How the Car Lease Calculator works
Leasing a car means paying for the portion of its value you use up during the term, plus a finance charge on the money tied up in the vehicle. This calculator uses the standard two-part lease payment formula that dealers and leasing companies use to build a payment quote, so you can check a proposed lease or plan a budget before you negotiate.
The formula
Start with the Adjusted Capitalized Cost — the negotiated vehicle price minus your down payment (cap cost reduction) — and the Residual Value, the car's predicted worth at lease end, set as a percentage of the price. The monthly payment has two components:
Depreciation fee = (Adjusted Cap Cost − Residual Value) ÷ Term (months)
Rent charge = (Adjusted Cap Cost + Residual Value) × Money Factor
The money factor is the lease industry's way of writing a finance rate as a small decimal. It equals the equivalent annual rate divided by 2400 — for example, a 6% rate corresponds to a money factor of 0.0025. Adding the depreciation fee and rent charge gives the base monthly payment; most states then apply sales tax to that payment, though a few tax the full price at signing instead.
Worked example
Take a $35,000 vehicle with a $3,000 down payment, a 55% residual value, a 36-month term, a 6% annual rate, and 7% sales tax. The adjusted cap cost is $32,000 and the residual value is $19,250. The depreciation fee is ($32,000 − $19,250) ÷ 36 ≈ $354.17/month. The rent charge is ($32,000 + $19,250) × (6 ÷ 2400) ≈ $128.13/month. Together that is a base payment of about $482.29, and with 7% tax the total comes to roughly $516.05 per month, or about $21,578 total over the lease including the down payment.
What moves the payment most
- Residual value: a higher residual percentage shrinks the depreciation fee because you are financing less of the car's value loss — but it also raises the price to buy the car at lease end.
- Down payment: a larger cap cost reduction lowers both the depreciation fee and the rent charge, but it is money you cannot get back if the car is stolen or totaled early in the lease.
- Rate (money factor): a lower rate reduces the rent charge directly; negotiating price and rate separately (rather than only a monthly number) helps you see this effect clearly.
- Term length: a longer term spreads the depreciation fee thinner per month but usually means more months of rent charge in total.
Sales tax treatment
This calculator applies sales tax to each monthly payment, which is the most common method across states. Some states tax the full negotiated price up front, others tax only the depreciation portion, and rates and rules change — treat the tax figure here as a typical-case estimate and confirm the exact method with your state's tax authority or the dealer's finance office.