Auto Lease Calculator

A lease payment has two main components: the depreciation fee and the finance fee. The depreciation fee is the vehicle's loss in value over the lease term divided by the number of months. The finance fee is calculated by adding the capitalized cost and the residual value, then multiplying by the money factor (APR ÷ 2400). These two fees are added together, then sales tax is applied to arrive at your monthly payment.

Residual value is the estimated worth of the vehicle at the end of the lease term, expressed as a dollar amount or percentage of MSRP. A higher residual value means you are financing less depreciation, which lowers your monthly payment. Residual values are set by the leasing company and typically range from 45% to 65% of MSRP for a 36-month lease.

The money factor is the leasing equivalent of an interest rate. To convert APR to money factor, divide the APR by 2400. For example, a 6.9% APR equals a money factor of approximately 0.002875. A lower money factor means lower finance charges over the life of your lease.

Leasing typically offers lower monthly payments and lets you drive a new vehicle every few years, but you build no equity and face mileage restrictions. Buying costs more per month initially but you own the car outright once it's paid off. Leasing is often preferred by drivers who want the latest models or use the car for business, while buying suits those who drive high mileage or want long-term value.

It depends on your priorities. Leasing is better if you value lower monthly payments, lower upfront costs, and driving a new car every 2–4 years. Buying is better if you want to own the vehicle, drive unlimited miles, or plan to keep the car long-term. Total cost of ownership over a decade is generally lower when buying.

A good lease deal typically has a low money factor (close to the current prime rate equivalent), a high residual value, and minimal fees. Compare the money factor offered to the 'buy rate' from the manufacturer's financial arm. If the dealer has marked up the money factor significantly, try to negotiate it down. Also check that the residual value aligns with industry guides like ALG or Edmunds.

Common upfront lease fees include the acquisition fee (charged by the lender, typically $500–$1,000), the first month's payment, a security deposit, registration and title fees, and any dealer documentation fees. Some deals advertise '$0 down' but still require these fees at signing — always clarify what's included.

At lease end you typically have three options: return the vehicle and walk away, purchase the vehicle at the pre-agreed residual value, or trade it in toward a new lease. If you exceed the allowed mileage or have excess wear and tear, you may owe additional fees. Reviewing the lease-end terms before signing helps you plan accordingly.