Auto Lease Payment Calculator
Lease Calculation Results:
Total Depreciation: $0.00
Monthly Depreciation: $0.00
Monthly Finance Charge: $0.00
Base Monthly Payment: $0.00
Total Monthly Payment: $0.00
Total Lease Cost (excluding upfront fees): $0.00
Understanding Your Auto Lease: A Comprehensive Guide
Leasing a car can be an attractive option for many drivers, offering lower monthly payments compared to buying and the flexibility to drive a new vehicle every few years. However, understanding the various components of a lease agreement is crucial to ensure you're getting a good deal. Our Auto Lease Payment Calculator helps you break down these costs, providing clarity on what you'll pay.
Key Components of an Auto Lease:
1. Vehicle Agreed Upon Value (Capitalized Cost)
This is essentially the negotiated selling price of the vehicle. Just like buying, you can negotiate the price of a car you plan to lease. A lower agreed-upon value directly translates to lower monthly payments, as it reduces the amount of depreciation you'll pay for.
2. Residual Value Percentage
The residual value is the estimated wholesale value of the vehicle at the end of the lease term. It's expressed as a percentage of the original MSRP (Manufacturer's Suggested Retail Price). A higher residual value means the car is expected to hold its value better, which is beneficial for you because it reduces the amount of depreciation you're responsible for over the lease term. This is a significant factor in determining your monthly payment.
3. Lease Term (Months)
This is the duration of your lease agreement, typically ranging from 24 to 48 months. A shorter lease term usually means higher monthly payments because you're depreciating the vehicle over a shorter period. Conversely, a longer term can lower monthly payments but might expose you to more maintenance costs as the car ages.
4. Money Factor
The money factor is the lease equivalent of an interest rate. It's a very small decimal number (e.g., 0.00180). To convert it to an approximate annual interest rate, you can multiply it by 2400 (0.00180 * 2400 = 4.32% APR). A lower money factor means lower finance charges on your lease.
5. Capitalized Cost Reduction
This is an upfront payment you make at the beginning of the lease to reduce the capitalized cost of the vehicle. It functions similarly to a down payment when buying a car. While it lowers your monthly payments, it's important to consider if tying up a large sum of cash upfront is the best financial move, especially since you don't own the vehicle.
6. Acquisition Fee
Also known as an administrative fee or bank fee, this is a charge from the leasing company for setting up the lease. It covers the costs of processing the application, checking credit, and other administrative tasks. This fee is typically paid upfront or rolled into the capitalized cost.
7. Sales Tax Rate
Sales tax on a lease is usually applied to your monthly payment in most states, rather than the full vehicle price upfront. The calculator applies this percentage to your base monthly payment to give you the total amount you'll pay each month.
How the Lease Payment is Calculated:
Your monthly lease payment is primarily composed of two parts: depreciation and finance charges, plus any applicable sales tax.
- Net Capitalized Cost: This is your Vehicle Agreed Upon Value minus any Capitalized Cost Reduction, plus the Acquisition Fee.
- Residual Value Amount: Calculated as the Vehicle Agreed Upon Value multiplied by the Residual Value Percentage.
- Total Depreciation: This is the difference between the Net Capitalized Cost and the Residual Value Amount. This is the portion of the car's value you "use up" during the lease.
- Monthly Depreciation: Total Depreciation divided by the Lease Term in months.
- Monthly Finance Charge: Calculated as (Net Capitalized Cost + Residual Value Amount) multiplied by the Money Factor. This is the "rent charge" for using the leasing company's money.
- Base Monthly Payment: The sum of Monthly Depreciation and Monthly Finance Charge.
- Total Monthly Payment: Base Monthly Payment plus Sales Tax (calculated on the base payment).
- Total Lease Cost: This is the sum of all your Total Monthly Payments over the lease term, plus any Capitalized Cost Reduction paid upfront.
Example Lease Calculation:
Let's use the default values in the calculator to illustrate:
- Vehicle Agreed Upon Value: $35,000
- Residual Value Percentage: 55%
- Lease Term: 36 months
- Money Factor: 0.00180
- Capitalized Cost Reduction: $2,000
- Acquisition Fee: $595
- Sales Tax Rate: 7.5%
Based on these inputs, the calculator would determine:
- Residual Value Amount: $35,000 * 0.55 = $19,250
- Net Capitalized Cost: $35,000 – $2,000 + $595 = $33,595
- Total Depreciation: $33,595 – $19,250 = $14,345
- Monthly Depreciation: $14,345 / 36 = $398.47
- Monthly Finance Charge: ($33,595 + $19,250) * 0.00180 = $52,845 * 0.00180 = $95.12
- Base Monthly Payment: $398.47 + $95.12 = $493.59
- Sales Tax Amount: $493.59 * 0.075 = $37.02
- Total Monthly Payment: $493.59 + $37.02 = $530.61
- Total Lease Cost: ($530.61 * 36) + $2,000 = $19,101.96 + $2,000 = $21,101.96
Using this calculator, you can adjust different variables to see how they impact your monthly payment and overall lease cost, helping you make an informed decision.