Understanding Lease Payments

The primary purpose of the Auto Lease Payment Calculator is to give you a clear, preliminary estimate of your financial obligation before signing any paperwork. The calculator works by focusing on the principle that you are only paying for the depreciation of the vehicle during the lease term, plus a finance fee (interest) on the leased asset. This is generally split into two main components: the depreciation fee and the money factor fee.

How to Use the Auto Lease Payment Calculator

To get the most accurate result from this calculator, you need three primary figures from your dealership: the Capitalized Cost, the Residual Value (as a percentage), and the Money Factor. Simply input these figures, along with the desired lease term in months, and the calculator will instantly provide your estimated monthly payment and a detailed breakdown of the costs. This tool is essential for effective negotiation.

Lease Payment Formula

The monthly lease payment (excluding taxes and government fees) is the sum of two main charges:

1. Monthly Depreciation Fee (Cost of Wear and Tear):
(Capital Cost - Residual Value) ÷ Lease Term (Months)
2. Monthly Finance Fee (Interest):
(Capital Cost + Residual Value) × Money Factor

The total monthly payment is the sum of the Monthly Depreciation Fee and the Monthly Finance Fee.

Key Lease Terms Explained

What is the “Money Factor”?

The Money Factor (MF) is the financing charge on a lease, similar to an interest rate. You can roughly convert the MF to an Annual Percentage Rate (APR) by multiplying it by 2400. A lower money factor means lower monthly finance fees. Since the money factor directly impacts the total amount paid, finding a competitive rate is key to reducing your overall lease cost.

What is “Residual Value”?

The Residual Value is the price the leasing company estimates the vehicle will be worth at the end of the lease term. This is the amount you don’t pay depreciation on. A higher residual value results in a lower monthly payment because the depreciation (the difference between Capital Cost and Residual Value) is smaller. This is often the most critical factor in determining a low monthly payment.

The Capitalized Cost, or Cap Cost, is the negotiated price of the car, before factoring in your down payment or trade-in value (if applicable). Ensuring you negotiate a good discount on the Cap Cost is the first step toward lowering your monthly auto lease payment.