Car Lease Calculator

Car lease payments consist of three components: Depreciation fee (largest portion) = (Capitalized Cost - Residual Value) / Lease Term. Finance fee = (Capitalized Cost + Residual Value) × Money Factor. Sales tax = (Depreciation + Finance Fee) × Tax Rate (varies by state). Capitalized cost is the negotiated price minus down payment and trade-in. Residual value is the predicted vehicle value at lease end, set by manufacturer (typically 50-65% of MSRP for 36 months). Money factor is the interest rate divided by 2,400 (e.g., 3% APR = 0.00125 money factor). Example: 35,000 dollar vehicle, 60% residual, 0.00125 MF, 36 months: Depreciation = (35,000 - 21,000) / 36 = 389 monthly. Finance = (35,000 + 21,000) × 0.00125 = 70 monthly. Total before tax = 459/month.

Residual value is the predicted worth of the vehicle at lease end, expressed as a percentage of MSRP. Set by the leasing company based on historical depreciation data, brand reputation, and market conditions. Higher residual = lower payment because you only pay for the difference between price and residual. Example: 40,000 dollar car with 60% residual (24,000) costs less per month than same car with 50% residual (20,000). Luxury brands often have lower residuals (45-55%) due to steep depreciation. Economy brands may have higher residuals (55-65%) due to strong resale value. Honda, Toyota, Subaru typically have highest residuals. Luxury sedans have lowest. Electric vehicles have uncertain residuals due to technology changes and tax credit impacts. You cannot negotiate residual - it is set by manufacturer.

Money factor is the lease equivalent of an interest rate, representing the financing charge. Convert to APR by multiplying by 2,400: Money Factor 0.00125 = 3.0% APR (0.00125 × 2,400). Convert APR to money factor by dividing by 2,400: 4.8% APR = 0.00200 money factor (4.8 / 2,400). Money factors typically range from 0.00100 to 0.00300 (2.4% to 7.2% APR) depending on credit score and manufacturer incentives. Excellent credit (720+): 0.00100-0.00150, good credit (680-719): 0.00150-0.00200, fair credit (620-679): 0.00200-0.00250, poor credit (below 620): may not qualify for lease. Manufacturer subvented leases offer artificially low money factors (0.00001-0.00050) as incentives, creating very attractive lease deals.

Lease advantages: Lower monthly payments (30-50% less than financing), drive new car every 2-3 years with latest technology and warranty coverage, no trade-in hassle or depreciation risk, potential tax benefits for business use (deduct payments), minimal maintenance costs (covered under warranty). Lease disadvantages: No equity or ownership, mileage limits (10,000-15,000/year, 20-30 cents/mile over), wear-and-tear charges at return, continuous payments (never own outright), early termination penalties are severe. Buy advantages: Build equity, no mileage restrictions, freedom to modify, eventually own outright with no payments, better long-term value if keeping 7+ years. Lease if: you want lower payments, drive under 12,000 miles/year, want new car frequently, have business write-offs. Buy if: you drive high miles, keep vehicles long-term (6+ years), want to build equity, need modification freedom.

Upfront fees (due at signing): First month payment (standard), acquisition fee (500-1,000, covers paperwork), security deposit (0-1,000, sometimes waived), DMV registration and title fees (state-dependent, 100-500), documentation fee (75-500 depending on dealer), sales tax on down payment (if applicable in your state). Monthly fees: Base lease payment (depreciation + finance charge), sales tax on payment (most states), possible gap insurance if not included. End-of-lease fees: Disposition fee (300-500 to process vehicle return, waived if leasing another vehicle from same brand), excess mileage charges (10-30 cents per mile over allowance), excess wear-and-tear charges (dings, scratches, tire tread, interior damage), late payment fees if applicable. Purchase option fee if buying vehicle at lease end (300-500). Total upfront costs typically 1,500-4,000.

Standard lease mileage allowances: 10,000 miles/year (low mileage, cheapest payment), 12,000 miles/year (standard, most common), 15,000 miles/year (high mileage, higher payment). Calculate your needs: Track current annual mileage for 3-6 months and extrapolate, include regular commute, weekend trips, and occasional long drives, add 10-15% buffer for unexpected needs. Costs: Prepaid high-mileage typically costs 5-15 cents per mile added upfront, excess miles at lease end cost 15-30 cents per mile. Example: 36-month lease, 12k allowance but you drive 15k/year. Option A: Prepay 3k extra miles/year (9k total) at 10 cents = 900 dollars added to cap cost. Option B: Pay overage at end: 9,000 miles × 25 cents = 2,250 dollars. Always better to prepay if you know you will exceed. Consider buying if consistently over 15k miles/year - leasing becomes poor value.

Yes, lease negotiations focus on different elements than purchase: NEGOTIABLE - Selling price (capitalized cost): This is the most important negotiation. Negotiate as if buying, ignore monthly payment talk. Get 3-5% below MSRP on average cars, 8-12% below on slow-selling models. Dealer fees: Documentation fees are somewhat negotiable. Trade-in value: Negotiate separately or sell privately for more. Down payment: You choose this amount. NOT NEGOTIABLE - Residual value: Set by manufacturer, dealer cannot change. Money factor: Set by manufacturer for your credit tier (but verify dealer is not marking it up). Acquisition fee: Set by leasing company. Mileage overage rate: Fixed in contract. Strategy: Get out-the-door price in writing before discussing lease terms, compare money factor to current manufacturer programs, use multiple dealer quotes for leverage, avoid high down payment (increases loss risk if totaled).

Exceeding your lease mileage results in per-mile charges at lease end, typically 15-30 cents per mile depending on brand: Economy brands (Honda, Toyota): 15-20 cents/mile, mainstream brands (Ford, Chevy, Nissan): 18-25 cents/mile, luxury brands (BMW, Mercedes, Audi): 25-30 cents/mile. Example: 36-month lease with 12,000/year allowance (36,000 total). You drive 15,000/year (54,000 total) = 18,000 miles over × 25 cents = 4,500 dollar penalty. Options if approaching limit: Purchase vehicle at lease end (avoid penalty entirely), trade in vehicle early to new lease (typically must be within 6 months of end), prepay additional miles if offered mid-lease (rare), negotiate penalty reduction when returning (difficult). Prevention: Track mileage regularly via odometer or apps, adjust driving habits if trending over, consider higher allowance on next lease, buy instead of lease if consistently high mileage.

Lease contracts allow normal wear, but charge for excess damage. Industry standard guidelines: ACCEPTABLE - Small door dings (less than 1 inch), minor scratches (less than 2 inches), small chips in windshield (not in driver view, repairable), light interior wear, tire tread above 4/32 inch. CHARGEABLE - Dents larger than 1-2 inches (50-200 each), deep scratches or paint damage (100-500 per panel), cracked windshield or glass (200-500), torn or stained upholstery (100-300), missing equipment (floor mats, spare tire, tools: 50-200), tire tread below 4/32 inch (100-200 per tire), frame or structural damage (500-5,000+), odors (smoke, pet: 100-300), aftermarket modifications. Pre-return inspection: Schedule 30-60 days before end to identify issues, fix cheaply yourself (independent shop vs dealer pricing), detail vehicle thoroughly (200-300 can save 500-1,000 in charges). Consider pre-purchase inspection if planning to buy at lease end.

Early lease termination is possible but expensive, typically the worst financial option: Early termination penalties include: All remaining lease payments (full obligation), early termination fee (200-500), difference between market value and payoff if negative (often 3,000-8,000), disposition fee still applies. Example: 24 months remaining at 450/month = 10,800 owed + potential negative equity. Better alternatives: Transfer lease to another party via lease assumption (SwapALease, LeaseTrader) - costs 300-500 platform fee but avoids remaining payments, requires leasing company approval. Trade to dealer (usually when close to end): They pay off lease and roll negative equity into new lease/purchase. Return and negotiate: Some manufacturers offer pull-ahead programs within 3-6 months of end if leasing another vehicle. Best practice: Only terminate early if absolutely necessary (job loss, relocation), explore all alternatives first, never rely on lease for temporary need. Short-term leases (24 months) or long-term rental may be smarter for uncertain situations.