Lease Calculator · Practical guide
How to Calculate a Car Lease Payment
Every lease payment is just three parts: monthly depreciation, a finance charge, and sales tax.
At a glance
The Formula in One Line
A monthly lease payment is depreciation + finance charge, then tax on top. Depreciation is (net capitalized cost - residual) / months; the finance charge is (net capitalized cost + residual) x money factor. The calculator above does all of it — here is the arithmetic so you can check any dealer's quote.
Interactive tool
Lease Calculator
Enter your own values, then compare the result with the examples below.
Worked Example
Take a car with an MSRP of $40,000, negotiated down to $38,000, with $2,000 down and a $5,000 trade-in, a 55% residual, a 0.00125 money factor, a 36-month term, and 7% sales tax:
- Net capitalized cost: $38,000 - $2,000 - $5,000 = $31,000
- Residual value: $40,000 x 55% = $22,000
- Monthly depreciation: ($31,000 - $22,000) / 36 = $250.00
- Finance charge: ($31,000 + $22,000) x 0.00125 = $66.25
- Pre-tax payment: $250.00 + $66.25 = $316.25
- With 7% tax: $316.25 x 1.07 = $338.39/month
Over the full term you pay $338.39 x 36 + $2,000 down = $14,181.95 in total lease cost.
What Moves the Payment Most
- Residual value: a 5-point higher residual on this example cuts depreciation by about $55/month.
- Negotiated price: every $1,000 off the price saves roughly $28/month on a 36-month lease.
- Money factor: multiply by 2,400 to compare it to an APR — 0.00125 equals 3%.
Check the Dealer's Math
Dealers must disclose the capitalized cost, residual, and money factor on request. Plug those exact numbers into the calculator above; if the quoted payment is higher than the computed one, ask what fees were rolled into the cap cost.
Frequently Asked Questions
Why is the residual based on MSRP and not the negotiated price?
The residual is the leasing company's forecast of the car's future wholesale value, which depends on the model — not on what you paid. It is always calculated as a percentage of MSRP.
Is the down payment included in the monthly payment?
No. A down payment reduces the capitalized cost, which lowers the monthly payment, and it is added separately into total lease cost. In the example, $2,000 down plus 36 payments totals $14,181.95.
What if I only know the APR, not the money factor?
Divide the APR by 2,400 to get the money factor — 3% APR becomes 0.00125. The calculator accepts either one.
Why does tax apply to the whole payment in some states?
Most states tax the monthly payment (depreciation plus finance charge), as this calculator assumes. A few states tax the full cap cost or the total payments upfront instead, so check your state's rule.