Car Lease Calculator

A lease is a long rental. You do not buy the car; you pay for the part of its value that you use up, plus a charge for the money tied up in it. The monthly figure on a leasing offer hides how that is built, which makes it hard to compare with a purchase or with another offer. The calculator opens the box: it takes the price and terms and shows each part of the payment, then the total cost if you hand the car back and if you buy it at the end.

The inputs

The sticker price (MSRP) sets the residual value, the amount the leasing company expects the car to be worth at the end, usually quoted as a percentage. The capitalised cost is the price you negotiated, plus any acquisition fee added to the lease, minus any money you pay up front, called a cost reduction. The term is in months. The finance charge can be given as a money factor, a small decimal, or as a yearly interest rate, and the page converts between them.

The payment formula

The depreciation part is (capitalised cost − residual) ÷ term: you pay for the drop in value over the months. The finance part is (capitalised cost + residual) × money factor. The monthly payment is the sum of the two, with tax on top if the tax rate applies to the payment. Because the finance part depends on the sum, a higher residual raises it, but a higher residual also lowers the depreciation part, so the net effect is usually a lower payment.

A worked example

The sample car has a sticker price of 15,00,000, a negotiated price of 14,40,000, 1,00,000 paid up front, an acquisition fee of 20,000, a residual of 58%, a 36-month term and a rate of 7.2%. The capitalised cost is 13,60,000, and the residual is 8,70,000. Depreciation is 13,611.11 a month, the finance charge is 6,690.00, and the payment is 20,301.11. The money factor is 0.00300, the same as 7.20% a year. Handing the car back costs 8,45,840 in all, including the up-front money and a 15,000 return fee, about 23,496 a month. Buying it at the end brings the total to 17,10,840.

Return or buy

The page compares the two endings. Returning the car costs the payments, the money paid at the start and the return fee. Buying it adds the residual value and a purchase fee, so it costs more by that amount minus the return fee: in the sample 8,65,000. The purchase only makes sense if the car is worth more than the residual plus fees on the open market, or you value having kept it. Otherwise the lease ended at the price the leasing company set.

Money factor and rate

Because the money factor is hard to compare with a loan rate, multiply it by 2,400 for the yearly rate. A money factor of 0.0030 is 7.2 percent, and 0.0021, as in the second sample, is 5.04 percent. Ask the dealer for the money factor and the residual; a low payment can hide a high rate or a low residual. The second sample, a 38,000 car with a 62% residual, comes to 461.86 a month.

Limits

Mileage limits and charges for excess wear are not included, and neither are insurance requirements or gap cover. Tax rules for leases differ by place: here a single percentage is added to the payment. A residual that equals or exceeds the capitalised cost is rejected as not a real lease. Compare with a purchase using the car loan calculator.

Related tools

• Car Loan Calculator prices the alternative of borrowing to buy the same car.
• Loan Calculator shows how the cost of borrowing builds up over a term.
• Bike Loan Calculator works through an on-road price for a smaller vehicle.
• Percentage Calculator helps with the residual as a share of the sticker price.