How this car lease calculator works
A car lease charges you for the part of the vehicle's value you use during the term, plus a financing cost for borrowing the car's value. So a monthly lease payment has two parts: depreciation and a finance charge (also called the rent charge).
First the tool finds the adjusted capitalized cost: the vehicle price (negotiated cap cost) minus your down payment and trade-in, which act as cap cost reductions. Then it computes monthly depreciation as (adjusted cap cost − residual value) ÷ term, and the monthly finance charge as (adjusted cap cost + residual value) × money factor. The base monthly payment is depreciation + finance charge.
The money factor is the lease equivalent of an interest rate. If you know the APR instead, convert it with money factor = APR ÷ 2400 (and the reverse, APR ≈ money factor × 2400). Residual value may be given as a dollar amount or as a percentage of MSRP. Finally, in many US states sales tax is applied to the monthly payment, so the payment with tax is base × (1 + tax rate ÷ 100) — this calculator uses that assumption.
The total of payments is the monthly payment (with tax) times the term, and the total lease cost adds your down payment and trade-in back in to show the full out-of-pocket amount.
Reference note: results are estimates. They do not include acquisition or disposition fees, registration, add-ons, gap insurance, mileage overage charges or dealer fees, and currency is shown in US dollars. Sales tax is applied to the payment, which is common but not universal — some states tax the full price or cap cost up front. This is general math, not a lease offer or financial advice.
Quick reference
| Term | Formula |
|---|---|
| Adjusted cap cost | price − down payment − trade-in |
| Monthly depreciation | (adjusted cap cost − residual) ÷ term |
| Monthly finance charge | (adjusted cap cost + residual) × money factor |
| Base monthly payment | depreciation + finance charge |
| Payment with tax | base × (1 + tax rate ÷ 100) |
| APR → money factor | APR ÷ 2400 |
Frequently asked questions
- How is a lease payment calculated?
- A lease payment is depreciation plus a finance (rent) charge. Depreciation is (adjusted cap cost − residual) ÷ term; the finance charge is (adjusted cap cost + residual) × money factor. Add them for the base payment, then sales tax is applied on top in many US states.
- What is the money factor?
- The money factor is the lease equivalent of an interest rate, written as a small decimal such as 0.00250. It sets the finance portion of the payment. Multiply it by 2400 to get an approximate APR, or divide an APR by 2400 to get the money factor.
- What is residual value?
- Residual value is the lender's estimate of what the car will be worth at the end of the lease, given as a dollar amount or a percentage of MSRP. A higher residual means less depreciation during the lease, which lowers that part of the payment.
- How does APR relate to money factor?
- They describe the same financing cost in different units. To convert an APR to a money factor, divide the APR percentage by 2400 (for example 6% ÷ 2400 = 0.0025). To go back, multiply the money factor by 2400 for the approximate APR.
- Is sales tax on the whole car or the payment?
- This calculator applies sales tax to the monthly payment, which is common in many US states. Some states instead tax the full price or cap cost up front, so this is an assumption — check your state's rules and treat the result as an estimate.
- Is this a real offer?
- No. This is a neutral math tool, not a lease offer, quote or financial advice. Results are estimates and exclude items like acquisition and disposition fees, dealer charges and add-ons. Confirm real figures with the dealer or lender before deciding.