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Lease Payment Calculator
Calculate monthly lease payments for cars or equipment
Lease Payment Calculator
Calculate monthly lease payments for cars or equipment
Negotiate this! Can save $2,000-4,000
Percentage of MSRP at lease end (typically 50-70%)
Equivalent interest rate: 3.00% (money factor × 2400)
Optional: Reduces monthly payment
Acquisition fee ($500-1,200), doc fees, etc.
Understanding Car Leasing
Leasing is essentially renting a car for a fixed period (typically 2-4 years) while paying for the depreciation plus interest. You never own the vehicle, but you get lower monthly payments than buying. At lease end, you return the car (or buy it for the residual value) and can lease a new one. It's popular for people who want a new car every few years, drive under 12,000-15,000 miles annually, and prefer predictable costs with warranty coverage.
However, leasing means continuous car payments with no equity buildup. You're paying for the steepest part of depreciation (first 2-4 years) and must return the car in good condition or face wear-and-tear charges. Exceeding mileage limits costs $0.15-$0.30 per mile. Leasing works best for business use (tax deductible), people who always want the latest tech, or those who can't afford to buy but need a reliable car.
Lease vs Buy: Making the Right Choice
🚗 When Leasing Makes Sense
Leasing is optimal in these situations:
- • You drive less than 12,000-15,000 miles per year
- • You want a new car every 2-4 years with latest tech and safety features
- • You prefer predictable costs with full warranty coverage
- • Business use where lease payments are tax deductible
- • You can't afford the down payment or monthly payments to buy
- • You take excellent care of vehicles (no kids, pets, or rough use)
- • You value driving a nicer car than you could afford to buy
💰 When Buying Makes Sense
Purchasing beats leasing in these scenarios:
- • You drive more than 15,000 miles annually (avoid overage fees)
- • You keep cars for 6+ years to maximize value
- • You want to build equity and eventually own the car payment-free
- • You customize or modify your vehicles
- • You have kids, pets, or a lifestyle that's hard on cars
- • You value long-term financial efficiency over short-term payment savings
- • You can afford a 3-5 year loan and plan to drive payment-free afterward
📊 True Cost Comparison
Over 10 years, here's the typical cost difference:
- • Leasing 3 consecutive 3-year leases: $40,000-60,000 paid, $0 equity
- • Buying with 5-year loan, keeping 5 more years: $35,000-45,000 paid, own $8,000-15,000 asset
- • Buying outright and keeping 10 years: $30,000-40,000 paid, own $5,000-10,000 asset
- • The monthly payment is lower on a lease, but the total cost is always higher
- • Buying breaks even around year 3-4, then becomes increasingly cheaper
Smart Lease Negotiation Tips
Negotiate the Selling Price, Not Payment
Dealers focus on monthly payment to distract from the actual price. Instead, negotiate the capitalized cost (selling price) just like buying. Get $2,000-4,000 off MSRP before discussing lease terms. A lower selling price directly reduces your monthly payment more than any other factor. Never say "I want to lease" until after negotiating the best price.
Understand and Challenge the Money Factor
Money factor is the lease interest rate in disguise. Multiply by 2,400 to get APR (0.00125 = 3% APR). Dealers often markup the money factor by 0.0001-0.0005, costing you $5-25/month. Ask for the "buy rate" (manufacturer's base rate) and refuse markups. With good credit (720+), demand the lowest available rate. This single negotiation can save $500-1,500 over the lease.
Question Every Fee
Acquisition fee ($500-1,200) is often negotiable or can be waived. Disposition fee ($300-500) charged at lease end can sometimes be waived if you lease another car. Doc fees ($100-800) are pure profit - negotiate down or walk away. "Dealer add-ons" (VIN etching, paint protection, fabric coating) are overpriced; decline everything. Only pay for state-mandated fees and legitimate registration costs.
Verify the Residual Value
Residual value (what the car will be worth at lease end) is set by the manufacturer and non-negotiable, but verify it's correct. Higher residual = lower monthly payment. Luxury brands often have higher residuals (60-70%) than economy cars (50-60%). Check if the dealer is using the right trim level and options. A 1% residual error costs $10-15/month on a $30,000 car.
Lease Traps to Avoid
Large Down Payments
If the car is totaled, insurance pays the leasing company, not you. Your down payment is gone. Keep down payments under $2,000 or zero if possible.
Mileage Underestimation
12,000 miles/year standard, but penalties are $0.15-$0.30/mile. Driving 15,000/year = 9,000 miles over 3 years = $1,350-$2,700 penalty. Buy extra miles upfront (cheaper).
Early Termination
Breaking a lease early costs thousands in penalties - all remaining depreciation plus fees. Life changes happen; buying provides flexibility to sell anytime.
Wear-and-Tear Charges
Normal wear is allowed, but dents, scratches, stains, or tire tread below 4/32" trigger $500-2,000 in charges at return. Get pre-inspection 3 months before lease end.
Frequently Asked Questions
What is money factor and how does it work?
Money factor is the lease equivalent of an interest rate, expressed as a decimal (e.g., 0.00125). To convert to APR, multiply by 2,400 (0.00125 × 2,400 = 3% APR). The money factor determines the finance charge portion of your monthly payment. It's calculated on the sum of the net capitalized cost plus residual value. Dealers often mark up the money factor above the manufacturer's "buy rate" as profit. With excellent credit (740+), you should get rates around 0.0010-0.0020 (2.4-4.8% APR). Always ask for the buy rate and negotiate any markup down or eliminated.
How is monthly lease payment calculated?
Lease payment has two components: depreciation and finance charge. Depreciation = (Net Capitalized Cost - Residual Value) ÷ Lease Term. Finance Charge = (Net Capitalized Cost + Residual Value) × Money Factor. Add these together, then add sales tax on the total. For example, on a $35,000 car (after negotiation) with $21,000 residual (60%), over 36 months at 0.00125 money factor: Depreciation = ($35,000 - $21,000) ÷ 36 = $389. Finance = ($35,000 + $21,000) × 0.00125 = $70. Base payment = $459. With 7% tax = $491/month. Understanding this math helps you negotiate each component separately.
What happens when my lease ends?
You have three options at lease end: (1) Return the car and walk away - schedule pre-inspection 90 days early to fix any damage or excess wear before official inspection. You'll owe $300-500 disposition fee plus any mileage overages or damage charges. (2) Buy the car for the predetermined residual value plus purchase fees - good if market value exceeds residual or you've fallen in love with the car. (3) Lease or buy a new car - dealers often waive disposition fees if you stay with their brand. Get your car independently appraised before turning in to know if buying makes financial sense.
Can I negotiate a lease buyout at the end?
The residual value (buyout price) is set in your lease contract and generally non-negotiable. It's determined by the manufacturer's prediction of the car's value at lease end. However, you can negotiate away some fees (purchase fee, doc fee) if buying out your lease. Also, compare your residual to the car's actual market value using KBB or Edmunds. If market value is significantly higher than your residual (due to shortage or high demand), buying it out is a great deal - you can even buy it and immediately sell for profit. If residual is higher than market value, return the car instead of buying.
Should I put money down on a lease?
Generally no, or keep it minimal (under $2,000). Here's why: if your leased car is totaled or stolen, insurance pays the leasing company the car's value, and your down payment is gone forever. Unlike buying, where down payment builds equity, lease down payment just prepays depreciation. Instead, keep the down payment money and invest it or keep it as emergency fund. If you want lower payments, negotiate a better selling price, get a better money factor, or choose a car with higher residual value. The only exception is if a manufacturer promotional lease requires a specific down payment for the advertised rate.
What is a lease buyout and how does it work?
A lease buyout is purchasing your leased vehicle before or at lease end. Your contract specifies the residual value (buyout price). You can buy it anytime during the lease, though some manufacturers only allow buyouts in the final 6 months. You'll pay the residual plus a purchase fee ($300-500) and sales tax. You can pay cash or finance it with an auto loan. Buyouts make sense when: (1) the car's market value exceeds the residual, (2) you've exceeded mileage and buying is cheaper than overage fees, (3) you love the car and want to keep it, or (4) you've modified it or have excessive wear. Get the car appraised first to ensure the buyout price is fair compared to market rates.
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