Auto Lease Calculator

Auto Price Monthly Pay  
Lease Termmonths
 
Down Payment 
Trade-in Value 
Sales Tax%
Residual Value: 
 

RelatedAuto Loan Calculator | Lease Calculator



The Auto Lease Calculator can help estimate monthly lease payments based on total auto price or vice versa.

Auto Leases

A car lease allows a person to drive a car for a fixed period of time as they make monthly payments until the lease ends. It helps to think of it as a long-term car rental.

Quick Tip: Try not to terminate leases before their terms end, as heavy penalties will soon follow.

Generally, upkeep of regular maintenance such as oil changes are covered under warranties. Expenses for replacing worn car parts such as brakes or tires may fall to the lessee. However, faults attributed to the lessee (such as collisions of their doing) will come out of their own pocket. Be sure to read the lease terms carefully as maintenance rules from lease to lease can differ greatly.

Most leases have mileage limits that penalize the lessee once the car is driven over the limit; they range anywhere from 5 to 20 cents per mile over.

Several things are required to calculate the monthly lease on any vehicle:

Explanation of How the Calculator Computes Monthly Leases

A car leasable for 3 years has an agreed upon value of $25,000 after negotiations on the auto price (capitalized cost). The lending financial institution for the lease has placed a residual value of $12,500 on the car after the 3 years and has given the borrowing lessee an APR of 6% after a down payment of $5,000. Assume that the down payment is solely to reduce the capitalized cost, not as payment for any upfront fees. For simplicity's sake, we will assume that all fees have already been rolled into the auto price. The lessee is also willing to trade in a used car with a value of $2,000, and the transaction occurs in a state with a 6% tax rate.

Quick Tip: As a general rule of thumb concerning leases, seek low selling prices, high residual values, and low money factors. The best combination of all of these will result in the most affordable car lease.

First, arrive at a true figure for the capitalized cost. In order to do this, subtract any trade-ins or down payments from the agreed upon value of the car. If there are no trade-ins or down payments made, simply use the original agreed upon value.

$25,000 - $5,000 - $2,000 = $18,000

Subtract the residual value as supplied by the financial institution,

$18,000 - $12,500 = $5,500

This is the amount that must be amortized over the life of the lease. Simply divide by the term, 36 months, to get the monthly depreciation:

$5,500/36 = $152.78

Next, convert APR into money factor. Remember to use 24 or 2400, depending on expression of rate as decimal or percent,

(6%)/24 = 0.0025

Sum the capitalized cost and residual value, then multiply by the money factor to get the monthly interest charge,

($18,000 + $12,500) × 0.0025 = $76.25

Sum the monthly depreciation and the monthly interest, then multiply this figure by the tax rate to get the monthly tax amount. If there is no sales tax, simply ignore this step.

($76.25 + $152.78) × 6% = $13.74

Finally, add all three charges together to arrive at the monthly lease payment amount:

$152.78 + $76.25 + $13.74 = $242.77

Lease vs. Buy

Included underneath the calculated lease information is data conveyed as if the car was purchased instead of leased. Right off the bat, it is easy to see that upfront payments and monthly payments are much higher for purchased cars.

A popular reason for leasing is when the leased car can be written off as a business expense. Because leases are defined by the IRS as an operating expense, they can be deducted from taxes. Some people can't bear to live without driving a new car every three years, and it certainly makes much more sense for them to lease rather than pay in full for each of them. Sometimes, people only need a car for short periods due to moves. Others may need to minimize monthly car payments for the next two to four years due to a tight budget. For these situations, leasing is better than buying. However, in general, there are very few instances where it makes more financial sense to lease than to buy. Just like with rent, when the lease ends, there is no equity built. Also, because there is never actual ownership of the car as it is still legal property of the lessor, the lessee may not do as they please to the car; there are certain restrictions in place regarding what modifications may be done.

More often than not, it will make much more sense to buy than to lease.