Why is the monthly payment so much less than financing the same car?

Because you're only paying for the depreciation — the difference between cap cost and residual — over the lease term. Financing the same car means paying for the FULL value over the loan term. Trade-off: at lease end you have nothing (a financed car is yours).

Should I put money down on a lease?

Generally no. A cap cost reduction lowers the monthly payment but is at risk if the car is totaled in months 1-12 — gap insurance covers the lease balance but NOT your down payment. Higher monthly payment with $0 down is usually the smarter financial structure.

What is the residual value?

The dealer's prediction of what the car will be worth at lease end. Set by the captive lender (Toyota Financial sets Toyota residuals, etc.) based on historical depreciation, mileage allowance, and brand strength. Hondas, Toyotas, and Subarus typically have the highest residuals (slow depreciation = lower lease payments).

What's NOT in this calculator?

Acquisition fee (~$700, often rolled into cap cost or paid upfront), disposition fee at lease end (~$400 unless you lease again from the same brand), excess-mileage charge ($0.15-$0.30/mile over your allowance), and excess wear-and-tear at turn-in. Budget an extra ~$1,500 lifetime for these.

Why is the monthly payment so much less than financing the same car?

Because you're only paying for the depreciation — the difference between cap cost and residual — over the lease term. Financing the same car means paying for the FULL value over the loan term. Trade-off: at lease end you have nothing (a financed car is yours).

Should I put money down on a lease?

Generally no. A cap cost reduction lowers the monthly payment but is at risk if the car is totaled in months 1-12 — gap insurance covers the lease balance but NOT your down payment. Higher monthly payment with $0 down is usually the smarter financial structure.

What is the residual value?

The dealer's prediction of what the car will be worth at lease end. Set by the captive lender (Toyota Financial sets Toyota residuals, etc.) based on historical depreciation, mileage allowance, and brand strength. Hondas, Toyotas, and Subarus typically have the highest residuals (slow depreciation = lower lease payments).

What's NOT in this calculator?

Acquisition fee (~$700, often rolled into cap cost or paid upfront), disposition fee at lease end (~$400 unless you lease again from the same brand), excess-mileage charge ($0.15-$0.30/mile over your allowance), and excess wear-and-tear at turn-in. Budget an extra ~$1,500 lifetime for these.

Auto Lease Calculator

Monthly lease payment from MSRP, capitalized cost, residual value, money factor, term, sales tax, and down payment — using the standard lease-payment formula (depreciation + finance + tax).

Result

Monthly lease payment

$477.00

$368.00 depreciation + $78.00 finance + $31.00 tax

Adjusted cap cost (after down)$32,500.00
Residual value at lease end55% of $35,000.00 MSRP$19,250.00
Monthly depreciation($32,500.00 − $19,250.00) ÷ 36$368.00
Monthly finance (rent) charge($32,500.00 + $19,250.00) × 0.00150$78.00
Equivalent APRMoney factor × 24003.60%
Total paid over lease term36 payments + $0.00 down$17,168.00
Total finance charge paidLease-equivalent of total interest — money paid that does NOT build equity.$2,795.00Note

Mid-market lease

Source: Standard US auto-lease formula (depreciation + finance + tax). Money factor → APR conversion via factor × 2400. Verified against major captive lender disclosures (Toyota Financial, Honda Finance, BMW Financial).

Not financial advice — Acquisition fee ($595-$995 typical), disposition fee ($395 typical at lease end), excess-mileage charges ($0.15-$0.30 per mile over allowance), and excess wear-and-tear NOT included — these are real costs you'll pay. Mileage allowances (10K/12K/15K per year) affect the residual; lower allowance = higher residual = lower payment but penalty if you exceed.

How to use this calculator

Enter MSRP and the negotiated cap cost (the actual price you agreed to).
Enter the residual value as a percentage of MSRP — the dealer should disclose this; typical 36-mo leases are 50-60%.
Enter the money factor (NOT the APR — multiply MF by 2400 to compare APRs).
Pick lease term (typically 24, 36, or 48 months) and your state sales tax rate.
Down payment / cap cost reduction lowers monthly payment proportionally, but most experts recommend $0 down on leases (you lose it if the car is totaled early — gap insurance covers loan/lease balance, not your cash down).

About this tool

A car lease is fundamentally renting the depreciation. You pay for the value the car loses while you have it (the depreciation chunk), plus a finance charge on the lender's investment (the money-factor chunk), plus tax. This calculator walks the standard US lease-payment formula bracket by bracket so you can sanity-check a dealer quote. Money factor is the lease equivalent of interest rate — multiply by 2400 for the APR. A "good" money factor in 2026 is 0.00100-0.00200 (2.4-4.8% APR) for prime credit on a mainstream brand.

Frequently asked

For prime credit (FICO 720+) on a mainstream brand, expect 0.00100-0.00200 (equivalent to 2.4-4.8% APR). Manufacturer subvented rates (special factory promotions) can go as low as 0.00050 (1.2% APR). Above 0.00250 (6% APR) is typically subprime or non-promotion stock.

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