Calculate Your Own Car Lease Payment
Leasing. For some shoppers, it’s as dark and mysterious as the deepest reaches of outer space. It’s full of confusing language, weird fees and payments that seem impossible to figure out at home without an advanced degree in mathematics.
The truth is you don’t have to be Neil deGrasse Tyson in order to calculate your own lease. You just need a calculator, some deal information and a little direction.
Calculating your own lease payment from home can be easy. All you need is a calculator, some deal info and a little guidance.
But first, a little advice. While you can certainly calculate your own lease, there are easier ways to estimate what your lease payments could be.
Your first stop should be our Incentives & Rebates page. Here you can find carmakers’ “lease specials” with very attractive monthly payments. We also suggest checking the automaker and dealership websites to learn the lease offers that are available.
Another valuable resource is the Edmunds Lease Calculator. You will need to have some information handy to get an accurate quote, but our calculator will do the math for you. It also pulls in current purchase price information about current models and local tax rates.
Perhaps the easiest way to get an idea of what a lease should cost is to get real-world lease quotes from multiple dealerships. With three to five quotes in hand, you can quickly get a feel for a good deal.
If after checking out all these other options you are still determined to calculate your own car lease payment, we’re happy to help.
And because we know that people process information differently, we will present the formula to you in two different ways.
What to Expect: A Very Close, but Not Exact, Lease Payment
Calculating your own lease payment to the penny is unrealistic: Taxes and fees will vary by region, and add-on fees can vary from brand to brand. And no matter how hard you try, you’re almost guaranteed to leave some forgotten fee out of the equation. But that doesn’t mean you can’t get pretty close.
In order to make your own calculations, you’ll need to gather some information. Some of that data will be available here on Edmunds. Other information you’ll need to collect from a dealership. A simple email to a fleet manager or sales manager should be all it takes to get the details you’ll need to get started.
What You’ll Need:
1. MSRP of the vehicle. Also known as the sticker price. You can find the MSRP for virtually any new car here on Edmunds.
2. The money factor. This is the “interest rate” you’ll pay during your lease. It’s sometimes called a “lease factor” or even a “lease fee.” To get the money factor, call or email a dealership that sells that brand, and be specific about the model you’re considering: Money factors may not be the same for all models. Money factors look different from their annual percentage rate (APR) cousins usually something like this: 0.00125.
Here’s a handy tip: To convert interest rates to money factors, divide the interest rate by 2,400. To convert money factors to interest rates, multiply by 2,400. So 0.00125 x 2,400 would equal an interest rate of 3 percent.
3. Lease term. We recommend leasing for 36 months or less. However, some lease specials are for 39 months.
4. Residual value of the car. Ask the dealer what the residual percentage is for the car you’re considering. The dealership will likely ask how many months you plan to lease and how many miles you plan to drive per year. These factors affect the residual percentage. As a rough guide, most cars have a residual value of between 45 and 60 percent for a 36-month lease.
5. Fees. These are registration, acquisition, down payment tax (if any), documentation fees and the like. If you’re unable to get an exact figure for the fees you’ll be responsible for, ask the dealer for a rough estimate.
6. Rebates. Without factoring in applicable rebates, your calculations will be off. If you’re not sure what rebates are available, don’t forget to check our Incentives and Rebates page.
A Walk Through a Sample Lease
To best explain the calculation steps, we are going to create a sample lease.
For our example, we are going to lease a car with an MSRP of $23,000. This car will have a residual value of 57 percent and a money factor of 0.00125. We will have a $1,700 down payment and the car will have a $500 rebate. Assume we’ve negotiated a sale price of $21,000 (before the rebate was applied) and will have $1,200 in various fees. For this example, we will not have a trade-in.
If you just want the formula, skip to the bottom of this article. If you’d prefer more context, read on.
Step 1. Take the vehicle’s MSRP and multiply it by its residual percentage to get the residual value.
Step 2. Take your negotiated sale price and add in all the fees you’ll have to pay. For our example, we’ve negotiated a sale price of $21,000 and have $1,200 in fees. Add those together and we get what’s called the “gross capitalized cost.”
Step 3. Take the total amount of the down payment, trade-in equity or rebates and add them together. In this example, we have $1,700 cash and a $500 rebate. So our total down payment is: $2,200. This is called our “capitalized cost reduction.”
Step 4. Subtract the capitalized cost reduction of $2,200 from our gross capitalized cost of $22,200. The amount we are left with is called the “adjusted capitalized cost.”
Step 5. Subtract the residual from the adjusted capitalized cost. This is your depreciation amount, which is the basis of your lease payment.
Step 6. Divide the depreciation amount from Step 5 by the months of the lease. In our example, we are using 36 months. The result is our base payment. Don’t get excited by this small number just yet. We still need to add interest and taxes.
Step 7. Take the adjusted capitalized cost and add it to the residual. Multiply that amount by the money factor. The resulting number will be the amount of interest charged per month. This is called the rent charge. Here is what that would look like, using our money factor of 0.00125.
Step 8. Add the rent charge to the payment you calculated in Step 6 to get your pre-tax lease payment.
If you’re lucky enough to live in a state that doesn’t charge sales tax, you’re done!
If you’re like the rest of us, you’ll still need to add monthly tax. Luckily, that’s easy to do. In Santa Monica, California, our sales tax rate is 9.5 percent. So we have one more step before we’re done:
Step 9. Multiply the payment by the local tax rate to get the total monthly payment.
Here is the formula again, without the commentary: