Car lease calculator
A lease payment is built from two pieces, not the price of the car: a depreciation charge (the value the car will use up during your lease) and a rent charge (interest, based on the money factor). On a $40,000 car with a $3,000 down payment, a 58% residual, a 0.00200 money factor (a 4.8% APR equivalent), a 36-month term, and 7% tax, the payment works out to about $538.99 a month, 76% of it depreciation and 24% of it rent charge. The calculator below runs your own numbers and shows every step.
How does a car lease payment work?
A lease is not a loan on the whole car. You negotiate a price for the vehicle (the capitalized cost, or "cap cost"), subtract any down payment or trade-in credit (a cap cost reduction), and the leasing company sets a residual value, its prediction of what the car will be worth when your lease ends. The Consumer Financial Protection Bureau (CFPB) lays out the same sequence: negotiate the price, pick a term, get a residual value, and the depreciation is the difference between what you're financing and that residual. Your payment covers only the slice of value the car is expected to lose (depreciation), plus a rent charge, the lease's version of interest, on the money you're effectively borrowing.
That is the mechanic worth remembering: you pay for depreciation plus rent, not the whole car. A car with a high residual value costs less to lease than an identical car with a low residual value, at the same price, because less of its value is expected to disappear during your term.
Calculate your own lease payment
Enter your own numbers. Nothing you type here is saved or sent anywhere; the math runs entirely in your browser.
| Adjusted cap cost (price minus cap cost reduction) | $37,000 |
|---|---|
| Residual value | $23,200 |
| Total depreciation over the lease (adjusted cap cost minus residual) | $13,800 |
| Monthly depreciation charge (total depreciation ÷ term) | $383.33 / month |
| Monthly rent charge ((adjusted cap cost + residual) × money factor) | $120.40 / month |
| Money factor as an APR (money factor × 2400) | 4.8% |
| Base monthly payment (depreciation + rent charge) | $503.73 / month |
| Monthly sales tax (base payment × tax rate) | $35.26 / month |
| Total monthly payment | $538.99 / month |
| Total of all payments over the lease | $19,403.81 |
You are financing $13,800 of depreciation (76% of your payment) plus a rent charge on the money you're borrowing (24% of your payment). You are not financing the whole $40,000 car.
At minimum, the cap cost reduction you entered ($3,000). Most leases also collect the first month's payment, an acquisition fee, and title/registration fees at signing, none of which are included in this total; ask for the itemized "amount due at signing" your state's Consumer Leasing Act disclosure requires.
Math: Federal Reserve Board, "Vehicle Leasing" (rent charge = money factor × (adjusted cap cost + residual value)), and CFPB, "What should I know about leasing versus buying a car?" (payment = depreciation + rent charge + tax and fees). This is an estimate; your actual lease worksheet may add an acquisition fee to the cap cost, round differently, or use a different tax method for your state.
What are the four numbers that set your lease payment?
Every lease payment comes down to four inputs. Change any one and the payment moves, which is exactly why a dealer can quote wildly different monthly payments for the "same" deal depending on which of these four they adjust.
| Number | What it is | Effect on payment |
|---|---|---|
| Cap cost | The negotiated price you're leasing from, minus any cap cost reduction (down payment, rebate, trade-in). | Lower cap cost means less to depreciate and a smaller rent-charge base. This is the one number you negotiate the same way you'd negotiate a purchase price. |
| Residual value | The leasing company's prediction of the car's value at lease-end, set at signing using the MSRP and a residual percentage. | A higher residual means less depreciation to pay for, so a lower payment on the same car. Residual is set by the lessor, not negotiated. |
| Money factor | The lease's interest rate, expressed as a small decimal like 0.00200 instead of a percentage. | A higher money factor means a bigger rent charge every month. Convert it to an APR (below) to compare it against a loan rate. |
| Term | The number of months in the lease, commonly 24 to 48. | A longer term spreads the same depreciation over more months, lowering the monthly depreciation charge, but residual and money factor both typically get worse at longer terms. |
Source: CFPB, "What should I know about leasing versus buying a car?" and Federal Reserve Board, "Vehicle Leasing" consumer guide.
How do you convert a money factor to APR?
Multiply the money factor by 2,400 to get its equivalent annual percentage rate (APR). A money factor of 0.00200, this page's default, works out to 0.00200 × 2400 = 4.8% APR. Dealers and leasing companies are required to quote a money factor, not an APR, and the CFPB's own examiner guidance for auto finance confirms that a lease's money factor and its APR equivalent are related by that constant, so this is the standard way to check whether a quoted money factor is actually competitive against a loan rate you've been offered.
| Money factor | APR equivalent (× 2400) |
|---|---|
| 0.00100 | 2.4% |
| 0.00150 | 3.6% |
| 0.00200 | 4.8% |
| 0.00250 | 6.0% |
| 0.00300 | 7.2% |
| 0.00417 | 10.0% |
Math: money factor × 2400 = APR equivalent. The Federal Reserve Board's own consumer guide warns that a money factor "cannot be converted to a lease rate by moving the decimal point," which is exactly the shortcut this trick avoids: it is a real multiplication, not a decimal shift.
What do you owe when you sign a lease?
Federal law, the Consumer Leasing Act and its implementing Regulation M, requires lessors to itemize an "amount due at lease signing or delivery" before you sign. That figure typically bundles several separate charges into one number, and the regulation specifically calls out any refundable security deposit, an advance monthly payment, and the capitalized cost reduction as line items that must be itemized. In practice, what you owe at signing usually includes some combination of:
- Cap cost reduction, your down payment, rebate, or trade-in credit, which lowers the depreciation you finance (this is the only one of these the calculator above accounts for).
- First month's payment, collected up front on top of the reduction.
- Acquisition fee (sometimes called a bank or origination fee), charged by the leasing company for setting up the lease, and often rolled into the cap cost rather than paid in cash.
- Title, registration, and license fees, set by your state, not the leasing company.
- A refundable security deposit, required by some lessors, especially for below-average credit.
Regulation M defines the cap cost reduction as "a payment in the nature of a down payment on the leased property that reduces the amount to be capitalized over the term of the lease," which is exactly the field this calculator asks for. Ask for the itemized "amount due at signing" disclosure before you sign; it is a legal requirement, not a courtesy, and it is the only way to know what you're actually paying beyond the monthly figure this calculator estimates.
Is it better to lease or buy a car?
Neither is universally better; the two serve different priorities. The CFPB frames the core trade-off plainly: lease payments are often lower than loan payments on the same car, but they "won't go towards owning the car," while loan payments build equity you keep at the end. Leasing also caps how many miles you can drive without a per-mile overage charge, commonly in the 10,000 to 15,000 mile-per-year range, while buying lets you drive as much as you want.
Leasing tends to make more sense if you drive relatively few miles, like driving a new car every few years, want a lower payment than a loan on the same car, or can deduct the lease as a business expense. Buying tends to make more sense if you drive a lot of miles, keep cars for many years past the point a loan would be paid off, or want to build equity you can sell or trade later. Run the same cap cost and term through both this calculator and the car loan calculator to compare the actual monthly numbers on a specific car, rather than deciding on a generic rule of thumb.
The flat truth: the payment is depreciation plus rent, nothing more mysterious
A lease payment can look like a black box, but it is only ever two numbers added together: how much of the car's value you're expected to use up, divided by your term, plus a rent charge on the balance you're financing. Cap cost, residual, money factor, and term are the only four levers that move it. If a dealer quotes a payment without showing you those four numbers, or without giving you the money factor when you ask, you cannot check whether the deal is fair. Convert the money factor to an APR, check the residual against the MSRP, and run your own numbers through the calculator above before you sign anything.
Related auto guides
Compare the same car financed instead of leased with the car loan calculator, or see the full multi-year cost of owning it, including depreciation, fuel, insurance, and maintenance, with the cost-to-own calculator. For the bigger picture on financing, ownership, and leasing math, start at the auto hub.
Sources
- Lease payment calculation steps (negotiate price, set term, set residual, depreciation = price minus residual), residual value definition, and the lease-vs-buy trade-off, including typical mileage caps: Consumer Financial Protection Bureau, "What should I know about leasing versus buying a car?"
- Rent charge formula (money factor × (adjusted cap cost + residual value)) and the warning that a money factor "cannot be converted to a lease rate by moving the decimal point": Federal Reserve Board, "Vehicle Leasing," More Information about the Rent Charge.
- Auto leases quoting a money factor instead of an APR, related by the constant 2400: Consumer Financial Protection Bureau, "Automobile Finance Examination Procedures" (June 2015).
- Required itemization of the "amount due at lease signing," and the definitions of capitalized cost reduction, gross capitalized cost, and residual value: 12 CFR § 1013.4, Regulation M (Consumer Leasing Act), "Content of disclosures."