Time value of money calculators

Lease Payment Calculator

Enter the price, the residual value and the rate to see the monthly payment and how it is built.

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A lease payment has two parts: depreciation, the value the car loses over the term, and a rent charge, the finance cost. This lease payment calculator computes both from the price, down payment, residual value, term and either a money factor or an APR.

It shows the monthly payment by the standard lease formula and, next to it, the same lease worked out as a time-value problem with payments in advance, so you can see how close the two methods are. It also converts between money factor and APR: multiply a money factor by 2,400 to get the APR. Taxes, acquisition fees and mileage charges are not included.

Lease payment calculator example

How to use the Lease Payment Calculator

  1. Enter the Vehicle price (capitalized cost) you are leasing at.
  2. Enter the Down payment or trade-in, which lowers the amount financed.
  3. Enter the Residual value as an amount of money, not a percentage. It is what the lessor expects the vehicle to be worth at the end.
  4. Enter the Lease term in months.
  5. Choose Rate given as an APR or a money factor, then enter the Rate: for example 6 for a 6% APR, or 0.0025 as a money factor.
  6. Read the Monthly payment (lease formula), split into the Depreciation part and the Rent charge part.
  7. Compare with the Monthly payment (time-value calculation), and check the Total cost over the term, which includes the down payment.
  8. Open How it was calculated for each step with your numbers.

The example buttons load a 36-month lease at 6% APR, the same lease as a money factor and a 24-month lease.

To compare a lease with buying, run the lease here and the purchase on the loan amortization calculator, then compare the total cost and what you own at the end.

If your quote gives the residual as a percentage, multiply it by the price it applies to, usually the manufacturer suggested price, and enter the result. Taxes and fees are not included in the payment shown.

Lease payment formula

With a net capitalized cost C (price minus down payment), a residual R, a term of T months and a money factor MF:

  • Depreciation part = (C − R) ÷ T
  • Rent charge = (C + R) × MF
  • Monthly payment = depreciation part + rent charge

The money factor relates to the APR by APR = MF × 2,400. A money factor of 0.0025 is therefore a 6% APR.

Worked examples

CaseResult
Price 35,000, down 2,000, residual 21,000, 36 months, 6% APR468.33 a month (333.33 depreciation + 135.00 rent charge)
Same lease given as money factor 0.0025468.33
Residual 23,000, 24 months556.67

The time-value calculation of the first lease, with payments at the start of each month, is 467.72, within 61 cents of the lease formula. The formula approximates interest on the average of the capitalized cost and the residual.

Ways to lower a lease payment

A higher residual value or a lower money factor reduces the payment more than a larger down payment does per dollar, because a down payment is lost if the car is written off. Negotiate the price (capitalized cost) first: it enters both parts of the payment.

What drives a lease payment

  • Capitalized cost. The negotiated price minus down payment. Every dollar off the price lowers both parts of the payment.
  • Residual value. The higher it is, the less the car depreciates during the lease, so the lower the depreciation part. It is set by the lessor.
  • Money factor. The finance charge. A difference of 0.0005 is 1.2 points of APR and adds (C + R) × 0.0005 per month, about 27 a month on the example lease.
  • Term. A shorter lease usually has a higher residual share but more payments per year of use.

Lease or buy?

A lease gives lower monthly payments because you pay for the depreciation you use, not the whole price. At the end you own nothing and may owe fees for excess mileage or wear. Buying costs more per month but leaves you the car. Compare the total of lease payments and the down payment with the purchase payments minus what the car is worth at the end.

What is not included

Sales tax, registration, the acquisition fee, disposition fee and mileage charges vary by lessor and location and change the total. Ask for a written breakdown and compare it with the result here.

Frequently asked questions

What is a money factor?

A way of quoting the lease finance rate as a small decimal. Multiply by 2,400 for the approximate APR.

Is the residual value a percentage?

Lessors often quote it as a percentage of the list price. Enter it here as an amount: the percentage times the price it applies to.

Why do I see two monthly payments?

The first uses the standard lease formula. The second treats the lease as a loan with a balloon and payments in advance. They agree within a few dollars; the lessor’s own figure follows its contract.

Does the payment include sales tax?

No. Tax rules vary by state and country, and are added to the payment or the upfront costs.

How do I get the residual value?

The lessor sets it. Ask the dealer for the residual in dollars, or multiply the manufacturer’s suggested price by the residual percentage.

Why is my quoted payment different from the calculator?

Taxes, fees paid monthly and a rounded money factor all change the figure. Ask the dealer to itemise the quote.

Can the money factor be negative or zero?

Zero is allowed and gives a payment equal to the depreciation part. Negative values are not accepted.