Car Lease Calculator

How to Calculate Car Lease Payments

Calculating car lease payments involves several factors such as the vehicle price, residual value, money factor, and lease term. Here's a comprehensive guide on how to use this calculator and understand the calculations behind it.

Formula for Car Lease Payments

The basic formulas used for calculating monthly lease payments are:

1. Capitalized Cost = Vehicle Price + Fees - Reductions - Trade-in - Down Payment
2. Depreciation = (Capitalized Cost - Residual Value) / Lease Term
3. Finance Fee = (Capitalized Cost + Residual Value) × Money Factor
4. Monthly Payment Before Tax = Depreciation + Finance Fee
5. Monthly Payment = Monthly Payment Before Tax + (Monthly Payment Before Tax × Tax Rate)

Where:

• Capitalized Cost: The amount being financed in the lease
• Residual Value: The estimated value of the vehicle at the end of the lease
• Money Factor: A way to express the interest rate (multiply by 2400 to get APR)
• Lease Term: The duration of the lease in months

Calculation Steps

1. Calculate the capitalized cost by subtracting any trade-in value, down payment, and reductions from the vehicle price, and adding any fees.
2. Calculate the monthly depreciation by subtracting the residual value from the capitalized cost and dividing by the lease term.
3. Calculate the monthly finance fee by multiplying the sum of the capitalized cost and residual value by the money factor.
4. Add the monthly depreciation and finance fee to get the monthly payment before tax.
5. Calculate the final monthly payment by adding sales tax to the monthly payment before tax.

Example Calculation

Let's calculate the lease payments for a car with the following details:

• Vehicle Price: $25,000
• Residual Value: $11,500
• Money Factor: 0.002 (equivalent to 4.8% APR)
• Lease Term: 36 months
• Sales Tax Rate: 6%
• No trade-in, down payment, fees, or reductions

1. Capitalized Cost: $25,000
2. Depreciation: ($25,000 - $11,500) / 36 = $375.00 per month
3. Finance Fee: ($25,000 + $11,500) × 0.002 = $73.00 per month
4. Monthly Payment Before Tax: $375.00 + $73.00 = $448.00
5. Monthly Payment: $448.00 + ($448.00 × 0.06) = $474.88

Therefore, the monthly lease payment would be $474.88.

Car Lease Payment Breakdown Diagram