# Car lease payment calculator

> Calculate a monthly car lease payment from the price, residual value and money factor or APR, split into depreciation, finance charge and tax.

Interactive version: https://www.calcopenly.com/finance/lease-calculator
Subject: Finance calculators

A lease payment has two parts. The depreciation charge spreads the car's expected loss in value, the net capitalized cost minus the residual value, evenly over the term. The finance (rent) charge is the money factor times the sum of the net capitalized cost and the residual. Sales tax, where it is charged on each payment, is added on top.

With the defaults, a 35,000 car negotiated to 33,000 with 2,000 down, a 58% residual of 20,300, a money factor of 0.0025 and a 36-month term, the payment is 297.22 of depreciation plus 128.25 of finance charge: 425.47 before tax and 451.00 with 6% tax.

Multiplying the money factor by 2,400 gives an approximate APR, 6% here. That conversion is an industry rule of thumb; no federal rule defines it. Acquisition and disposition fees, mileage overage and wear charges are not included unless you add them to the price.

## Inputs

- **MSRP (list price)**
- **Negotiated price (gross capitalized cost)**: Include any fees rolled into the lease.
- **Down payment, trade-in and rebates**
- **Residual given as** (options: % of MSRP, Amount)
- **Residual value (% of MSRP)**
- **Residual value**
- **Lease term**
- **Rate given as** (options: Money factor, APR)
- **Money factor**: Multiply by 2,400 for the approximate APR, an industry rule of thumb.
- **APR**
- **Sales tax on the payment**

## Results

- Monthly payment — main result
- Payment before tax
- Depreciation charge per month
- Finance (rent) charge per month
- Sales tax per month
- Money factor
- Approximate APR
- Residual value
- Net capitalized cost
- Total cost of the lease
- Total finance charges

## Formula

$$
\text{payment} = \underbrace{\frac{C - R}{n}}_{\text{depreciation}} + \underbrace{(C + R)\cdot MF}_{\text{finance}},\qquad MF = \frac{\text{APR}}{2400}
$$

## Worked examples

### 33k car, 58% residual, money factor 0.0025, 36 months

- MSRP (list price): 35,000
- Negotiated price (gross capitalized cost): 33,000
- Down payment, trade-in and rebates: 2000
- Residual given as: % of MSRP
- Residual value (% of MSRP): 58%
- Lease term: 36 months
- Rate given as: Money factor
- Money factor: 0.0025
- Sales tax on the payment: 6%
- **Depreciation charge per month: 297.22**
- **Finance (rent) charge per month: 128.25**
- **Payment before tax: 425.47**
- **Sales tax per month: 25.53**
- **Monthly payment: 451.00**
- **Approximate APR: 6%**
- **Total cost of the lease: 18,236.02**
- Checked against: Python decimal (prec 50): (31000 − 20300)/36 + (31000 + 20300) × 0.0025, plus 6% tax

### Same lease entered as 6% APR

- MSRP (list price): 35,000
- Negotiated price (gross capitalized cost): 33,000
- Down payment, trade-in and rebates: 2000
- Residual given as: % of MSRP
- Residual value (% of MSRP): 58%
- Lease term: 36 months
- Rate given as: APR
- APR: 6%
- Sales tax on the payment: 6%
- **Money factor: 0.0025**
- **Finance (rent) charge per month: 128.25**
- **Monthly payment: 451.00**
- Checked against: 6 / 2400 = 0.0025 (industry money-factor convention); payment as above

### Federal Reserve rent-charge example

- MSRP (list price): 25,000
- Negotiated price (gross capitalized cost): 18,800
- Down payment, trade-in and rebates: 0
- Residual given as: Amount
- Residual value: 12,350
- Lease term: 36 months
- Rate given as: Money factor
- Money factor: 0.00354
- Sales tax on the payment: 0%
- **Finance (rent) charge per month: 110.27**
- **Net capitalized cost: 18,800.00**
- Checked against: Federal Reserve Board leasing guide: 0.00354 × (18,800 + 12,350) = 110.27

### Zero money factor

- MSRP (list price): 35,000
- Negotiated price (gross capitalized cost): 33,000
- Down payment, trade-in and rebates: 2000
- Residual given as: % of MSRP
- Residual value (% of MSRP): 58%
- Lease term: 36 months
- Rate given as: Money factor
- Money factor: 0
- Sales tax on the payment: 0%
- **Finance (rent) charge per month: 0.00**
- **Monthly payment: 297.22**
- **Total finance charges: 0.00**
- Checked against: Hand calculation: only depreciation, 10700 / 36

### Residual as an amount, 24 months

- MSRP (list price): 32,000
- Negotiated price (gross capitalized cost): 30,000
- Down payment, trade-in and rebates: 0
- Residual given as: Amount
- Residual value: 18,000
- Lease term: 24 months
- Rate given as: Money factor
- Money factor: 0.00125
- Sales tax on the payment: 0%
- **Depreciation charge per month: 500.00**
- **Finance (rent) charge per month: 60.00**
- **Monthly payment: 560.00**
- **Approximate APR: 3%**
- **Total finance charges: 1,440.00**
- Checked against: Hand calculation: 12000/24 = 500; 48000 × 0.00125 = 60; 0.00125 × 2400 = 3%

## Questions

### How is a car lease payment calculated?

Add the depreciation charge, (net capitalized cost − residual) ÷ months, to the finance charge, (net capitalized cost + residual) × money factor, then add any tax. For a net cost of 31,000, a residual of 20,300 and 36 months, depreciation is 10,700 ÷ 36 = 297.22 and the finance charge is 51,300 × 0.0025 = 128.25, so the payment is 425.47 before tax.

### How do you convert a money factor to an APR?

Multiply the money factor by 2,400: 0.0025 × 2,400 = 6%. To go the other way, divide the APR by 2,400, so 4.8% is a money factor of 0.002. The Federal Reserve notes that no federal standard defines this conversion; it is an industry rule of thumb, and the lease contract's rent charge is the figure that counts.

### How does the residual value affect a lease payment?

A higher residual lowers the payment, because you pay only for the value the car loses during the lease. On the default 35,000 car, a 55% residual (19,250) gives a payment of 479.13 with tax, 58% gives 451.00 and 62% gives 413.49. The residual is usually also the buyout price at the end of the lease, before any purchase-option fee.

### Is it better to negotiate the price or put more money down on a lease?

Negotiate the price first. Cutting the price by 1,000 and putting 1,000 more down both lower the payment by 32.09 a month with 6% tax (30.28 before tax), but only the price cut keeps the 1,000 in your pocket: the total cost of the default lease falls to 17,080.62 against 18,080.62 with the extra down payment.

### How accurate is the car lease payment calculator?

Accuracy depends on your inputs and the method's assumptions. Decimal arithmetic uses 50 significant digits, but estimates, numerical methods and source data can be less precise; the displayed rounding does not remove those limits. It is checked against 5 worked examples whose answers come from independent sources; for example, “33k car, 58% residual, money factor 0.0025, 36 months” is checked against Python decimal (prec 50): (31000 − 20300)/36 + (31000 + 20300) × 0.0025, plus 6% tax.

### Where does the method come from?

Federal Reserve Board — Vehicle leasing: more information about the rent charge; Regulation M (12 CFR 1013) — Consumer leasing, Appendix A model forms.

## Sources

- [Federal Reserve Board — Vehicle leasing: more information about the rent charge](https://www.federalreserve.gov/pubs/leasing/resource/consider/ongoing_info6.htm)
- [Regulation M (12 CFR 1013) — Consumer leasing, Appendix A model forms](https://www.consumerfinance.gov/rules-policy/regulations/1013/)

_Note: financial information, not professional advice._