Car Lease Calculator
Should you lease or buy a car?
How To Calculate Monthly Car Lease Payments
Estimate your monthly lease payment by using our car lease payment calculator. Finding out how much money it will cost to lease a new car, truck, or SUV is quick and easy with our lease calculator. Leasing a car has more variables than buying a car, but we are here to help shed some light on the ins and outs of auto leases.
How are Lease Payments Calculated?
Calculating a lease payment is a little more complicated than calculating a loan payment, but many of the factors overlap. Mileage is a big factor when leasing a car, and most leases allow between 10,000 – 15,000 miles per year. Higher mileage leases are going to cost more money due to the car having a lower residual value at the end of the lease.
To calculate a monthly lease payment on a new car, you will need five essential pieces of information:
- Residual Value
- Money Factor
- Incentives and fees
- Down Payment and trade-in
| How To Calculate a Lease Payment (36-Months) | ||
|---|---|---|
| 1. | Sticker Price (MSRP) | $40,000 |
| 2. | Residual Value Percentage | 57% |
| 3. | Residual Value | $22,800 |
| 4. | Car Purchase Price | $38,000 |
| 5. | Additional Fees | $1,300 |
| 6. | Gross Capitalized Cost | $39,300 |
| 7. | Down payment & Incentives | $3,000 |
| 8. | Adjusted Capitalized Cost | $36,300 |
| 9. | Vehicle Depreciation | $13,500 |
| 10. | Base Payment | $375 |
| 11. | Monthly Rent Charge (Money Factor .0020833) | $123 |
| 12. | Pre-Tax Lease Payment | $498 |
| 13. | Total Lease Payment (Sales Tax 6.5%) | $530.48 |
If you’re interested in learning more about the car leasing equation, be sure to read our article on how to calculate a lease payment.
Is Leasing Better than Buying a New Car?
Length of vehicle ownership is one of the most significant determining factors in whether a car lease or a car loan is a better financial option. If a car will be driven for less than three years, then leasing makes a lot of sense. However, buying will make more sense if you plan to own your car for more than a few years or would like to modify it beyond OEM accessories.
How to Calculate Residual Lease Value?
A car’s residual value is largely determined by its age and mileage. Car lease terms usually range from 24 – 36 months, but some extended leases go up to 48 months and beyond. With some manufacturer’s bumper-to-bumper warranties expiring after 36 months, would you want to replace parts on a car that you will only own for a few more months? average annual mileage was 13,476 in 2018. Leases typically allow for between 10,000 – 15,000 miles per year, and additional miles will result in fees.
In addition to vehicle usage, some makes and models tend to have better residual values than others. Leasing a new car, truck, or SUV with a high resale value will typically yield a lower monthly lease payment.
Is My Lease A Good Deal?
With the price of new cars, trucks, and SUVs, continuing to rise, leasing is becoming more appealing to shoppers who want to keep their monthly payments lower. If you’re lucky enough to take advantage of a subsidized lease, then you can rest assured knowing that you have a car lease with great terms. Car leases can be subsidized in two ways that both lower the monthly payment of a vehicle. However, one of the ways will make your lease less desirable if you have any intention of buying the car at the end of the lease.
Decreased Purchase Price – Lowering the purchase price of a new car helps to lower the amount of depreciation of a car since it started at a lower price. A lease with a lower purchase price won’t negatively impact the lessee if they wish to buy the car at the end of the term
Increased Residual Value – Another way that a car leases monthly payment can be lowered is by increasing the residual value. Increasing the residual value of the car can be an issue if you are considering leasing to buy.
Still interested in learning more about car leases? Visit the complete guide to leasing.
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Frequently Asked Questions
Car shoppers who are new to leasing might be unfamiliar with some terminology in the fine print. “Money factor” in the lease language means interest rate. It may also be called “lease factor” or even “rent fee.” This number contains several decimal places. To convert it to a familiar-looking APR interest rate, multiply it by 2,400. For example, a money factor of 0.00125 equates to a 3% interest rate.
The residual value is the estimate of what a vehicle will be worth at the end of the lease term. In other words, residual value depends on how much the car will depreciate – and not all cars depreciate at the same rate. Residual value usually shows up as a percentage of the car’s original MSRP. And to make residual value even more complicated to understand, it can vary from lender to lender and/or can from trim levels within the same make and model.
You can only calculate residual value yourself if you know how much the car you’re considering will depreciate (which isn’t always available to the average shopper). You can contact the specific lender – or dealer if using a captive finance company – to find out the residual value of a particular truck or car.
Leases often look attractive to car shoppers because of the lower monthly car payments shown in advertisements. Figuring the real cost of leasing isn’t as simple as multiplying the monthly fee by the length of the lease. It’s essential to pay attention to the “cash due at signing” line seen in lease advertisements when you evaluate the total lease cost. Be sure you include the down payment, fees, taxes, and the disposition charge (when you turn in the car) to calculate how much money you will spend on leasing a car. Paying $3,600 as a down payment to initiate the lease is the equivalent of $100 extra per month throughout a 36-month lease.
There are pros and cons to leasing a car and advantages and disadvantages to purchasing an automobile. Entering a car lease may be the right choice for car shoppers who enjoy driving a new vehicle every few years and do not want to pay a significant down payment. Everyone has different needs, financial situations, and lifestyles.