Car Lease Payment Calculator

A lease payment is not a loan payment. It has a depreciation part — the value the car loses while you hold it, spread evenly — and a finance part, the rent charged on the money tied up:

$\text{Payment} = \underbrace{\frac{C - R}{N}}_{\text{depreciation}} + \underbrace{(C + R)\cdot MF}_{\text{finance charge}}$

• $C$ — adjusted capitalised cost: the negotiated price plus fees rolled in, minus any cap-cost reduction (down payment, trade equity, rebates)
• $R$ — residual value: the contract's estimate of what the car is worth at lease end, usually quoted as a percentage of MSRP
• $N$ — term in months
• $MF$ — the money factor, a rate expressed per month in a peculiar scaling

The finance term uses $C + R$, not the outstanding balance, because the average amount financed over the term is $(C+R)/2$ and the money factor already carries a factor of 2 inside it. Sales tax is then applied on top, but how it is applied — on the monthly payment, on the total of payments, or on the full price up front — depends entirely on your jurisdiction.

Money factor to APR

$APR = MF \times 2400, \qquad MF = \frac{APR}{2400}$

So $MF = 0.00200$ is $4.8\%$; $MF = 0.00225$ is $5.4\%$. The $2400$ is $1200 \times 2$: $1200$ converts a monthly decimal to an annual percentage, and the $2$ compensates for charging on $C + R$ rather than the average balance.

Residual value

$R = \text{MSRP} \times \text{residual}\%$

Note that the residual percentage is set against MSRP, not against the price you negotiated. Negotiating the price down lowers $C$ and therefore the payment, but leaves $R$ untouched.

What the lease costs in total

$\text{Total} = N \times \text{payment (with tax)} + \text{cap-cost reduction} + \text{fees}$

Buying it at the end

$\text{Buyout} = R + \text{purchase-option fee} \;(+\;\text{tax})$

The residual is contractual, so an end-of-lease buyout price is known on day one. What the car is actually worth then is not.

• Using MSRP as the cap cost: $C$ is the negotiated price after discounts, plus any fee you roll in. Starting from MSRP overstates every payment.
• Multiplying the money factor by 1200: the conversion is $\times 2400$. Using $1200$ halves the implied rate.
• Treating a lease like a loan: there is no amortisation table here. The depreciation part is a flat $(C-R)/N$ every month; only a loan payment splits differently each period.
• Assuming a down payment saves interest proportionally: a cap-cost reduction lowers $C$, which cuts both terms — but on a lease that money is gone if the car is totalled early.
• Forgetting mileage and wear charges: those sit outside the payment formula entirely and are pure contract terms.
• Assuming your tax works like the example: lease taxation varies widely by jurisdiction. Apply the rule that applies where you are; the arithmetic below simply shows one common form.