How to use this calculator
Start by selecting your lease term (24, 36, or 48 months). Enter the vehicle's MSRP (sticker price) and the price you negotiated with the dealer (cap cost). Add your down payment and trade-in value if applicable.
Enter the money factor from your lease offer. If you only have an APR, divide it by 2400 to get the money factor. The residual value percentage auto-fills based on your term but can be adjusted to match your specific offer.
The calculator shows your monthly payment, a breakdown of each component (depreciation, rent charge, and tax), the total cost of the lease, and a comparison of leasing vs buying the same vehicle.
Understanding lease terminology
MSRP (Manufacturer's Suggested Retail Price): The sticker price of the vehicle. The residual value is calculated as a percentage of this number, so it affects your payment even if you negotiate a lower selling price.
Capitalized cost (cap cost): The negotiated selling price of the vehicle. This is the number you should haggle on, just like buying a car. A lower cap cost means a lower monthly payment.
Money factor: The interest component of a lease, expressed as a small decimal number. Multiply by 2400 to get the equivalent APR. A lower money factor means less interest paid over the life of the lease.
Residual value: The predicted value of the car when the lease ends, set by the leasing company as a percentage of MSRP. A higher residual means lower payments because you're financing less depreciation.
Depreciation charge: The portion of your monthly payment that covers the car's loss in value. Calculated as (Net Cap Cost - Residual Value) / Lease Term.
Rent charge: The interest or finance portion of your monthly payment. Calculated as (Net Cap Cost + Residual Value) x Money Factor.
Acquisition fee: A fee charged by the leasing company to set up the lease, typically $595 to $1,095. This gets rolled into the cap cost and increases your monthly payment.
Disposition fee: A fee charged when you return the vehicle at lease end, typically $300 to $500. You can sometimes avoid this fee by leasing another vehicle from the same brand.
Lease vs buy: when does leasing make sense?
Leasing works well for people who want a new car every few years, drive a predictable number of miles, and prefer lower monthly payments. You never own the car, so there's no equity to show for your payments, but you also avoid the risk of depreciation and major repair costs.
Buying makes more financial sense over the long term, especially if you keep the car well past the end of the loan. Once the loan is paid off, you drive payment-free while the leaser starts a new lease and new payments. Buying also gives you the freedom to drive as many miles as you want and modify the vehicle.
The break-even point varies by vehicle and terms, but as a general rule: if you plan to keep a car for more than 4-5 years, buying almost always costs less in the long run. If you want a new car every 2-3 years, leasing can be the more affordable path.
Frequently asked questions
How is a car lease payment calculated?
A lease payment has three parts: the depreciation charge (net cap cost minus residual value, divided by the lease term), the rent charge (net cap cost plus residual value, multiplied by the money factor), and sales tax. The net cap cost is the negotiated price plus fees minus your down payment and trade-in value.
What is a money factor and how do I convert it to APR?
A money factor is the lease equivalent of an interest rate. To convert a money factor to APR, multiply it by 2400. For example, a money factor of 0.00125 equals a 3% APR. To convert APR to a money factor, divide the APR by 2400.
What is residual value and why does it matter?
Residual value is the predicted value of the car at the end of the lease, expressed as a percentage of the MSRP. A higher residual value means lower monthly payments because you are paying for less depreciation. Vehicles that hold their value well tend to have higher residual values and therefore lower lease payments.
Is it better to lease or buy a car?
Leasing typically offers lower monthly payments and lets you drive a new car every few years. Buying costs more per month but builds equity. Leasing makes sense if you drive under 15,000 miles per year, prefer new cars, and want predictable costs. Buying is better if you plan to keep the car long-term or drive a lot of miles.