Auto Lease Calculator

Multiply the money factor by 2400. A money factor of 0.00125 equals roughly 3% APR (0.00125 * 2400 = 3). The 2400 multiplier comes from the lease finance formula, which charges interest on the cap cost plus residual rather than on the balance alone, so a fixed 2400 collapses the math cleanly into an annual rate. Dealers are not required to disclose APR on lease paperwork the way they are on a loan, so always ask for the money factor directly. For someone with strong credit, a fair money factor tracks current new-car loan APRs minus 0.5 to 1 percentage point, since captive lenders (Honda Finance, Toyota Financial, BMW FS) often subsidize lease rates to move inventory.

Residual value is what the leasing company expects the car to be worth at the end of the lease term, set as a percent of MSRP. A 36-month lease typically lands between 50% and 65%, with strong-residual brands (Toyota, Honda, Lexus, Porsche) at the top and weak-residual ones (most domestic sedans, EVs with collapsing used prices) at the bottom. Residual is the single biggest driver of your monthly payment, because you only finance the gap between cap cost and residual. A $35,000 car with a 60% residual ($21,000) costs you $14,000 in depreciation over the term. The same car at 50% residual ($17,500) costs you $17,500, which adds about $97 to every monthly payment over 36 months. Residual is set by the lessor from ALG and Black Book tables and is not negotiable.

Three levers move the cap cost down. First, negotiate the selling price, exactly the way you would on a purchase, before any discussion of monthly payment. Second, apply manufacturer incentives, lease cash, or loyalty rebates as cap cost reductions rather than down payments. Third, trade in a vehicle with equity to roll the trade value into the cap reduction. Down payments also reduce the cap cost, but they carry a hidden risk: if the car is totaled or stolen early in the lease, your down payment is gone, because insurance pays only the depreciated value to the lessor. Most lease experts (Edmunds, Consumer Reports) recommend keeping money down small or zero and absorbing the slightly higher monthly payment instead.

Every US lease bills two distinct things every month. The depreciation fee covers the value the car loses while you have it, calculated as (net cap cost minus residual) divided by term. It is the wear-and-tear bill. The finance fee covers the interest the lessor charges on the money tied up in the car, calculated as (net cap cost plus residual) times money factor. It is the rent on the lessor's capital. Adding both gives the pre-tax monthly. Sales tax in most US states is then applied to that pre-tax monthly figure (not to the full vehicle price), which is why leasing can be tax-efficient versus buying in high-tax states like California, New York, and Illinois. Splitting the payment this way also makes it obvious where to push: a high depreciation fee means the residual is weak or the cap cost is too high, while a high finance fee means the money factor is uncompetitive.

Leasing fits three profiles cleanly. First, you want the lowest monthly payment on a newer vehicle and you trade up every two to four years anyway. Second, the vehicle is a business expense you can deduct (single-member LLCs and S-corps often write off lease payments more cleanly than depreciation on a financed car). Third, the manufacturer is subsidizing a specific model with a high residual and low money factor, making the lease cheaper than the loan on the same car. Leasing breaks down when you drive more than the standard 10,000 to 15,000 mile cap (excess miles cost 15 to 30 cents each at lease return), when you keep cars more than 5 to 7 years (the no-payment years after a loan payoff destroy the lifetime comparison), or when you want to modify the vehicle. Run the mileage cap honestly before signing: a 5,000-mile overage on a 36,000-mile lease at 25 cents per mile is $1,250 on top of the disposition fee at turn-in.