Last updated: March 2026
Understanding Car Lease Payments
A car lease payment is fundamentally different from a loan payment. With a loan, you are paying off the full vehicle price plus interest. With a lease, you are only paying for the depreciation that occurs during your lease term, plus a financing charge.
The key variables that determine your lease payment are: the capitalized cost (negotiated vehicle price minus your down payment), the residual value (what the car will be worth at lease end), the money factor (equivalent to an interest rate), and the lease term (typically 24-39 months).
This is why vehicles with high residual values lease so well. If a $40,000 car has a 60% residual after 36 months, you are paying for $16,000 in depreciation. If another $40,000 car has only a 45% residual, you are paying for $22,000 — a $6,000 difference that adds roughly $167/month to your payment.
The money factor is the lease world's version of an interest rate. Multiply it by 2,400 to get the equivalent APR. A money factor of 0.00125 equals 3.0% APR. Like loan rates, better credit scores earn lower money factors. Always negotiate the money factor — dealers frequently mark it up above the manufacturer's base rate.
Use this calculator to compare your lease payment against buying the same vehicle. The side-by-side comparison reveals the true cost of each option, including equity you build when buying versus the convenience premium you pay when leasing.
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 is a car lease payment calculated?
A lease payment has two parts: the depreciation charge and the finance charge. The depreciation charge equals (capitalized cost minus residual value) divided by the lease term in months. The finance charge equals (capitalized cost plus residual value) multiplied by the money factor. Add these together for your monthly payment before tax.
What is a good residual value for a lease?
A residual value of 55-65% after 36 months is considered excellent. This means the car retains most of its value, so you pay less in depreciation. Brands like Toyota, Honda, Lexus, and Porsche typically have the highest residual values. Luxury European brands and American trucks often have lower residuals, resulting in higher lease payments.
Should I put money down on a lease?
Financial experts generally advise against large down payments on leases. If the car is totaled or stolen early in the lease, you lose your down payment — gap insurance covers the lease balance, not your cash down. A small down payment or just the first month's payment and fees at signing is typically the safest approach.
What fees are included in a car lease?
Common lease fees include: acquisition fee ($595-$1,095), disposition fee ($300-$500), registration and title fees, documentation fee ($100-$500), and security deposit (sometimes waivable). You may also face early termination fees if you end the lease early, and excess wear-and-tear charges at turn-in.
Can I negotiate the money factor?
Yes. Dealers often mark up the money factor above what the manufacturer's finance company charges. Ask for the 'base money factor' or 'buy rate' — this is the lowest rate available. Good credit (700+) qualifies for the best money factors. The markup is pure dealer profit and is always negotiable.
What happens if I go over my mileage limit?
You pay an excess mileage fee for every mile over the limit at lease return. This fee is typically $0.15-$0.30 per mile, set in your lease contract. On a 3-year lease with 12,000 miles/year, driving 15,000 miles/year would cost $1,350-$2,700 in overage fees. If you know you'll exceed the limit, negotiate a higher mileage allowance upfront — it's cheaper than paying per-mile at the end.