Lease Calculator
The monthly payment on a lease, from the price, residual value and money factor — and the interest rate that money factor really is.
A lease payment has two parts.
How the lease calculator works
A lease payment has two parts. Depreciation covers the value the asset loses while you have it: the capitalized cost minus what it is worth at the end, spread over the term. Finance covers the interest on the money tied up, charged on the sum of the start and end values rather than a declining balance.
The money factor is where leases become opaque. It is the interest rate divided by 2,400 — a money factor of 0.00250 is 6% a year. Quoting it that way makes the rate hard to compare, which is not an accident, and this page converts it back.
A higher residual lowers the payment because you are financing less depreciation. That is why leases look cheap on cars that hold their value.
Formula: payment = (cap cost − residual)/term + (cap cost + residual) × money factor
Worked examples
| Inputs | Monthly payment | Note |
|---|---|---|
| A 45,000 car, 27,000 residual, 36 months | $589.17 | about 590 a month |
| A higher residual | $462.78 | cheaper — less depreciation to finance |
| No money factor | $416.67 | depreciation only |
FAQFrequently asked questions
How is a lease payment calculated?
Depreciation — the capitalized cost minus the residual, divided by the term — plus a finance charge on the sum of the two values.
What is a money factor?
The interest rate in disguize. Multiply it by 2,400 to get the annual percentage rate: 0.00250 is 6%.
Why does a higher residual make the lease cheaper?
Because you only pay for the value the asset loses. A car that holds its value costs less to lease.
Is a lease cheaper than buying?
The monthly payment is lower, but you own nothing at the end. Over a long horizon, buying and keeping is almost always cheaper.
Why is the finance charge on the sum of both values?
It is a convention that approximates interest on the average balance over the term — the average of the start and end values, times twice the rate, gives the same result.
Where these figures come from
- CFA Institute — Quantitative Methods: The Time Value of Money — the discounting, annuity and IRR conventions used here
- US Federal Reserve — Regulation Z (Truth in Lending), APR calculation — why APR includes fees where a nominal rate does not
- Consumer Financial Protection Bureau — the US consumer finance regulator
Last checked: September 2026. These are the standard textbook formulas; the conventions named are those of the CFA Institute curriculum and ISO 80000 usage.