How the Lease Payment Calculator Works
Our lease payment calculator uses the exact same formula that automakers and lenders use to generate lease quotes. The formula is standardized across the industry and has three main components: depreciation, finance charge, and tax.
Depreciation Fee = (Net Cap Cost โ Residual Value) รท Months
Finance Charge = (Net Cap Cost + Residual Value) ร Money Factor
Tax = Base Payment ร State Tax Rate
Step-by-Step Calculation Example
Let's walk through a real example: You're leasing a car with MSRP of $40,000. You negotiate the price to $38,000, the residual value is 55% ($22,000), the money factor is 0.00125 (equivalent to 3% APR), and the term is 36 months.
Step 1 โ Net Capitalized Cost: $38,000 โ $0 down = $38,000
Step 2 โ Residual Value: $40,000 ร 55% = $22,000
Step 3 โ Depreciation Fee: ($38,000 โ $22,000) รท 36 = $444.44/month
Step 4 โ Finance Charge: ($38,000 + $22,000) ร 0.00125 = $75.00/month
Step 5 โ Base Payment: $444.44 + $75.00 = $519.44/month
With 8% tax: $519.44 ร 1.08 = $560.99/month
What Inputs Do I Need?
MSRP (Manufacturer's Suggested Retail Price): The sticker price of the vehicle. This is used to calculate the residual value. Do not confuse this with the negotiated price.
Capitalized Cost: The negotiated purchase price of the vehicle for the lease. This is the most important number to negotiate โ a lower cap cost directly reduces your payment.
Residual Value Percentage: Set by the manufacturer's finance arm and expressed as a percentage of MSRP. For a $40,000 car with 55% residual, the residual value is $22,000. Higher residual = lower payment.
Money Factor: The interest rate component of your lease, expressed as a small decimal. To find the equivalent APR, multiply by 2,400. A money factor of 0.00125 = 3.0% APR. Ask your dealer for this number explicitly.