# Lease Payment Calculator

Calculate your monthly car lease payment. Enter MSRP, residual value, money factor, and lease term to estimate costs. Free auto lease calculator.

## What this calculates

Estimate your monthly car lease payment before visiting the dealer. Enter the vehicle MSRP, negotiated price, residual value, money factor, and lease term to see your payment breakdown.

## Inputs

- **MSRP / Vehicle Price** ($) — min 0 — Manufacturer's suggested retail price.
- **Negotiated Price (Cap Cost)** ($) — min 0 — The price you negotiate with the dealer (before incentives).
- **Down Payment / Cap Reduction** ($) — min 0 — Upfront payment to reduce the capitalized cost.
- **Residual Value** (%) — min 0, max 90 — Projected value at lease end as a percentage of MSRP.
- **Money Factor** — min 0, max 0.01 — Lease interest rate factor (APR / 2400). E.g., 3% APR = 0.00125.
- **Lease Term** — options: 24 months, 27 months, 36 months, 39 months, 42 months, 48 months — Length of the lease.

## Outputs

- **Monthly Lease Payment** — formatted as currency — Your estimated monthly lease payment (before tax).
- **Total Lease Cost** — formatted as currency — Total of all lease payments plus down payment.
- **Depreciation Cost** — formatted as currency — The vehicle value lost during the lease period.
- **Equivalent APR** — formatted as percentage — The money factor converted to an annual interest rate.

## Details

A car lease payment consists of two components: the depreciation fee and the finance fee. The depreciation fee covers the vehicle's loss in value during the lease, while the finance fee is essentially the interest charge.

The lease payment formula is: Monthly Payment = Depreciation Fee + Finance Fee. Depreciation Fee = (Net Cap Cost - Residual Value) / Lease Term. Finance Fee = (Net Cap Cost + Residual Value) x Money Factor. The money factor is the lease equivalent of an interest rate; multiply by 2,400 to convert to APR.

The key to a good lease deal is a low negotiated price (cap cost), high residual value, and low money factor. Vehicles that hold their value well (high residual %) have lower depreciation fees and thus lower lease payments. Luxury vehicles often lease well despite high MSRPs because of manufacturer subsidies (subvented money factors) and competitive residual values.

## Frequently Asked Questions

**Q: What is a money factor and how does it relate to APR?**

A: The money factor is the leasing equivalent of an interest rate, expressed as a small decimal number like 0.00125. To convert a money factor to an approximate APR, multiply by 2,400. So a money factor of 0.00125 equals approximately 3% APR. To convert APR to money factor, divide by 2,400. Lower money factors mean lower finance charges. Some manufacturers offer subsidized (below-market) money factors as lease incentives.

**Q: What is residual value and why does it matter?**

A: Residual value is the projected value of the vehicle at the end of the lease, set by the leasing company and expressed as a percentage of MSRP. A higher residual means less depreciation during the lease, which directly lowers your monthly payment. For example, a $40,000 vehicle with a 55% residual ($22,000) depreciates $18,000 during a 36-month lease. With a 45% residual ($18,000), depreciation is $22,000. The $4,000 difference equals about $111/month more.

**Q: Is leasing or buying a car cheaper?**

A: Leasing typically has lower monthly payments than buying because you only pay for the depreciation during the lease term, not the full vehicle price. However, buying builds equity and is usually cheaper long-term if you keep the vehicle for many years. Leasing makes more financial sense if you prefer a new car every 2-3 years, drive less than 12,000-15,000 miles/year, and want lower monthly payments. Buying is better if you keep cars long-term and want to avoid perpetual payments.

**Q: Should I make a down payment on a lease?**

A: Many financial experts advise against large down payments on leases. If the car is totaled or stolen early in the lease, your gap insurance covers the lease payoff but you lose your down payment. Instead, negotiate a lower cap cost (vehicle price), which achieves the same lower payment without the risk. If you must reduce the payment, consider a small cap reduction of $1,000-$2,000 or make a security deposit if the lessor offers a money factor reduction for deposits.

**Q: What happens at the end of a lease?**

A: At lease end, you have three options: return the vehicle and walk away, purchase the vehicle at the predetermined residual value, or trade it in and lease/buy a new vehicle. If you return it, you may owe excess mileage charges ($0.15-$0.25/mile over the limit) and wear-and-tear fees. If the vehicle is worth more than the residual value, buying it can be a good deal. Always get a pre-inspection before turn-in to avoid surprise charges.

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Source: https://vastcalc.com/calculators/finance/lease-payment
Category: Finance
Last updated: 2026-04-21