See what an equipment lease really costs each month.
Enter the asset value, its residual at lease end, and a rate, and watch the whole picture: the depreciation you are paying for, the finance charge on top, the end-of-lease buyout, and the total cost over the full term.
The lease
Money factor works out to 0.00250 (rate divided by 2,400).
Your lease at a glance
Where the payment goes, and what it adds up to
Your monthly payment, split
Total cost over the term
Key numbers
How the payment moves
Your monthly payment at a range of interest rates, holding everything else fixed. Your current rate is highlighted.
How leasing works
How Lease Payments Work
A lease payment has two components: depreciation and finance charge. The depreciation portion covers the vehicle's loss in value during the lease (purchase price minus residual value, divided by lease term). The finance charge is calculated using the money factor applied to the sum of purchase price and residual value.
Understanding Money Factor
The money factor is the lease equivalent of an interest rate. To convert an APR to a money factor, divide by 2,400. For example, a 6% APR equals a money factor of 0.0025. To convert back, multiply the money factor by 2,400. Lower money factors mean lower finance charges. Negotiate this number just as you would an interest rate.
Residual Value Explained
Residual value is the predicted worth of the vehicle at the end of the lease. It is set by the leasing company and is not negotiable. Higher residual values result in lower monthly payments because you are paying for less depreciation. Vehicles that hold their value well (Honda, Toyota, Lexus) tend to have higher residuals and lower lease payments.
Leasing vs Buying
Leasing offers lower monthly payments, the ability to drive a new vehicle every few years, and no trade-in hassle. Buying costs more monthly but builds equity, has no mileage restrictions, and is cheaper long-term if you keep the vehicle. Leasing is best if you prefer new vehicles and drive fewer than 12,000-15,000 miles per year.
Common questions
What is a good money factor?
A good money factor depends on your credit score and current market rates. As a rule of thumb, multiply the money factor by 2,400 to get the equivalent APR. A money factor of 0.001 (2.4% APR) is excellent, 0.002 (4.8% APR) is good, and anything above 0.003 (7.2% APR) is high.
Can I negotiate the purchase price on a lease?
Yes, the capitalized cost (purchase price in a lease) is negotiable just like a car purchase. A lower cap cost directly reduces your monthly payment. Research invoice prices and negotiate before discussing lease terms. Every dollar off the cap cost reduces your total lease cost.
What happens at the end of a lease?
At lease end, you typically have three options: return the vehicle and walk away, buy the vehicle at the pre-set residual value, or trade it in on a new lease. If the vehicle is worth more than the residual, buying it can be a good deal. If worth less, returning it is usually best.
What fees are included in a lease payment?
This calculator shows the base depreciation and finance charges. Additional costs may include acquisition fees ($500-$1,000), disposition fees ($300-$500 at lease end), sales tax on payments, excess mileage charges ($0.15-$0.30/mile), and wear-and-tear charges.
Estimates for planning only. Real lease quotes may add acquisition, documentation and disposition fees, security deposits, and taxes that vary by state and by the type of asset. Confirm the final numbers with your lessor before you sign.