How to calculate the monthly payment for a car lease
A lease payment has three pieces: a depreciation fee, a finance fee called the rent charge, and tax. In the example above, the depreciation fee is $416.53, the rent charge is $153.49, and tax is $37.05. You're paying for the value the car loses while you drive it, plus a charge for the money tied up in it.
Monthly payment = (adjusted cap cost − residual) ÷ months + (adjusted cap cost + residual) × money factor + tax| Line | How it works | Amount |
|---|---|---|
| Gross capitalized cost | $37,500 price + $695 acquisition fee | $38,195 |
| Capitalized cost reduction | Cash, rebates, and trade-in equity | $0 |
| Adjusted capitalized cost | Gross cost minus reductions | $38,195 |
| Residual value | 58% of $40,000 MSRP | $23,200 |
| Depreciation fee | ($38,195 − $23,200) ÷ 36 | $416.53 |
| Rent charge | ($38,195 + $23,200) × 0.00250 | $153.49 |
| Tax | 6.5% of $570.02 | $37.05 |
| Monthly payment | The three pieces added | $607.07 |
These are the terms in the federal lease disclosure under Regulation M, so you can hold your contract up against this table. To build it in Excel, put this in a cell: =(cap-res)/months+(cap+res)*mf. That gives you the payment before tax.
The price is the number to push on. It can be negotiated, just as when you buy. Taking $1,000 off lowers this payment by $32.25 and saves $1,161 over the lease.
What is a money factor, and how do I turn it into an APR?
Multiply the money factor by 2,400 to get a rough APR. A money factor of 0.00250 is about 6%. The 2,400 comes from the formula itself: the rent charge works like a monthly rate on the average of the cap cost and the residual, so dividing by 2 and by 12 months and by 100 gives 2,400.
| Money factor | About APR | Monthly payment | Total rent charge |
|---|---|---|---|
| 0.00100 | 2.4% | $508.98 | $2,210 |
| 0.00150 | 3.6% | $541.68 | $3,315 |
| 0.00200 | 4.8% | $574.38 | $4,421 |
| 0.00250 | 6% | $607.07 | $5,526 |
| 0.00300 | 7.2% | $639.76 | $6,631 |
| 0.00350 | 8.4% | $672.45 | $7,736 |
| 0.00400 | 9.6% | $705.15 | $8,841 |
It's a shortcut, not an exact rate. Lease payments are due at the start of each month, so the rate this payment stream really implies is 6.03%, a little above the 6% the shortcut gives. The calculator's results note a bigger gap when there is one.
A lease quote may show a money factor and no APR, so ask for the money factor in writing. If a quote gives a "rate" of 6% or a factor of "2.5", check which one it means. The calculator takes either form of the rate.
How does residual value change a car lease payment?
A higher residual lowers the payment, because you pay for less of the car's lost value. On this lease, moving the residual from 50% to 66% of MSRP cuts the payment from $693.21 to $520.92 a month. The lessor sets this number, so enter the one on your quote. The percentages below are only examples.
| Residual | Value at lease end | Monthly payment | Total lease cost |
|---|---|---|---|
| 50% | $20,000 | $693.21 | $25,751 |
| 54% | $21,600 | $650.14 | $24,200 |
| 58% | $23,200 | $607.07 | $22,650 |
| 62% | $24,800 | $563.99 | $21,099 |
| 66% | $26,400 | $520.92 | $19,548 |
Notice the catch. The CFPB suggests questioning the residual estimate, since it drives both your payment and the price if you buy the car at lease end. A high residual makes a good payment but a pricey buyout. If the car ends up worth less than that, you'd just hand it back, and if it's worth more, buying it could make sense.
Car lease calculator with tax: why New York and New Jersey differ
The formula is the same in every state, but the tax isn't. In some places you pay tax on each payment, and in others the whole tax is due when the lease starts. At 6.5%, the example lease has $37.05 of tax a month, or $1,334 at signing if the tax falls on the total of the payments. The total is close to the same, but the cash at signing jumps from $1,007 to $2,304.
- New York. Publication 839 taxes the total of the payments plus any down payment and certain fees, due at the start of the lease. Its Example 6 is $450 a month for 36 months at 8%, which is $1,296 of tax. Choose "Upfront, on the total of the payments".
- New Jersey. Bulletin S&U-12 says that leases of more than six months are taxed upfront, on either the original purchase price or the total lease payments. The lessor and lessee may negotiate which one. Choose the matching upfront option.
- California. The state's guide for lessors says a lessor can generally choose between tax on its purchase price and tax on rental receipts, with some exceptions. Ask your dealer which applies to your lease.
- Texas, Ohio, Florida, and others. This site hasn't built in state rules, so don't assume yours. Enter your combined rate and check the method with your state's revenue agency or your dealer.
Some states, such as New York, also tax your cash down. The advanced options have a switch for that, and it covers rebates too if your state taxes them. If a dealer rolls an upfront tax into the lease, you'll pay the rent charge on it, so ask to see it as its own line.
Does a trade-in, negative equity, or money down help on a lease?
Money down lowers the payment but saves far less than it looks. Putting $3,000 down on this lease cuts the payment by $96.74, but the total cost falls only $483, the rent charge and tax you avoid. The rest of your $3,000 just pays the same depreciation sooner. Check your contract for what happens to that money if the car is stolen or totaled early.
A trade-in works the same way. A $12,000 car with $8,000 owed gives you $4,000 of equity, which brings the payment to $478.08. If you owe $15,000 on it instead, the $3,000 of negative equity gets added to the lease. The payment rises to $703.81, and you pay the rent charge on your old debt with no car to keep at the end. The CFPB gives a similar warning about rolling a balance into a new car loan: it raises your total cost.
What costs money on a lease that the payment doesn't show
The quoted payment leaves out cash at signing and charges at the end. This lease's $607.07 payment really averages $629.15 a month once you count $400 of signing fees and a $395 disposition fee.
- Miles. The CFPB says most leases limit you to 10,000 to 15,000 miles a year. Driving 3,000 miles a year over at an example 25 cents a mile costs $2,250 at lease end.
- Wear. You can be charged for excess wear, and the lessor's standards decide what counts. Read them before you sign, and take photos when you return the car.
- Leaving early. Regulation M's disclosure warns the charge may be up to several thousand dollars, and the earlier you end the lease, the greater it's likely to be. A lease is a poor fit if your plans might change.
- No car at the end. After paying $22,650, you own nothing unless you buy it. See how that compares in the lease vs. buy calculator.
This calculator covers a closed-end lease and uses the standard formula, so your lessor's rounding or fees may differ by a little. Your signed disclosure is what counts. If a dealer won't give you each line, or the numbers don't match, a consumer protection office in your state can tell you what to do next. For the whole monthly picture, try the budget calculator.
Common questions
What are car lease rates in 2026?
This site doesn't publish lease rates, because the money factor depends on the car, the lessor, and your credit. Get a written quote, then enter its money factor here. The table above shows what each step in the factor costs.
Can I use this calculator with my credit score?
Not directly. Credit affects the money factor you're offered, and this tool can't predict that. Enter the factor from your quote, then use the "Money factor 0.0005 lower" what-if to see what a better offer would be worth.
Does a lease have a balloon payment?
Not in the usual sense. In a closed-end US lease, you can hand the car back at the end. If your lease has a purchase option, buying the car at that point is the large final payment, and it's based on the residual value.
Should I add the acquisition fee to the lease or pay it upfront?
Adding it means you pay the rent charge on it. On this lease, a $695 fee costs $1.74 a month in rent charge when it's added, or $63 over 36 months. Paying upfront avoids that, but it uses your cash sooner.
Is a security deposit part of the cost?
It's part of what you pay at signing, but not the total cost here, because you can get it back if the lease ends without charges owed. Check your contract for the conditions.
Why is the MSRP separate from the price?
The residual is figured here as a percentage of MSRP, while your payment starts from the price you negotiate. That's why a discount lowers the payment without lowering the residual. Check your quote to confirm how your lessor sets it.
Sources
- What should I know about leasing versus buying a car? · Consumer Financial Protection Bureau
- Regulation M, 12 CFR 1013.4: Content of disclosures · Consumer Financial Protection Bureau
- Financing or leasing a car · Federal Trade Commission
- Publication 839: A dealer's guide to sales and use taxes on long-term motor vehicle leases · New York State Department of Taxation and Finance
- Bulletin S&U-12: Leases and rentals · New Jersey Division of Taxation
- Publication 46: Leasing tangible personal property · California Department of Tax and Fee Administration