Compute monthly car lease payments from capitalized cost, residual value, money factor or APR, lease term and down payment.
Enter the capitalized cost, residual value, money factor (or APR — the calculator converts it), lease term in months, and any down payment.
Formula: Payment = (Cap − Residual) ÷ Term + (Cap + Residual) × Money Factor; MF = APR ÷ 2400. Example: $30,000 cap, $18,000 residual, 0.00208 MF, 36 months → $433.17/month.
Estimating a lease payment by hand is notoriously error-prone, which is why the calculator above exists. Gather your deal sheet numbers first, then follow these steps to get an accurate monthly payment in under a minute.
Pro tip: always ask the dealer for the three raw inputs, which are the gross capitalized cost, the residual value, and the money factor. With those three numbers you can reproduce any lease quote in this calculator and spot padded fees or a marked-up money factor in seconds.
Leasing a car is best understood as paying for the portion of the vehicle you use. When you buy, you pay for the entire car and keep whatever value remains. When you lease, you pay only for the depreciation that occurs during the lease term plus a finance fee for borrowing the leasing company’s money, then you return the car. That is why lease payments are almost always lower than loan payments on the same vehicle: you are financing $12,000 of depreciation, not $30,000 of car.
The two numbers that define any lease are the capitalized cost and the residual value. The capitalized cost is the starting value: the negotiated price plus acquisition fees and other charges, minus your down payment, trade-in, and rebates. The residual value is the predicted end value, set by the lender as a percentage of the sticker price. The gap between them is the depreciation you must repay, spread evenly over the lease term as the depreciation fee.
The second component, the finance fee, works like interest on a loan. It equals the money factor multiplied by the sum of the capitalized cost and the residual value. The money factor looks cryptic, but it is simply the APR divided by 2400, so a money factor of 0.00208 is 5 percent APR. Multiplying it by the average amount financed, which is roughly the cap cost plus the residual, gives the monthly rent charge. Because you are effectively borrowing the full value of the car for the whole term, even a small markup in the money factor adds up: raising it from 0.00125 to 0.00208 on a $30,000 lease adds about $37 per month, or more than $1,300 over 36 months.
A down payment on a lease is called a capitalized cost reduction. It lowers the cap cost and therefore shrinks both the depreciation fee and the finance fee. But unlike a down payment on a purchase, which builds equity you keep, a cap cost reduction is simply prepaid rent. If the car is stolen or totaled a month into the lease, insurance pays the leasing company, and your upfront cash is gone. This asymmetry is why lease experts recommend keeping drive-off costs minimal and putting the cash you would have used as a down payment toward the monthly payments instead.
Leasing makes the most sense for drivers who want a new car every two to four years, drive predictable mileage within the allowance, and value warranty coverage and low maintenance over ownership. It makes less sense for high-mileage drivers, people who customize their cars, or anyone who wants to build equity. Understanding the mechanics above turns leasing from a confusing dealer ritual into a transparent financing choice you can evaluate with real numbers.
A monthly lease payment has two parts that are computed separately and added together:
Depreciation fee = (Capitalized cost – Residual value) / Lease term in months
Finance fee = (Capitalized cost + Residual value) x Money factor
Monthly payment = Depreciation fee + Finance fee (plus sales tax, which most states apply to the monthly payment)
And the conversion you will use constantly: Money factor = APR / 2400. The two worked examples below apply these formulas to real deals.
Worked example 1: the $30,000 sedan. A dealer offers a $30,000 sedan at a negotiated capitalized cost of $28,500, with a residual value of $18,000 (60 percent of sticker), a 36-month term, and a money factor of 0.00125, which equals 3 percent APR. The depreciation fee is ($28,500 – $18,000) / 36 = $10,500 / 36 = $291.67 per month. The finance fee is ($28,500 + $18,000) x 0.00125 = $46,500 x 0.00125 = $58.13 per month. The base payment is $291.67 + $58.13 = $349.80 per month. In a state with 8 percent sales tax on lease payments, the payment becomes $349.80 x 1.08 = $377.78 per month, and the total of 36 payments is $13,600.08.
Worked example 2: the $45,000 SUV. You negotiate a $45,000 SUV down to $43,500 and put $2,000 down, giving an adjusted capitalized cost of $41,500. The residual is 55 percent of sticker, or $24,750. The term is 36 months, the money factor is 0.00167 (about 4 percent APR), and your sales tax rate is 7 percent. The depreciation fee is ($41,500 – $24,750) / 36 = $16,750 / 36 = $465.28 per month. The finance fee is ($41,500 + $24,750) x 0.00167 = $66,250 x 0.00167 = $110.64 per month. The base payment is $465.28 + $110.64 = $575.92 per month, and with 7 percent tax it is $575.92 x 1.07 = $616.23 per month. Your total cost is the $2,000 down payment plus 36 payments of $616.23, which is $24,184.28, meaning you pay about 54 percent of the SUV’s sticker price to drive it for three years.
Notice how the residual value drives the result: the SUV’s lower 55 percent residual forces you to repay $16,750 of depreciation versus only $10,500 on the sedan, even though both leases run 36 months. When comparing leases, the car with the higher residual percentage almost always leases better relative to its price.
The Nguyen family needs a $30,000 midsize SUV for school runs and weekend trips. They negotiate the price down to $28,000 and put $2,500 down, so the adjusted capitalized cost is $25,500. The lender sets a strong residual of 62 percent, which is $18,600, because this model holds its value well. The term is 36 months, the money factor is 0.00110 (about 2.64 percent APR, a promotional rate), and their state taxes lease payments at 6 percent.
Running the formula: the depreciation fee is ($25,500 – $18,600) / 36 = $6,900 / 36 = $191.67 per month. The finance fee is ($25,500 + $18,600) x 0.00110 = $44,100 x 0.00110 = $48.51 per month. The base payment is $191.67 + $48.51 = $240.18 per month, and with 6 percent tax it becomes $240.18 x 1.06 = $254.59 per month.
The family’s total lease cost is the $2,500 down payment plus 36 payments of $254.59, which equals $2,500 + $9,165.24 = $11,665.24 to drive a $30,000 SUV for three years. That is less than 39 percent of the sticker price. The deal works so well because of three compounding advantages: a negotiated discount of $2,000 off sticker, a high 62 percent residual, and a promotional money factor. Remove any one of them and the payment climbs fast: at the standard money factor of 0.00208 instead of 0.00110, the finance fee would jump to $91.73 and the payment to about $301 per month with tax.
Should you lease a $32,000 car or buy it and sell after three years? Assume you drive 12,000 miles per year, within a standard lease allowance, and the car will be worth $19,200 (60 percent) after three years either way.
The lease path. You negotiate the cap cost to $30,000 and put $1,000 down, giving an adjusted cap cost of $29,000. Residual $19,200, money factor 0.00125 (3 percent APR), 36 months, 7 percent sales tax. Depreciation fee: ($29,000 – $19,200) / 36 = $9,800 / 36 = $272.22 per month. Finance fee: ($29,000 + $19,200) x 0.00125 = $48,200 x 0.00125 = $60.25 per month. Base payment $332.47, with tax $355.74 per month. Total three-year cost: $1,000 + (36 x $355.74) = $1,000 + $12,806.64 = $13,806.64.
The buy path. You put $5,000 down and finance $27,000 at 5 percent APR for 60 months. The monthly loan payment is $509.54. After 36 payments you sell the car for $19,200. Your remaining loan balance after 36 months is $11,613.39, so your equity is $19,200 – $11,613.39 = $7,586.61. Total out of pocket: $5,000 down + (36 x $509.54) – $7,586.61 equity recovered = $5,000 + $18,343.44 – $7,586.61 = $15,756.83.
The verdict. Leasing costs $13,806.64 versus $15,756.83 for buying and selling, a savings of about $1,950 over three years, and the monthly burden is $355.74 versus $509.54. The buyer ends up with no car either, since it was sold. Buying wins only if the car holds its value better than the 60 percent assumed, if you keep it well beyond the loan term and drive it payment-free for years, or if you drive far more miles than a lease allows. For drivers who genuinely replace cars every three years, the lease is usually the cheaper way to do it.
1. Shopping by monthly payment alone. A dealer can hit any monthly payment target by extending the term, increasing the down payment, or quietly raising the capitalized cost with fees. Two leases at $350 per month can differ by thousands in total cost. Always evaluate the three raw inputs, which are the cap cost, residual, and money factor, plus the total of all payments, before judging a deal.
2. Accepting a marked-up money factor. Dealers are often allowed to add a markup to the lender’s base money factor and keep the difference. A bump from 0.00125 to 0.00208 looks tiny but equals a jump from 3 percent to 5 percent APR, adding roughly $37 per month on a $30,000 lease. Multiply any money factor by 2400 to get the APR, compare it with current auto loan rates, and ask for the base rate if it is inflated.
3. Making a large down payment. Putting $5,000 down on a lease lowers the payment by about $140 per month on a 36-month term, which feels good, but that cash is at risk: if the car is totaled or stolen, insurance pays the leasing company for the car’s value, and your upfront money is not refunded. Keep drive-off costs to the minimum (first payment, registration, and fees) and keep the rest of your cash.
4. Not negotiating the capitalized cost. Many shoppers haggle hard when buying but accept the sticker price when leasing, as if the price no longer matters. It matters just as much: every $1,000 you negotiate off the cap cost saves about $28 per month on a 36-month lease with a typical residual, split between lower depreciation and lower finance charges. Negotiate the price first, then discuss lease terms.
5. Underestimating mileage and wear charges. A standard lease allows 10,000 to 12,000 miles per year, and excess miles cost 15 to 30 cents each. Driving 15,000 miles per year on a 12,000-mile lease for three years creates 9,000 excess miles, which is a $1,350 to $2,700 surprise at turn-in. Be honest about your driving before signing, buy extra miles upfront at the cheaper rate if you need them, and budget for the disposition fee of $300 to $500 that most lenders charge when you return the car.
Compare leasing against buying with the Auto Loan Calculator to see purchase payments on the same car, use the Loan Calculator for general financing scenarios, or browse the full Financial Calculators collection.
This page’s Car Lease Calculator estimates monthly lease payments from five inputs: capitalized cost in dollars, residual value in dollars, rate type (money factor or APR), lease term in months, and down payment in dollars. Formulas: monthly depreciation fee = (capitalized cost – residual value) / term; monthly finance fee = (capitalized cost + residual value) x money factor; monthly payment = depreciation fee + finance fee; money factor = APR / 2400. Reference values: $30,000 cap cost, $18,000 residual, 0.00208 money factor, 36 months, $0 down gives $433.17 per month ($333.33 depreciation + $99.84 finance, $15,594.24 total). Worked examples: $28,500 cap, $18,000 residual, 0.00125 MF, 36 months gives $349.80 before tax; $41,500 cap, $24,750 residual, 0.00167 MF, 36 months gives $575.92 before tax. Down payment reduces capitalized cost. Tax treatment varies by jurisdiction and is not included in the base calculation.
Two parts: a depreciation fee ((cap cost − residual) ÷ term) plus a finance fee ((cap cost + residual) × money factor).
The money factor is the lease finance rate: APR ÷ 2400. A 0.00208 money factor ≈ 5% APR.
The car’s projected value at lease end. A higher residual means less depreciation — and a lower monthly payment.
Yes — it reduces the capitalized cost, which shrinks both the depreciation and finance fees.
Leasing gives lower payments and a new car every few years but no ownership; buying costs more monthly but leaves you with an asset.
A money factor of 0.00125 or lower, which equals 3 percent APR, is generally a good deal in normal rate environments. Multiply the money factor by 2400 to get the equivalent APR and compare it with current auto loan rates: if the lease APR is close to or below the loan APR you qualify for, the rate is fair. Be wary of anything above 0.00250 (6 percent APR) unless your credit is limited, and always ask whether the dealer marked up the lender’s base rate.
Usually not. A down payment on a lease is a capitalized cost reduction: it lowers your monthly payment, but unlike a down payment on a purchase, it builds no equity you can recover. Worse, if the car is totaled or stolen early in the lease, insurance pays the leasing company for the car’s value and your upfront cash is gone. Keep drive-off costs to the first payment plus required fees, and keep the rest of your money.
You have three options: return the car and walk away, buy it for the residual value stated in your contract, or lease or buy a new vehicle. If you return it, expect a disposition fee of $300 to $500, plus charges for excess mileage (usually 15 to 30 cents per mile) and any damage beyond normal wear. Schedule the free pre-inspection a month or two before turn-in so you can fix minor issues yourself for less.
Sources: Consumer Financial Protection Bureau; Federal Reserve; standard auto-finance references.
Also try our Auto Loan Calculator and Loan Calculator — or browse all Financial Calculators.