Lease Rate Calculator
Use this calculator to estimate your monthly lease payment and understand the components that make up your lease cost. This tool helps you break down the depreciation, finance charges, and total monthly outlay for a vehicle lease.
The agreed-upon selling price of the vehicle before any reductions.
Any upfront payments (e.g., down payment, trade-in value) that reduce the capitalized cost.
The estimated value of the vehicle at the end of the lease term.
The duration of your lease agreement in months.
A decimal number representing the financing cost of the lease. Multiply by 2400 to get the approximate annual percentage rate.
The applicable sales tax rate in your region, applied to the monthly payment.
An administrative fee charged by the lessor, often financed into the lease.
Lease Payment Breakdown
Monthly Depreciation Portion:
Monthly Finance Charge:
Total Monthly Lease Payment (with tax):
Effective Annual Rate (from Money Factor):
Understanding Your Lease Rate and Payments
Leasing a vehicle can be a flexible and often more affordable alternative to purchasing, especially if you enjoy driving a new car every few years. However, understanding the components of a lease payment is crucial to ensure you're getting a good deal. This Lease Rate Calculator helps demystify these components.
What is Gross Capitalized Cost?
The Gross Capitalized Cost is essentially the selling price of the vehicle that the lease is based on. It's the starting point for all lease calculations. Negotiating a lower capitalized cost is one of the most effective ways to reduce your monthly lease payment.
What is Capitalized Cost Reduction?
This refers to any upfront payments you make to reduce the Gross Capitalized Cost. This can include a cash down payment, the value of a trade-in vehicle, or rebates applied to the lease. A higher capitalized cost reduction will lower your monthly payments, but it also means more money out of pocket upfront.
What is Residual Value?
The Residual Value is the estimated wholesale value of the vehicle at the end of the lease term. It's determined by the leasing company and is a critical factor because it directly impacts the depreciation portion of your monthly payment. A higher residual value generally leads to lower monthly payments because you're financing a smaller amount of depreciation.
What is the Lease Term?
The Lease Term is simply the duration of your lease agreement, typically expressed in months (e.g., 24, 36, 48 months). A longer lease term will spread the depreciation over more months, potentially lowering your monthly payment, but you might pay more in total finance charges.
What is the Money Factor?
The Money Factor is the lease's equivalent of an interest rate. It's a small decimal number (e.g., 0.00150) that represents the financing charge you pay on the lease. To convert the money factor to an approximate annual percentage rate (APR), you can multiply it by 2400. A lower money factor means lower finance charges and a more affordable lease.
Sales Tax Rate and Acquisition Fee
- Sales Tax Rate: In most states, sales tax is applied to your monthly lease payment. This calculator includes this in the final monthly payment.
- Acquisition Fee: This is an administrative fee charged by the leasing company for setting up the lease. It can sometimes be paid upfront or rolled into the capitalized cost, increasing the amount subject to the money factor.
How Your Monthly Payment is Calculated
Your monthly lease payment is primarily composed of two parts:
- Depreciation Portion: This covers the difference between the Net Capitalized Cost (Gross Capitalized Cost minus Capitalized Cost Reduction, plus any financed fees like the acquisition fee) and the Residual Value, divided by the lease term. This is the cost of the vehicle's value loss over the lease period.
- Finance Charge Portion: This is calculated by adding the Net Capitalized Cost and the Residual Value, then multiplying that sum by the Money Factor. This represents the cost of financing the lease.
These two portions are added together to get your base monthly payment, to which sales tax is then applied to arrive at your total monthly lease payment.
Example Calculation:
Let's use the default values in the calculator:
- Gross Capitalized Cost: $35,000
- Capitalized Cost Reduction: $2,000
- Residual Value: $19,250
- Lease Term: 36 months
- Money Factor: 0.00150
- Sales Tax Rate: 7%
- Acquisition Fee: $695
- Net Capitalized Cost (NCC): $35,000 (Gross Cap Cost) – $2,000 (Cap Cost Reduction) + $695 (Acquisition Fee) = $33,695
- Monthly Depreciation: ($33,695 – $19,250) / 36 = $14,445 / 36 = $401.25
- Monthly Finance Charge: ($33,695 + $19,250) * 0.00150 = $52,945 * 0.00150 = $79.42
- Base Monthly Payment: $401.25 + $79.42 = $480.67
- Total Monthly Payment (with tax): $480.67 * (1 + 0.07) = $480.67 * 1.07 = $514.32
- Effective Annual Rate: 0.00150 * 2400 = 3.60%
By understanding these components, you can better negotiate your lease terms and make an informed decision.