Car Lease Calculator

Calculating Car Lease Payments

This calculator can be used to estimate the car lease payments under a variety of scenarios. The calculator requires a total of nine inputs, including:

  • The negotiated price of the vehicle, this is the price of the vehicle as equipped for the lease
  • The residual value of the vehicle. If you don’t know this value, we will discuss how to develop an estimate later in this article
  • Any dealer acquisition fees that will be rolled into the lease
  • If an extended warranty will be purchase and rolled into the lease, the calculator needs the cost of that warranty
  • Capitalized cost reductions, including down payments as well as a trade-in allowance if you are trading in a car as part of the agreement
  • The money factor for the lease. If you do not know this value, we will discuss how to calculate it later in this article
  • The term or duration of the lease, which can be 24, 36, or 48 months
  • Any sales tax if you live in a jurisdiction that charges a sales tax

The calculator then provides the user with ten outputs:

  • The gross and net capitalized cost of the vehicle. The gross capitalized cost is the negotiated price of the vehicle plus any additional lease costs. The net capitalized cost is the gross capitalized cost less any capitalized cost reductions
  • An estimate of the annual percentage rate, or APR, on the lease
  • Depreciation over the course of the leased, which is the difference between the net capitalized cost and the vehicle’s residual value
  • The lease’s finance charge, which is the interest charges on the capitalized cost
  • The sales tax paid on the lease, if you live in a jurisdiction that charges a sales tax
  • The lease payments on the vehicle, including a buildup of the monthly payment
  • Finally, the total of all lease payments, which is found by multiplying the total lease payment times the term of the lease (in months)

Determining residual values

When discussing leases, the car’s residual value is the best guess at how much the car will be worth at the end of the lease. Dealerships analyze a lot of data to come up with this estimate since it one of the most important factors when determining lease payments. The difference between the car’s negotiated price and its residual value is the depreciation that must be recovered by the dealership. The most accurate way to use this calculator to verify a lease payment is by using the residual value provided by the dealer. If that’s not available, you can use our car depreciation calculator to come up with an estimate of the car’s terminal value.

Calculating money factors

Another important lease variable is the money factor. This value is the equivalent of the interest rate charged on a car loan. As such, the money factor is used to develop the financing costs associated with the lease. In fact, there is a very simple relationship between interest rates and money factors:

Money Factor x 2,400 = Interest Rate, or

Interest Rate / 2,400 = Money Factor

Capitalized costs in car leases

The last car lease concept worth discussing is the capitalized cost. The gross capitalized can be thought of as all the upfront costs associated with the lease. This would include the negotiated price of the vehicle plus any other cost such as the purchase of an extended warranty or the dealer acquisition fee.

The net capitalized cost is found by subtracting all the upfront funds provided by the borrower from the gross capitalized costs. For example, if a car is traded-in then the value of that vehicle would be subtracted from the gross capitalized cost to determine the net capitalized cost. The same holds true for any down payment made as part of the leasing agreement. These upfront funds serve to lower the capitalized cost of the vehicle, lower the financing costs, and therefore lower the lease’s monthly payment.