Car Lease Calculator

Residual value affects the lease payment in two opposing ways: a higher residual shrinks the depreciation portion (since you're financing less of the vehicle's value loss), but slightly raises the finance-charge portion (since finance charge is based on net capitalized cost PLUS residual value). In this calculator's formula, the depreciation effect is substantially larger, so the net result of a higher residual value is a lower monthly payment -- consistent with why vehicles known for strong resale value often lease more cheaply.

A money factor is a small decimal (typically 0.0001 to 0.005) rather than a percentage, and it's applied to the SUM of net capitalized cost and residual value rather than to a declining loan balance the way conventional loan interest works. Multiplying the money factor by 2,400 converts it to a roughly equivalent APR for comparison -- so a money factor of 0.0025 corresponds to about 6% APR.

As long as there's a depreciation portion to spread, yes -- a longer lease term divides the same depreciation amount over more months, lowering that part of the monthly payment, while the finance-charge portion stays the same regardless of term length. If a large enough down payment already covers the vehicle's full depreciation over the lease (net capitalized cost at or below the residual value), the depreciation portion is already zero and floored there, so lease term stops changing the monthly payment at all -- it's driven entirely by the finance charge in that case. The tradeoff when depreciation is still positive is that total finance charges paid over the full lease rise with a longer term, since you're paying that per-month charge for more months.

This calculator applies sales tax to the pre-tax monthly payment (depreciation plus finance charge), reflecting how many states tax lease payments as they're made rather than taxing the vehicle's full purchase price up front -- a common structure for lease taxation, though exact rules vary by state, so always confirm your local lease tax treatment.