Car Lease Calculator

A lease is a long rental. You pay for the part of the car's value you use up while you have it, plus a rent charge (the lease's interest) on the money tied up in the car. At the end you hand it back, or buy it for the residual value.

The formula

adjusted price = agreed price + fees added to the lease − down payment − trade-in equity − rebates
residual = residual % × MSRP
depreciation = (adjusted price − residual) ÷ months
money factor = APR ÷ 2400
rent charge = (adjusted price + residual) × money factor
monthly payment = depreciation + rent charge (+ tax, if tax is charged on each payment)
due at signing = down payment + first payment + fees and tax paid at signing
total cost = down payment + all payments + fees and tax paid at signing + disposition fee + extra mileage

Worked example

A car with a $35,000 MSRP is agreed at $33,000. You pay $2,000 down, so the adjusted price is $33,000 − $2,000 = $31,000. The residual is 58% of $35,000 = $20,300. Over 36 months the depreciation is ($31,000 − $20,300) ÷ 36 = $10,700 ÷ 36 = $297.22 a month. A 6% APR is a money factor of 6 ÷ 2400 = 0.0025, so the rent charge is ($31,000 + $20,300) × 0.0025 = $51,300 × 0.0025 = $128.25 a month. The payment is $297.22 + $128.25 = $425.47 a month. You pay $2,000 + $425.47 = $2,425.47 at signing, and $2,000 + 36 × $425.47 = $17,317.00 in all ($10,700 of value used up plus $4,617 of rent charge, plus the $2,000 down).

Money factor and APR

Leasing companies quote the rate as a money factor. Multiply it by 2400 for the rough APR, or divide the APR by 2400 to get the money factor. Dealers may mark the money factor up above the bank's base rate, so ask for the "buy rate".

The "effective rate" in Advanced mode is the yearly rate that matches what you are really lent against everything you pay, including fees. With no fees it is close to the APR (6.03% in the example, because payments are made at the start of each month). Fees push it up.

How sales tax is charged

How lease tax works depends on where you live, so check locally. With 8% tax on the example lease:

• On each monthly payment (common in many US states): $425.47 × 1.08 = $459.51 a month. Some places also tax the down payment and rebates at signing.
• On the total of payments: 8% × 36 × $425.47 = $1,225.36, paid at signing or added to the lease.
• On the full price: 8% × $33,000 = $2,640, paid at signing or added to the lease.
• No tax: where the price already includes VAT, or the lease is tax-free.

When tax on the total is added to the lease, the tax itself raises the payments it is charged on, so we solve for the tax that covers itself.

Fees, trade-ins and mileage

The acquisition (bank) fee is usually added to the lease, so you pay rent charge on it. Doc and registration fees are usually paid at signing. A trade-in worth more than you owe lowers the adjusted price like a down payment; if you owe more than it is worth, the difference is added to the lease. A refundable security deposit is paid at signing and returned at the end, so it is not counted in the total cost. Mileage limits are often 10,000–15,000 miles (16,000–24,000 km) a year, and each extra mile or km is charged, often $0.15–$0.30 a mile.

The 1% rule (a rule of thumb)

Lease shoppers often say a good deal costs 1% of MSRP a month or less, before tax, with any down payment and fees paid at signing spread over the months. In the example that is ($425.47 × 36 + $2,000) ÷ 36 = $481.03 a month, or 1.37% of $35,000, so it is not a great deal. We call 1% or less great, up to 1.25% fair, and above that poor. It is only a quick check: residuals and incentives differ a lot between cars.

Lease vs buy

Over the lease term, the lease costs everything you pay and you own nothing at the end. Buying costs the cash you pay in the same months, minus what you own at the end: the car's value less any loan still owed. In the example, a $31,000 loan at 6% over 36 months is $943.08 a month: $2,000 + 36 × $943.08 = $35,950.88, minus the car worth $20,300, is a net $15,650.88, so buying costs $1,666.12 less than the $17,317.00 lease. The loan adds sales tax on the full price and your other fees, but not the lease's acquisition fee.

Assumes the standard money-factor lease method used by most US and Canadian lenders. Payments in your contract may differ slightly because of rounding, local tax rules and fees. Checked 2026-10-13.