Car Lease Calculator

Car Lease Definition

Vehicle leasing is purchasing the use of a motor vehicle for fixed period of time, typically 2, 3 or 4 years. Leasing differs from a purchase largely in the sense that at the end of the lease term, the car must be returned to the leasing agent. There can be advantages to leasing including: (1) lower payments than a traditional loan for qualified buyers and (2)the ability to return the car and select a new model when the lease expires.

Calculator Description

This car lease calculator will provide the user with a monthly lease payment. The user must input the following information:

1. MSRP (Sticker Price)
2. Final Negotiated Price
3. Down Payment
4. Sales Tax (%)
5. Lease Length (months)
6. Interest Rate (%)
7. Car Value at End of Loan

Input Details

• MSPR (Manufacturer Suggested Retail Price) – This price is set by the manufacturer, should not change from one location to the next, and is meant to reflect the costs of making and selling a product. These prices are set so that each participant in the sale – the manufacturer, the wholesaler, and the retailer – can make a profit. US car dealerships must list this MSRP on each new car on the window sticker.

• Final Negotiated Price – Also known as ‘Cap Cost’ for a lease, this is the price that the car is actually leased for. The lower the price, the lower your monthly lease payment will be. The dealer is the only participant in the sale that negotiates this price with you.

• Down Payment – Sometimes called a ‘Cap Cost Reduction’ is essentially the money that you pay up front for the lease. The goal is to reduce the monthly payment. In contrast to the advice for a car purchase, some experts recommend keeping this amount as close to zero as you can for a lease.

• Sales Tax (%) – This amount is the tax on your monthly payment – and down payment if applicable – and is based on your state’s tax rate.

• Lease Length (months) – This is the term of the lease agreement. These are typically 24, 36, or 48 months.

• Interest Rate (%) – also called ‘money factor’ or ‘lease factor’. Even though you don’t have a traditional loan, you are still borrowing money indirectly. The finance company uses its money to buy the car from the dealer and then loans the car to you for the lease term. The interest you pay is for the use of the company’s money that gets tied up in the car while you drive it. The lower your lease rate, the lower your monthly payment will be. While the best rates are typically offered by finance companies associated with major car manufacturers, other factors such as a good credit score, a larger down payment, a pre-paid lease, and promotional lease deals can also lower your interest rate dramatically.

• Car Value at End of Loan – also called residual value. This is the estimated value of the vehicle at the end of the lease term and is determined by the lender. This value is important not only in determining your monthly payment, but also if you choose to purchase the vehicle at the end of the lease term. Many lenders begin with Automotive Lease Guide which tracks vehicle depreciation over time.

Be sure to check out some of the related financial calculators here!

How to Calculate Car Lease

Let's be honest - sometimes the best car lease calculator is the one that is easy to use and doesn't require us to even know what the car lease formula is in the first place! But if you want to know the exact formula for calculating car lease then please check out the "Formula" box above.

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