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 — embedded

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.

What this calculator does

Converts between annual salary and hourly wage using standard US assumptions (40 hours/week × 52 weeks = 2,080 hours/year). Also handles the reverse — annualising an hourly rate to yearly income at various hours-per-week assumptions.

How it works — the formula

Hourly = annual salary ÷ 2,080 (standard full-time)
Annual = hourly × 2,080 (full-time equivalent)
Biweekly = annual ÷ 26; monthly = annual ÷ 12

The 2,080-hour figure is US Department of Labor standard for full-time work (40 hrs/wk × 52 wks/yr). Real work-year hours differ: US workers actually average about 1,780 hours after PTO and holidays. Some industries use different conventions (education uses 9-10 month calendars; healthcare uses 2,088 or 2,096 with rounding).

Source: DOL — Wages Under the Fair Labor Standards Act (Publication 1281)

Worked examples

Example 1

Full-time employee, standard 40hr week

Inputs:: annual salary = $75,000
Output:: Hourly = $36.06; biweekly = $2,885; monthly = $6,250

These are gross figures. Take-home is roughly 70-80%% of gross depending on state, filing status, and pre-tax deductions.

Example 2

Consultant reverse-calc, target income

Inputs:: target hourly = $85, hours per week = 30
Output:: Annual = $132,600 (at 52 weeks) or ~$118,000 realistic (with vacation/downtime)

Consultants should target billable-hour rates 30-50%% above what they would accept as a W-2 employee, to cover self-employment tax and time not billable (marketing, admin, unpaid time off).

Why 2,080 hours?

The 2,080 figure comes from 40 hours per week × 52 weeks per year. It is the US Department of Labor standard used in federal wage calculations, the OPM (Office of Personnel Management) standard for federal employee compensation, and the convention most private-sector employers use when translating salaries to hourly rates.

It is also fictional. No US worker actually works 2,080 hours per year. Standard PTO (10-25 days), federal holidays (11 for federal workers, 8-10 typical private sector), and sick leave reduce actual working hours to about 1,750-1,900 for most salaried workers. The 2,080 base overstates hours worked by roughly 10%%.

Why does the convention persist? Because it makes back-of-envelope math easier. A $50,000 salary at 2,080 hours is exactly $24.04/hour; at actual working hours of 1,850 it would be $27.03. The rounder number is easier to communicate, and everyone knows it slightly overstates the "true" hourly rate.

Overtime and the FLSA

The Fair Labor Standards Act (FLSA) requires most US employers to pay non-exempt (typically hourly) employees 1.5x their regular hourly rate for hours worked over 40 in a work-week. This dramatically changes the salary-to-hourly comparison for jobs that regularly involve overtime.

Exempt employees (typically salaried at above $684/week or in specific job categories — executive, administrative, professional, computer, outside sales) do not qualify for FLSA overtime. Their salary covers all hours worked, so a "salaried" job at $80K working 60 hours/week has an effective hourly rate of $25.64 — often less than a non-exempt $28/hour job that gets 1.5x for overtime.

Before comparing a salaried offer to an hourly one, understand: is the salaried role exempt? What are typical hours (some industries — investment banking, tech during crunch, law associates — expect 60-80 hour weeks)? What is the effective hourly rate at typical hours?

Source: DOL — Fair Labor Standards Act overtime provisions

Consultant / contractor rate premium

Independent contractors and consultants should quote hourly rates significantly higher than the equivalent W-2 salary would translate to. Rule of thumb: 30-50%% premium over the W-2 hourly-equivalent, driven by five specific costs.

Self-employment tax (15.3%% for the first ~$176K of net earnings): a contractor pays both employer and employee FICA vs a W-2 employee's 7.65%. This alone adds ~7.65%% to the required rate.

Health insurance (typically $500-1500/mo for an individual, $1200-2500/mo for family): a W-2 employer covers 60-80%% of this; a contractor covers 100%% out of pocket.

Retirement contributions (no employer match): losing a typical 3-5%% employer 401(k) match is 3-5%% of income.

Unbillable time (~15-25%%): consultants spend meaningful hours on marketing, admin, invoicing, and unpaid downtime between contracts. Billable hours are about 75-85%% of "working" hours.

Business expenses (software, hardware, insurance, professional development): 5-10%% of gross income typical.

Together these justify the 30-50%% premium, and the specific number depends on your health insurance situation, professional overhead, and how much unbillable time you accept.

Salary negotiation using hourly framing

Salaried employees rarely think of their compensation in hourly terms, which can distort negotiation. If you are considering an offer requiring 55-hour work-weeks vs one requiring 40-hour weeks, comparing base salary alone misleads.

Convert both offers to effective hourly and effective take-home hourly. Offer A: $95K salary, 45 hr/week average, results in $95K / (45 × 48 actual working weeks) = $44/hr gross. Offer B: $80K salary, 40 hr/week average = $80K / (40 × 48) = $42/hr gross. Offer A pays slightly more per hour, but requires 12%% more time.

Whether that trade-off makes sense is personal (career growth, life stage, other obligations), but framing offers in hourly terms surfaces the trade-off that base salary hides.

Limitations

Assumes standard 40-hr work-week and 52 working weeks. Adjust for part-time, PTO, or non-standard schedules.
Does not account for overtime pay differentials (FLSA-mandated 1.5x for non-exempt workers over 40 hrs/week).
Gross figures only — take-home requires subtracting federal, state, FICA, and pre-tax deductions.

Salary and hourly conversions are gross (before-tax) figures. For take-home estimates, use the Take-Home Pay Calculator.

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.

Inputs

💰Result