Car Lease Calculator

Q: How is a car lease payment calculated?

Two parts: depreciation — (capitalized cost − residual value) ÷ months — plus the rent charge — (capitalized cost + residual value) × money factor. Sales tax is then applied, usually on the monthly payment.

Q: What is a money factor?

The lease's interest rate in disguise. Multiply the money factor by 2400 to get the equivalent APR — a 0.0025 money factor is about a 6% APR. Anything above roughly 0.0035 (8.4% APR) deserves negotiation or a better credit tier.

Q: What is residual value?

The leasing company's prediction of the car's worth at lease end, set as a percentage of MSRP. A higher residual means less depreciation to pay for, so cars that hold value well lease more cheaply.

Decode the dealer's lease worksheet: your payment from capitalized cost, residual value, and money factor — with the money factor translated into a real APR.

Monthly lease payment (with tax)

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Depreciation portion

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Rent charge (interest)

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Money factor as APR

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Residual value

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Total of payments

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The lease payment formula

Depreciation = (Net cap cost − Residual) ÷ Months
Rent charge = (Net cap cost + Residual) × Money factor
Payment = (Depreciation + Rent charge) × (1 + tax rate)

Worked example

Cap cost $38,000 − $2,000 down = $36,000 net · MSRP $40,000 × 58% = $23,200 residual · 36 months · MF 0.0025

Depreciation: (36,000 − 23,200) ÷ 36 = $355.56 · Rent: (36,000 + 23,200) × 0.0025 = $148.00

Pre-tax payment $503.56; with 6.5% tax ≈ $536/mo. The money factor equals 0.0025 × 2400 = 6% APR.

Negotiating a lease like a buyer

Dealers quote payments; the payment hides four levers. Negotiate the cap cost exactly as if buying the car — every dollar off reduces depreciation. Ask for the money factor and multiply by 2400; if it exceeds current auto-loan APRs, push back. The residual is set by the leasing bank and isn't negotiable — but comparing models by residual percentage tells you which cars lease efficiently. Finally, be careful with large down payments: if the car is totaled early, cap reductions are usually gone. Compare the same car as a purchase with the auto loan calculator.

Frequently asked questions

How is a car lease payment calculated?

Depreciation ((cap − residual) ÷ months) plus rent charge ((cap + residual) × money factor), then tax.

What is a money factor?

The lease interest rate ÷ 2400. MF 0.0025 = 6% APR. Above ~0.0035, negotiate.

What is residual value?

Predicted end-of-lease value as % of MSRP. Higher residual → cheaper lease.

Related calculators

Note: Some states tax leases differently (upfront or on full value). Acquisition and disposition fees not included. Not financial advice. Last reviewed: July 2026.