Lease Payment Calculator

About Lease Payment Calculator

Calculate monthly lease payments. This calculator provides instant results with step-by-step explanations to help you understand the calculation process.

Formula

How to use this calculator

1. Enter the capitalized cost, which is the price being financed in the lease.
2. Enter the residual value, which is the estimated value at the end of the lease.
3. Enter the lease term in months and the money factor, if your lease uses one.
4. Click calculate to see the estimated monthly payment, usually before taxes and fees.

The formula explained

The basic lease payment formula finds the monthly charge by adding the depreciation charge and the finance charge. In common form, it uses the adjusted cost, the residual value, the lease term, and the money factor to estimate what you pay each month.

• C = capitalized cost, the amount being financed in the lease
• R = residual value, the estimated value of the asset at the end of the lease
• n = lease term in months
• m = money factor, the lease interest rate expressed as a decimal factor
• P = monthly lease payment

Step by step method

1. Find the depreciation portion by subtracting the residual value from the capitalized cost, then divide by the lease term: \(\frac{C-R}{n}\).
2. Find the finance portion by adding the capitalized cost and residual value, then multiply by the money factor: \((C+R)m\).
3. Add the two parts together to get the monthly payment: \(P=\frac{C-R}{n}+(C+R)m\).

Worked example

Problem. A car has a capitalized cost of \(\$28{,}000\), a residual value of \(\$16{,}000\), a lease term of \(36\) months, and a money factor of \(0.0020\). Estimate the monthly lease payment.

1. Depreciation charge: \(\frac{28{,}000-16{,}000}{36}=\frac{12{,}000}{36}=333.33\).
2. Finance charge: \((28{,}000+16{,}000)\times 0.0020=44{,}000\times 0.0020=88.00\).
3. Monthly payment: \(333.33+88.00=421.33\).

Tips and common mistakes

• Make sure the residual value and capitalized cost are in the same units, usually dollars, before calculating.
• The result is often the pre-tax payment, so sales tax and fees may increase the final amount.

Frequently asked questions