Estimate your monthly car lease payment from price, residual value, money factor, and term — with a full breakdown of depreciation and rent charge.
How a Car Lease Payment Is Calculated
A lease payment has two parts. The depreciation fee covers the value the car loses while you drive it — the capitalized cost minus the residual value, spread over the lease term. The rent charge (finance charge) is the interest, calculated from the money factor applied to the cap cost plus residual.
Money Factor and APR
Leases quote interest as a money factor rather than an APR. To convert, multiply the money factor by 2,400. A money factor of 0.00250 is roughly a 6% APR. A lower money factor means a cheaper lease.
Residual Value
The residual is what the leasing company expects the car to be worth at lease end, as a percentage of MSRP. A higher residual means less depreciation to pay for, so a lower monthly payment. Cars that hold value well are cheaper to lease.
Tip: In most states you pay sales tax only on the monthly payment, not the full car price — one reason a lease payment can be lower than a loan payment on the same vehicle.
Frequently Asked Questions
How is a lease payment different from a loan payment?
A loan finances the entire price of the car; a lease only finances the depreciation (the value lost during the lease) plus a rent charge. That's why lease payments are usually lower than loan payments on the same vehicle.
What is a money factor?
The money factor is how leases express interest. Multiply it by 2,400 to get the approximate APR — for example, 0.00250 × 2,400 ≈ 6% APR. A lower money factor means less interest.
What is residual value?
Residual value is the car's projected worth at the end of the lease, set as a percentage of MSRP. A higher residual lowers your monthly payment because there is less depreciation to cover.
Is sales tax on a lease charged on the whole car?
In most U.S. states you pay tax only on each monthly payment, not the full vehicle price. A few states tax the full price or the cap cost up front, so check your state's rule.
Should I put money down on a lease?
Putting money down lowers the monthly payment but is generally discouraged — if the car is totaled or stolen early, you can lose that down payment. Many lessees prefer little or nothing down.