Car Lease Calculator: Estimate Your Monthly Auto Lease Payment

Use this car lease calculator to estimate your monthly payment to:

The calculation that produces a monthly lease payment contains many figures. Some are negotiable, others are set by the lender, and the rest are up to you. However, these four figures have the biggest impact on your monthly payment:

• The negotiated sale price of the car

• The resale value of the car, which is its predicted value at the end of the lease

Sale price of the car: Even though you’re not actually buying the car, you can negotiate the sale price to lower your monthly payment. For an estimate, look up the current market value of the car on one of the pricing guides, such as Edmunds and the National Automobile Dealers Association.

Resale value: This is also called the “residual value.” It’s what the car is worth at the end of the lease and it’s set by the lender, so you can’t negotiate it. However, it’s smart to lease a car with good resale value. Here’s why: If a car is worth $30,000 new, and its residual value after three years is $15,000 (or 50%) you have essentially used $15,000 of value. But if that same car is worth $18,000 (60%) after three years, you have used only $12,000 of its value. You pay only for the value you use, meaning you’re on the hook for less when the resale value is higher.

Eventually, you’ll get the specific residual value from the dealer. But for now, use a resale value between 50% and 58% for most cars.

Interest rate: In a lease calculation, the interest rate is called the “lease factor” or “money factor.” In a monthly lease calculation, the interest rate is converted to a decimal so interest on the monthly payment can be computed. So 3% interest would be written as 0.00125. (You can convert an interest rate to a decimal by dividing it by 2,400: 3/2,400 = 0.00125. Conversely, you can convert a lease factor to an interest rate by multiplying it by 2,400.)

The rate you get is based on your credit score. Different lenders (leasing companies) will offer different interest rates. Typically, you could expect a rate between 2% and 5% if you have strong credit, between 6% and 9% for average credit, and between 10% to 15% for poor credit. However, given the current car market and economic climate, you may find lease interest rates outside of these ranges — something to factor into your decision whether to lease or buy a car.

Length of the lease: Car leases usually last 36 months, which is how long most warranties last. This means you don’t have to pay extra for extended coverage, and your cost of maintenance will be low since the car is new. Don’t be talked into leasing for four or five years. You could be on the hook for more service costs, buying new tires and costly repairs.

There are other factors that alter the monthly payment, some of which you choose and others that the leasing company sets.

Drive-off fees: This is similar to a down payment when buying a car. It’s made up of several fees and it sometimes is called a “capitalized cost reduction.” You can select any drive-off amount you want, all the way down to zero. We recommend that you start a lease with a drive-off payment of about $1,000. Making a higher payment upfront will reduce your monthly payment but it will also reduce your cash flow for other things, such as investments. Also, unlike a car purchase, you’re not building equity in the vehicle.

Cash rebates and incentives: When a car isn’t selling quickly enough, the manufacturer may offer rebates and incentives, which can reduce the monthly payment of a lease. Often, these are simply called “lease specials” and can greatly reduce your payment. Websites like CarFax track lease offers for car shoppers.

Included miles: Many lease contracts allow 12,000 miles a year. However, you can find leases with mileage as low as 5,000 miles; because these ultra-low-mileage leases provide less value, they should result in a lower monthly payment. Similarly, high-mileage leases will cost more, but they can be a good option if you drive a lot and want to avoid potential excess-mileage charges. Always check to see how many miles are included with the lease.

Sales tax: One benefit of leasing is that you pay sales tax only on the amount of the car’s value that you use, not the total purchase price. So if sales tax is 9% and the car costs $30,000, the buyer pays $2,700. Leasing the same car for 36 months, with a $15,000 residual value, the sales tax is $1,350 and is paid in smaller amounts ($37.50) each month.

Now that you have all the information you need, you can estimate your monthly payment. Plug in the figures that best suit your financial situation and lifestyle. Input different drive-off amounts and see how it changes the monthly payment. But remember not to put too much money down, because that defeats the leasing advantage of preserving cash flow.

Auto lease calculator example

Here’s how to estimate the monthly payment on a midsized economy sedan with a sticker price of $33,000.

1. By checking pricing guides on Edmunds, Kelley Blue Book or TrueCar, you find you could buy the car for $30,000, so put that in the box marked “Car Price.”

2. Decide how much you want to budget for a down payment, or drive-off fees. We recommend no more than about $1,000. Enter that in the “Down Payment” field.

3. You think the resale value of this car is average, so you multiply the $30,000 by 0.55 and put the result, $16,500, in the box marked “Resale Value at End of Lease.”

4. Enter your state and local sales tax. If you’re leasing in another state, enter its sales tax. For this example we’ll use 9%.

5. Put in the interest rate you think you’ll qualify for based on your credit history. If you don’t know your credit score, this is a good time to check it. Enter the interest rate as a percentage, not a decimal. Here, we’ll use 3% (not 0.03).

6. In the “Number of Months” box, enter how long you want the lease to last. Remember, 36 months is the sweet spot for leasing. That’s what we’ll use. Shorter leases — 24 months — are OK, but the payments will be higher.

According to the calculator, your estimated monthly lease payment is $440.47. That includes the sales tax of $36.37 and $56.88 in interest.