Lease Payment Calculator
| Money factor | APR | Verdict |
|---|---|---|
| 0.00125 | 3% | subsidized - take it |
| 0.00167 | 4% | fair market |
| 0.00208 | 5% | negotiable |
| 0.00250 | 6% | push back or walk |
A lease payment is three numbers stapled together: depreciation (cap cost minus residual, divided by months - the part you actually consume), the rent charge (the financing fee on money still owed, computed from the money factor), and sales tax on the sum where applicable. The money factor is the part dealers mumble: multiply it by 2,400 to see the APR - a 0.00250 factor is a 6% rate - and negotiate it like the rate it is. Residual is set by the lender, not the dealer, and a high residual (55-62% at 36 months for popular models) is what makes some leases cheap: you only finance the drop.
The honest comparison is total-cost-per-mile: a lease buys lower monthly payments and a new car under warranty, and charges you for mileage (10,000-12,000 miles a year standard, $0.15-0.30 per mile over) plus wear charges at turn-in. Buy the same car and month three is uglier, year six is prettier - the calculator prices the lease side so the comparison is arithmetic instead of vibes.
How to use
- Enter the negotiated cap cost (price plus fees minus down), the lender's residual percentage, the term in months, and the money factor from the lease worksheet.
- Read the three-part payment: monthly depreciation, monthly rent charge, and the total - then convert the factor to APR with the x2,400 rule to see what you are really paying.
- Stress-test the mileage: 12,000 miles a year is standard; if your commute says 15,000, price the extra miles into the comparison before signing.
Frequently asked questions
How is a monthly lease payment calculated?
Monthly depreciation = (capitalized cost minus residual value) divided by the term; rent charge = (cap cost plus residual) times the money factor; add tax on the payment where your state charges it. On a $40,000 car with a 60% residual over 36 months: depreciation is $444 a month, and the rent charge at a 0.00250 money factor is $160 - the 'why is leasing 3% of the sticker' question answered in two lines.
How do I convert a money factor to an APR?
Multiply by 2,400: a money factor of 0.00125 is 3% APR, 0.00167 is 4%, 0.00250 is 6%. The number hides in plain sight on the lease worksheet - dealers who answer 'that's the money factor' when asked for the interest rate are quoting a number that IS an interest rate wearing a disguise.
What is residual value and can I negotiate it?
Residual is the lender's forecast of the car's value at lease end, set by the captive finance company from historical data - the dealer cannot move it. What IS negotiable: the capitalized cost (the price), the money factor, and the fees. A high residual is your friend either way: it shrinks depreciation now, and it becomes the purchase price if you buy it out.
What happens if I go over the mileage allowance?
Overages run $0.15-0.30 per mile, charged at turn-in - 5,000 miles over a 12,000-mile allowance is $750-1,500 at walk-away. Buying extra miles up front at contract signing costs roughly half the overage rate, which makes the annual-mileage honest question the cheapest question in the whole deal.