Last updated: March 2026
Auto Leasing: What You Need to Know
Auto leasing has grown significantly in popularity, with about 32% of new vehicles in the US acquired through leases. The appeal is straightforward: lower monthly payments, always driving a new car, and avoiding the hassle of selling a used vehicle.
But leasing is not simply cheaper. You are paying for the most expensive years of a car's life — the period when depreciation is steepest. A new car loses roughly 20% of its value in year one and 10-15% per year after that. When you lease, 100% of your payment covers this depreciation plus interest. When you buy, the same depreciation occurs, but you retain the remaining value as equity.
The key to getting a good lease deal is understanding the three cost components: depreciation (negotiate the cap cost down and choose cars with high residual values), financing (negotiate the money factor — multiply by 2,400 to see the equivalent APR), and fees (acquisition, disposition, excess mileage, and wear charges).
Use this calculator to run your specific numbers and see exactly how leasing compares to financing. The true cost analysis accounts for equity, fees, and depreciation to give you a complete financial picture. Try adjusting the duration and mileage to see how different scenarios change the outcome.
This calculator provides estimates for educational purposes only. Actual lease terms depend on your credit, the manufacturer, and dealer negotiations. Consult a financial professional for personalized advice.
Frequently Asked Questions
How do I calculate my auto lease payment?
Your lease payment equals the depreciation charge plus the finance charge. The depreciation charge is (negotiated price minus residual value) divided by the number of months. The finance charge is (negotiated price plus residual value) times the money factor. Add sales tax on top for your total monthly payment.
What is a good money factor for an auto lease?
A good money factor is typically 0.001 to 0.002 (equivalent to 2.4% to 4.8% APR). Excellent credit (750+) can qualify for money factors below 0.001, and some manufacturers offer promotional money factors as low as 0.00001 (essentially 0% APR). Anything above 0.003 (7.2% APR) is considered high.
How does residual value affect my lease?
Residual value is the predicted worth of the car at lease end. A higher residual means you pay less depreciation, resulting in a lower monthly payment. For example, a $40,000 car with 60% residual costs $16,000 in depreciation over the lease, while 50% residual costs $20,000 — a difference of about $111/month on a 36-month lease.
Should I lease or finance my next car?
Lease if: you want a new car every 2-3 years, drive under 15,000 miles/year, want lower monthly payments, and don't mind always having a car payment. Finance if: you plan to keep the car 5+ years, drive high miles, want to build equity, or want eventual payment-free ownership. Run both scenarios through this calculator to see the actual numbers for your situation.
What is the lease disposition fee?
The disposition fee ($300-$500) is charged when you return a leased vehicle at the end of the term. It covers the dealer's cost of inspecting, reconditioning, and reselling the car. This fee is typically waived if you lease another vehicle from the same manufacturer. It's set in your contract and is usually non-negotiable, though some dealers may waive it to earn your business.
Can I end my auto lease early?
Yes, but it's expensive. Early termination typically requires paying all remaining lease payments plus an early termination fee, minus the vehicle's current value. Alternatives include: transferring the lease to another person (if the leasing company allows it), trading in the lease at a dealer (they may absorb early termination costs in a new deal), or buying out the lease early at the residual value.