Car Lease Payment Calculator
Use this calculator to estimate your monthly car lease payments and the total amount due at signing. Understanding these figures is crucial for budgeting and making an informed decision about leasing your next vehicle.
Cash down, trade-in equity, or rebates that reduce the lease's principal.
Fee charged by the leasing company for setting up the lease.
Fee for processing paperwork.
Fees for vehicle tags and registration.
Understanding Your Car 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 car more frequently. However, understanding how lease payments are calculated is key to ensuring you get a good deal.
Key Components of a Car Lease:
- 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 calculating depreciation.
- Residual Value: This is the estimated value of the car at the end of the lease term, expressed as a percentage of the MSRP. A higher residual value means less depreciation, leading to lower monthly payments.
- Lease Term: The duration of your lease agreement, typically ranging from 24 to 48 months.
- Money Factor: This is the lease equivalent of an interest rate, but expressed as a small decimal (e.g., 0.0004). To convert it to an approximate Annual Percentage Rate (APR), multiply it by 2400 (0.0004 * 2400 = 0.96% APR).
- Capitalized Cost Reduction: Any upfront payments, trade-in equity, or rebates that reduce the principal amount of the lease. This is similar to a down payment on a purchase.
- Sales Tax Rate: The applicable sales tax in your state, which is typically applied to the monthly payment in most states.
- Acquisition Fee: A fee charged by the leasing company for initiating the lease. It can sometimes be rolled into the capitalized cost or paid upfront.
- Documentation Fee: A fee charged by the dealership for processing paperwork.
- License & Registration Fees: Government fees for vehicle tags and registration.
How Monthly Lease Payments Are Calculated:
A car lease payment primarily consists of two parts:
- Depreciation Portion: This covers the difference between the adjusted capitalized cost (selling price minus any capitalized cost reduction) and the residual value, spread out over the lease term.
(Adjusted Capitalized Cost - Residual Value) / Lease Term - Finance Charge Portion (Rent Charge): This is the cost of borrowing money for the lease, calculated based on the sum of the adjusted capitalized cost and the residual value, multiplied by the money factor.
(Adjusted Capitalized Cost + Residual Value) * Money Factor
The sum of these two portions gives you the base monthly payment. Sales tax is then typically added to this base payment to arrive at your total monthly payment.
Example Calculation:
Let's use the default values in the calculator:
- Vehicle Selling Price: $35,000
- Residual Value Percentage: 55%
- Lease Term: 36 months
- Money Factor: 0.0004
- Capitalized Cost Reduction: $2,000
- Sales Tax Rate: 7%
- Acquisition Fee: $595
- Documentation Fee: $150
- License & Registration Fees: $300
Step 1: Calculate Residual Value Amount
$35,000 (Selling Price) * 0.55 (Residual Percentage) = $19,250
Step 2: Calculate Adjusted Capitalized Cost
$35,000 (Selling Price) – $2,000 (Cap Cost Reduction) = $33,000
Step 3: Calculate Depreciation Portion
($33,000 – $19,250) / 36 months = $13,750 / 36 = $381.94 per month
Step 4: Calculate Finance Charge Portion
($33,000 + $19,250) * 0.0004 (Money Factor) = $52,250 * 0.0004 = $20.90 per month
Step 5: Calculate Base Monthly Payment
$381.94 (Depreciation) + $20.90 (Finance Charge) = $402.84
Step 6: Calculate Total Monthly Payment (with tax)
$402.84 * (1 + 0.07) = $402.84 * 1.07 = $431.04
Step 7: Calculate Total Due at Signing
$2,000 (Cap Cost Reduction) + $595 (Acquisition Fee) + $150 (Documentation Fee) + $300 (License & Registration Fees) + $431.04 (First Month's Payment) = $3,476.04
By using the calculator above, you can quickly adjust these variables to see how they impact your potential lease payments and upfront costs, helping you negotiate and plan your budget effectively.