Vehicle Lease Payment Calculator
Use this calculator to estimate your monthly lease payment for a new or used vehicle. Understanding the key components of a lease can help you negotiate a better deal.
Understanding Your Vehicle Lease
Leasing a car can be an attractive option for many drivers, offering lower monthly payments compared to financing a purchase, and the ability to drive a new vehicle more frequently. However, understanding how lease payments are calculated is crucial to making an informed decision.
Key Components of a Lease Payment:
- Vehicle Selling Price (Capitalized Cost): This is the agreed-upon price of the vehicle, similar to the purchase price. It's the starting point for your lease calculation.
- Residual Value: This is the estimated value of the vehicle at the end of the lease term, expressed as a percentage of the MSRP (Manufacturer's Suggested Retail Price). The higher the residual value, the less depreciation you pay for, resulting in lower monthly payments.
- Lease Duration (Term): The length of your lease agreement, typically expressed in months (e.g., 24, 36, 48 months).
- Money Factor: This is the leasing company's equivalent of an interest rate. It's a small decimal number (e.g., 0.00125). To convert it to an approximate annual percentage rate (APR), multiply it by 2400 (0.00125 * 2400 = 3.0% APR).
- Capitalized Cost Reduction: This is essentially a "down payment" on a lease. Any money you pay upfront (cash, trade-in equity) reduces the capitalized cost, thereby lowering your monthly payments.
- Acquisition Fee: A fee charged by the leasing company for setting up the lease. This can sometimes be rolled into the capitalized cost or paid upfront.
- Sales Tax Rate: Sales tax is typically applied to the monthly payment in most states, though some states tax the total lease cost upfront. Our calculator assumes it's applied to the monthly payment.
How the Calculator Works:
The calculator uses a standard formula to determine your monthly lease payment, which primarily consists of two parts:
- Depreciation Charge: This covers the difference between the adjusted capitalized cost and the residual value, spread out over the lease term. It represents the portion of the car's value you "use up" during the lease.
- Finance Charge (Rent Charge): This is calculated based on the average amount of money the leasing company has invested in the vehicle over the lease term, using the money factor.
These two charges are added together to get your base monthly payment, to which sales tax is then applied.
Example Calculation:
Let's use the default values in the calculator:
- Vehicle Selling Price: $35,000
- Residual Value Percentage: 55% (of $35,000 = $19,250)
- Lease Duration: 36 months
- Money Factor: 0.00125
- Capitalized Cost Reduction: $1,000
- Acquisition Fee: $595
- Sales Tax Rate: 7%
1. Adjusted Capitalized Cost: $35,000 (Selling Price) – $1,000 (Cap Cost Reduction) + $595 (Acquisition Fee) = $34,595
2. Depreciation Amount: $34,595 (Adjusted Cap Cost) – $19,250 (Residual Value) = $15,345
3. Monthly Depreciation Charge: $15,345 / 36 months = $426.25
4. Monthly Finance Charge: ($34,595 (Adjusted Cap Cost) + $19,250 (Residual Value)) * 0.00125 (Money Factor) = $53,845 * 0.00125 = $67.31
5. Base Monthly Payment: $426.25 (Depreciation) + $67.31 (Finance Charge) = $493.56
6. Monthly Sales Tax: $493.56 * 0.07 = $34.55
7. Total Monthly Lease Payment: $493.56 + $34.55 = $528.11
This example demonstrates how each factor contributes to your final monthly payment. Experiment with different values to see how they impact your lease.