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A lease payment has two parts: monthly depreciation, which is the value the car is expected to lose during your lease term ((capitalized cost minus residual value) divided by months), and the monthly rent charge, which is the finance charge ((capitalized cost plus residual value) times money factor). Sales tax is added on top in most states.

The money factor is how lease finance charges are expressed. Multiply it by 2400 to get the equivalent APR (for example, a money factor of 0.00208 equals about 4.99% APR). Conversely, divide any APR by 2400 to get the money factor. Dealers sometimes quote only the money factor, so converting it lets you compare lease offers against loan rates honestly.

Residual value is the leasing company's prediction of what the car will be worth when your lease ends, usually quoted as a percentage of the MSRP (for example, 60% of a $35,000 MSRP is $21,000). A higher residual means less depreciation for you to pay, which lowers your monthly payment.

Capitalized cost is the price the lease is based on: the negotiated selling price plus any fees rolled into the lease, minus your down payment, trade-in value, and rebates. Lowering the cap cost by negotiating the selling price directly lowers both the depreciation and the rent charge.

Often yes. A down payment (capitalized cost reduction) on a lease only prepays depreciation; if the car is totaled or stolen early, GAP coverage pays the leasing company and you generally do not recover that down payment. Many lease experts recommend keeping drive-off costs minimal and accepting a slightly higher monthly payment instead.

Usually not. Unlike a purchase where a down payment builds equity, a lease down payment simply prepays part of the depreciation with no refund if the car is lost. A large down payment also masks the true monthly cost of the lease. Compare offers using the effective monthly cost (total lease cost divided by term) instead.

You pay an excess mileage charge at lease end, typically $0.15 to $0.30 per mile over the allowance. Driving 3,000 extra miles at $0.25 per mile costs $750. If you know you drive more than the standard 10,000 to 12,000 miles per year, buy extra miles upfront (usually cheaper) or choose a higher-mileage lease from the start.

Yes, but it is expensive. Options include an early buyout (paying the remaining payments plus the residual), a lease transfer to another person (if the leasing company allows it), or trading the car in if its market value exceeds the buyout. This calculator does not estimate early-termination fees; check your lease contract.

In most states you pay sales tax only on the monthly payment (depreciation plus rent charge), not the full car price. A few states (such as Texas, Illinois, and Virginia) tax the full selling price or total lease payments upfront. Use the tax timing option in the calculator to match your state's rule.

The disposition fee (usually $300 to $500) is charged at lease end to cover the leasing company's cost of preparing the returned car for resale. It is waived if you buy the car or lease another vehicle from the same brand. It is not part of the monthly payment calculation above.

Yes. Your contract lists a buyout price (usually the residual value plus a purchase-option fee). Buying makes sense when the car's market value is higher than the buyout price. You can finance the buyout with a regular auto loan.

Some leasing companies let you pay multiple refundable security deposits upfront in exchange for a lower money factor (typically 0.00007 off per deposit, up to 7 to 10 deposits). Unlike a down payment, MSDs are refunded at lease end. Availability varies by brand; ask the finance manager.

A loan finances the car's full price and you own the car once it is paid off; a lease finances only the depreciation during the term plus a rent charge, and you return the car at the end. Lease payments are usually lower than loan payments for the same car, but a loan builds equity while a lease does not.

The best lease terms (lowest money factors) generally require good to excellent credit, often cited as 700 and above. Lower scores may still qualify but with a higher money factor, which raises the rent charge. Your actual eligibility and rate are set by the leasing company, not by this calculator.

The 1% rule is a rough rule of thumb that a good lease deal has a monthly payment (with $0 down) of about 1% of the car's MSRP, for example $350 per month on a $35,000 car. It is only a screening shortcut, not a guarantee; always run the actual numbers with this calculator.

No. Most leases include GAP coverage in the contract (confirm with the dealer), but maintenance plans, wear-and-tear protection, and excess mileage charges are not part of the monthly payment formula and are excluded here. Treat the result as a payment estimate for comparison shopping.