Depreciation + finance + tax monthly composition with money factor → APR conversion.
Money factor × 2400 ≈ APR. Depreciation = (cap cost − residual) / term. Finance = (cap cost + residual) × money factor. Total cost includes the down payment.
Leasing a car is fundamentally different from buying — the math, the variables, the decision criteria are all different. A lease is paying for the depreciation of the car over the lease term, plus a financing charge on the average capital tied up, plus tax. The dealer hides this structure behind a single "monthly payment" number, which obscures the three distinct components and makes apples-to-apples comparisons across offers nearly impossible. Buyers who don't unpack the lease formula systematically over-pay, often without knowing it. This calculator separates the three components — depreciation, finance, tax — and shows them as a stacked bar so it's clear which lever moves the payment most. It also converts the elusive "money factor" to its equivalent APR (multiply by 2400) so you can compare the financing cost to a conventional loan.
Capitalized cost (cap cost) = vehicle_price + acquisition_fee − cap_cost_reduction (down payment) − rebates − trade_in.
Residual value = vehicle_price × residual_pct (typically 50–60 % of MSRP for a 36-month lease).
Depreciation = cap_cost − residual.
Money factor is a fraction analogous to interest rate: APR = money_factor × 2 400. A money factor of 0.00125 = 3 % APR.
Monthly depreciation = depreciation / months.
Monthly finance charge = (cap_cost + residual) × money_factor.
Monthly base payment = depreciation + finance.
Monthly tax = base × tax_rate (varies: some states tax the full base, some only the depreciation portion).
Total monthly = base + tax.
Total cost of lease = monthly × months + drive-off costs (down payment, first-month, fees, registration).
The chart visualizes the three monthly components stacked.
Enter the vehicle MSRP / negotiated price. Enter the residual percentage (the dealer or industry guides — Edmunds, ALG — publish these by model and term). Enter the money factor (or compute as APR/2400 if quoted as APR). Enter the lease term in months (24, 36, 48 most common). Enter down payment and acquisition fees. Enter sales tax rate (state + local). The result panel shows the three components individually and the total monthly payment, plus the implied APR and the total cost of lease over the full term.
$40 000 MSRP sedan, 36-month lease, 60 % residual, money factor 0.00125 (= 3 % APR), $3 000 down, $695 acquisition fee, 6 % sales tax.
If money factor doubles to 0.00250 (= 6 % APR), monthly finance jumps to $154.24, total to $568 — a $84/month increase that's purely financing cost.
Residual is a quoted number, not a negotiation point. Dealers can adjust the cap cost (negotiable), money factor (sometimes negotiable, often hidden as "lease APR" in small print), and fees (semi-negotiable). Residual is set by the manufacturer's captive lender — non-negotiable.
Money-factor opacity. Dealers prefer to quote money factor because it sounds smaller than APR. Always multiply by 2 400 to get APR.
Cap-cost reduction is a misnomer for "down payment". A "$3 000 cap cost reduction" reduces the cap cost by $3 000 — exactly the same as a down payment.
Sign-and-drive vs zero-due-at-signing offers. These roll the drive-off costs into the cap cost, raising the monthly. Total cost is roughly the same; only cash flow differs.
Mileage caps and overage. Standard leases include 10–15k miles/year; over is $0.15–0.30/mile. Going 5k miles over on a 36-month lease is an extra $750–1500 surprise at turn-in.
Wear-and-tear charges. Excessive interior wear, dent dings beyond credit-card-size, missing maintenance records — all billed at lease end. Budget 1–3 % of vehicle value as expected end-of-lease cost.
Disposition fee. Most leases charge $300–$500 at turn-in unless you lease another vehicle from the same captive (a "loyalty waiver").
Lease vs buy comparison. A lease is the right answer if you reliably keep cars 3 years and like new ones; buy is better for longer holds (5–7+ years) because you avoid the recurring depreciation curve.
Gap insurance. If the car is totaled mid-lease, gap insurance covers the difference between insurance payout and lease balance. Some leases include it; others don't.
Subvented (subsidized) leases. Manufacturers offer artificial below-market money factors and inflated residuals on slow-selling models. The calculator gives an exact answer; the subvention comes from the manufacturer's marketing budget, not your pocket — but only on those specific models.
Tax base varies. Some states tax the full payment (including finance + depreciation); others tax only the depreciation; some tax the full vehicle price up front. The calculator's flat "tax rate × base" approach generalizes; check your state's specific rule.