying
Leasing gives a lower monthly payment and a new car every few years, but you build no equity and usually face mileage limits and wear charges. Buying costs more per month, yet after the loan ends the car is yours.
Compare total cost over the same period, not just the monthly figure. If you drive a lot, keep cars for many years or want to modify them, buying often wins; if you want a low, predictable cost for a short period, a lease can fit.
Ways to lower the cost
- Negotiate the car's price first, exactly as if you were buying; the lease is based on it.
- Ask for the money factor and residual in writing and compare them across dealers.
- Avoid large down payments on a lease; if the car is totaled or stolen early, that money may not come back.
- Choose a mileage allowance that matches how you drive, since overage fees are charged per mile.
- Check for fees such as acquisition, disposition and early-termination charges.
Assumptions and limits
The calculator uses the standard lease formula with tax applied to the monthly payment. Rules differ by state or country: some tax the full price, some tax only payments, and some add registration and doc fees.
It does not include acquisition or disposition fees, mileage or wear charges, insurance, or incentives. Your lease agreement states the exact numbers, so use this to compare offers and ask questions.
Frequently asked questions
What is a money factor?
It is the lease's interest charge in decimal form. Multiply it by 2,400 to get the approximate APR; for example, 0.0025 equals 6%.
What is a good residual value for a lease?
Higher is better for the payment, since you pay for less depreciation. Residuals are set by the lessor and vary by model, term and mileage, so compare quotes on similar cars.
Is it better to put money down on a lease?
Usually not much. A big down payment lowers the monthly figure but can be lost if the car is stolen or totaled early.
Can I buy the car at the end of the lease?
Most leases allow it for the residual value plus fees. If the car is worth more than the residual, buying can be a good deal; if less, you can simply return it.
Is sales tax charged on the lease payment?
In many places it is charged on each payment, in others on the full price or the down payment. Check local rules, since this calculator applies the rate you enter to the monthly payment.