Car Lease Calculator

Car lease payments are built from two components: a depreciation fee and a finance charge. Understanding both helps you negotiate a better deal — and avoid the common mistake of only focusing on the monthly number without knowing what drives it.

Core lease payment formulas:

Depreciation Fee = (Net Cap Cost − Residual Value) / Lease Term

Finance Fee = (Net Cap Cost + Residual Value) × Money Factor

Monthly Payment = Depreciation Fee + Finance Fee

Variable definitions:

• Net Cap Cost — The negotiated selling price of the vehicle, minus any down payment, trade-in credit, or manufacturer rebates
• Residual Value — The car’s projected worth at lease end, expressed as a percentage of MSRP (set by the leasing company, not negotiable)
• Money Factor — The lease equivalent of an interest rate. Multiply by 2,400 to convert to APR
• Lease Term — Number of months (typically 24, 36, or 48)

APR conversion: APR = Money Factor × 2400

A money factor of 0.00125 equals 3.0% APR. A money factor of 0.0020 equals 4.8% APR.

Worked example:

• Vehicle MSRP: $42,000
• Negotiated price (cap cost): $39,500
• Down payment: $2,500 → Net Cap Cost = $37,000
• Residual value: 55% of MSRP = $23,100
• Money factor: 0.00150
• Lease term: 36 months

Depreciation fee = ($37,000 − $23,100) / 36 = $386.11/month Finance fee = ($37,000 + $23,100) × 0.00150 = $90.15/month Monthly payment = $386.11 + $90.15 = $476.26/month (before tax)

Key negotiating insights:

• The cap cost (selling price) is fully negotiable — treat it like a cash purchase
• The residual value is set by the lessor and cannot be changed
• A higher residual = lower depreciation fee = lower payment
• Money factors below 0.001 (2.4% APR) are considered excellent
• Never roll negative equity from a trade-in into a new lease — it inflates payments significantly

Lease vs. buy rule of thumb: Leasing makes sense if you drive under 12,000–15,000 miles/year, value driving a new car every 3 years, and prefer lower monthly payments over building equity.