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Estimated lease payment
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About the Auto Lease Calculator
Leasing a vehicle can make a new car accessible with a lower monthly payment than financing the same vehicle, but the number shown on a lease advertisement rarely tells the whole story. An auto lease is based on several moving pieces, including the negotiated vehicle price, the expected value of the vehicle at the end of the lease, the length of the agreement, the financing rate, taxes, trade-in value and money paid at signing. This calculator brings those variables together to give you a simple estimate before you sit down with a dealership.
The most important concept to understand is depreciation. When you lease a vehicle, you are generally paying for the portion of the vehicle's value that is expected to disappear during your lease term rather than paying for the entire vehicle. For example, if a vehicle has an adjusted lease cost of $45,000 and is expected to be worth $25,000 at the end of a 36-month lease, approximately $20,000 of value is being consumed during the lease. That depreciation is spread across the scheduled payments.
How to use this calculator
Start with the vehicle price. Whenever possible, use the negotiated selling price rather than simply entering the manufacturer's suggested retail price. A lower negotiated price can reduce the amount being depreciated and therefore lower the lease payment. Next, choose the lease term. Common lease periods are around two to four years, although the actual choices available depend on the manufacturer and leasing company.
Enter the residual value supplied by the dealer or leasing company. Residual value is the estimated worth of the vehicle when the lease ends. A higher residual generally means less depreciation has to be paid during the lease. This is one reason two vehicles with similar selling prices can have noticeably different lease payments.
Next, enter your down payment and any trade-in value. These amounts can reduce the effective amount being financed through the lease. However, a large down payment on a lease deserves careful consideration because you generally do not build ownership equity in the vehicle simply by making a larger upfront payment. If the vehicle is totaled early in the lease, the financial outcome of a large upfront payment can also be different from what many shoppers expect.
The calculator also lets you enter either an APR or a money factor. Money factor is a decimal commonly used in automobile leasing to represent the financing component. A commonly used approximation converts money factor to APR by multiplying the factor by 2,400. For example, a money factor of 0.00200 corresponds to approximately 4.80% APR. The exact structure of a lease offer can vary, so always compare the actual figures in your contract rather than relying only on a converted number.
Finally, enter your sales tax rate and select Calculate Lease. The calculator estimates the monthly depreciation charge, finance charge and applicable tax, then combines those components into an estimated monthly lease payment. It also shows the total scheduled payments and an approximate cash outlay that includes the upfront contribution you entered.
What is residual value?
Residual value is one of the most important numbers in a lease. It represents the leasing company's estimate of what the vehicle will be worth when the contract ends. A vehicle expected to retain more of its value generally has a higher residual percentage. Because lease payments are influenced by the difference between the adjusted vehicle cost and residual value, strong residual values can result in lower payments.
Why the negotiated price matters
Many shoppers concentrate on the advertised monthly payment instead of the vehicle's actual transaction price. That can make it harder to determine whether the lease is a good deal. A dealer can potentially change the payment by altering the amount due at signing, the lease term, the mileage allowance, the selling price, or other components. Negotiating the vehicle price separately gives you a clearer starting point for evaluating the lease.
Mileage limits are important
Most leases include a mileage allowance. Common annual allowances are around 10,000 to 15,000 miles, although different programs offer different limits. If you expect to drive significantly more than the allowance, ask for a higher-mileage lease before signing. Excess mileage charges can become expensive when the vehicle is returned. It is generally better to choose an allowance that matches your expected driving pattern than to assume you will somehow stay under a low limit.
Watch the fees beyond the payment
A lease can include costs that are not reflected in the simple monthly payment calculation. Depending on the contract, these can include an acquisition fee, documentation fees, registration, dealer fees, security deposits, taxes, disposition charges and other amounts. Some offers also require a significant amount due at signing. When comparing offers, look at the entire financial picture rather than choosing the lease with the smallest advertised monthly number.
Leasing versus buying
Leasing and buying serve different purposes. Buying a vehicle allows you to build ownership equity as the loan balance is paid down. Once the loan is paid off, you own the vehicle and can keep driving it without a monthly loan payment. Leasing generally gives you the right to use the vehicle for a specified period while the leasing company retains ownership. At the end, you typically return the vehicle, purchase it if a buyout option is available, or enter another agreement.
Leasing may appeal to drivers who prefer changing vehicles every few years, want a newer vehicle while it is relatively new, or place a high value on predictable vehicle ownership cycles. Buying may make more sense for drivers who keep vehicles for many years, drive significant mileage, or want to eventually eliminate the monthly payment. Neither approach is automatically cheaper for everyone; the right choice depends on the vehicle, lease terms, financing costs, mileage and how long you plan to keep the car.
Before signing a lease
Ask the dealer for the complete lease worksheet or contract figures. Review the selling price, residual value, money factor or APR, mileage allowance, amount due at signing, acquisition fee, taxes, disposition fee and purchase-option price. Make sure you understand what happens if you exceed the mileage allowance or return the vehicle with damage considered beyond normal wear. Also determine whether the advertised payment assumes a particular amount of money due at signing.
The calculator is designed to help you evaluate those numbers before making a commitment. It is an educational estimate, not a quote from a lender, manufacturer or dealership. Actual lease payments can differ because contracts may include additional fees, incentives, tax rules, credits, rebates, acquisition charges and other items that are not included here.