Edmunds dealer partner, Bayway Leasing, is now offering transparent lease deals via these forums. Click here to see the latest vehicles!

How Do I Calculate Monthly Lease Payments?

CarMan@EdmundsCarMan@Edmunds Member Posts: 38,514
For some reason my original post that explained how to calculate monthly lease payments seems to have disappeared in our transition to the new Town Hall software. Given this topic's popularity and numerous requests to bring it back, I have decided to create a new discussion on the subject.

How to Calculate Monthly Lease Payments

Step 1: Calculate the Capitalized Cost

To calculate a vehicle's capitalized cost, take its selling price subtract your down payment.

Step 2: Calculate Your Vehicle's Residual Value

To calculate your vehicle's residual value, multiply its full MSRP (note some banks will only allow consumers to residualize certain options or will place a cap on the amount of money that can be residualized for each option) times its residual value percentage. The residual value percentage is determined by the bank that you are leasing through.

Step 3: Determine Your Vehicle's Total Depreciation

To determine your vehicle's depreciaiotn, subract its residual value from your capitalized cost.

Step 4: Determine Your Vehicle's Monthly Depreciation

To figure out your car or truck's monthly depreciation, divide the total depreciation that you just calculated by the number of months that you are going to lease it for.

Step 5: Determine Interest Charges

To determine the interest portion of your monthly lease payment add your vehicle's capitalized cost and its residual value and then multiply the result times your bank's lease money factor.

Step 6: Calculate Monthly Payment

Finally, add the results from Step 4 (the monthly depreciation) and Step 5 (the monthly interest charge) to come up with your pre-tax monthly lease payment.

Smart Shoppers / FWI Message Boards


  • golicgolic Member Posts: 714

    You rock. this saved me a few grand. And to show my appreciation I put an excel spreadsheet together to do perform this calcualtion.

    Anyone who emails me, can have it for free.

    Never let the dealer figure out your lease payment - when you udnerstand how it works and can do this yourself- it will save you THOUSANDS!!
  • biancarbiancar Member Posts: 965
    Hi Golic,

    Could you shoot me a copy of that spread sheet too, please?

    I've never leased a car before, but am considering it now. In general terms, it seems that if the lease is a good deal, then probably it has a high residual which would make buying it at the end of the lease a bad deal. But with a low residual, then buying it at the end might make more sense.

    Is that a correct interpretation of the overall principle?

    I'm not sure it's for me, I usually keep my cars a long time, but maybe a lease plus a buy at the end *might* make sense, depending how numbers work out.
  • golicgolic Member Posts: 714
    Its on its way, feel free to email back if you have questions.
  • golicgolic Member Posts: 714
    Yes, you have it right, but let me rephrase it.

    You will always have the option at the end of the lease to buy the vehicle at a stated price that will not change. When you lease the vehicle the finance company estimates the value of the vehicle at the end of the lease.

    Take my Pilot, full MSRP was 33,600. With my 36/15K lease the value will be 18,480.

    If the pilot holds it value and lets say it is worth $20,000, I can buy that vehicle for only $18,480 OR I can buy the vehicle for $18,480, then trade it in on my new vehicle and put $1,520 in my pocket PLUS save sales taxes on the trade in.

    If at the end of the lease the Pilot is only worth 17K, I just give it to the dealer and walk away.

    IMO, leasing should not be done unless you running the car through a business or you simply must have a new car every 3 years and you can keep it in good shape and meet the milage requirements. YMMV
  • british_roverbritish_rover Member Posts: 8,502
    As have seen several people, owning all variety of cars/trucks/SUVs buy a car at lease end and only one of them has ever been right side up in it.

    The guy that was right side up had a Very sharp 4wd Toyota Tacoma extended cab manual transmission which I think was a 1999. It had close to a 100,000 miles and was still worth over 10,000 dollars on a trade. He owed 9,300 though because he leased first then bought out the lease.
  • golicgolic Member Posts: 714
    It happened to me on the first lease I did. We purchased a 2000 Honday Ody in 1999 when everyone was selling them for MSRP +, I was able to get it at MSRP and when the lease ended in 2002 the cars were still so hot, that the we had tradin offers from $2000- $2500.

    We ended up with a new Ody and did the buy/trade-in at the dealership.

    In all honesty, I have considered this my once in a lifetime lease victory.
  • british_roverbritish_rover Member Posts: 8,502
    Hey golic when you get a chance email me your lease spread sheet. I would like to see how it matches up versus our mainframe based lease calculator.
  • subearusubearu Member Posts: 3,613
    how about just sharing the lease spreadsheet with the forum? I'm sure others would benefit from using it to calc their own lease scenarios.

  • golicgolic Member Posts: 714

    If I knew how to attach the spreadsheet I would.

    Basically all I did was take the instructions from Car_Mans opening post and put it into a workable spreadsheet. I then fine tuned it to apply to my situation and then tested it against other web based applications like lease calculater to make sure it worked.

    Once you see it on paper, it is actually very easy to work out the payments with a pencil and paper. But I wanted to take my laptop to the dealer and crunch the numbers with him to verify everything.
  • CarMan@EdmundsCarMan@Edmunds Member Posts: 38,514
    Thanks golic. I'm glad that you found my post so helpful.

    Smart Shopper / Prices Paid Forums
  • citymomcitymom Member Posts: 8
    Hey Golic.........

    Can I get that spreadsheet?

    Thanks a million.......citymom
  • golicgolic Member Posts: 714
    I would be happy to citymom, email me and I will send it to you. Your email is not listed here.

  • biancarbiancar Member Posts: 965
    Golic, does your e-mail go by "trackwreck" or something like that?
  • krumb2krumb2 Member Posts: 2

    You mention that this is a pre-tax monthly lease payment.
    I live in IL. On a recent lease they charged full tax on the purchase price of the vehicle. Is this legitamite? Also, I did my preplanning on Edmunds lease calculator and in putting the same info here as on the Toyota dealership program, the difference was around $60/mo they were higher. Any possible explanation for this. Thanks.

  • golicgolic Member Posts: 714
    Welcome to Illinois.

    If I can jump in (with all due respect to Car_man) This is confusing, so follow me. IL looks at the leasing company (Lessor) as the "true" owner of the vehicle and is one of only 2 states (texas being the other I believe) that imposes a tax on the "sales" price of the vehicle.

    Which in turn the leasing company (lessor)passes on to you the driver (the lessee). So technically you are not being charged the tax, only reimbursing the Lessor for his tax cost.

    Now, are you ready for this? If you at the end of the lease decide to purchase the vehicle for it's residual value, you are subject to sales tax on the entire purchase amount (ie residual value).

    This is one of the many wacky ways IL operates its sales and use tax.

    As far as your $60 issue, did you factor in the lease inititian fee?? This was something I forget that Honda hit me up with..or did you get NAV, RES or some other funky options wich will change the residual %? Just some thoughts.
  • CarMan@EdmundsCarMan@Edmunds Member Posts: 38,514
    Hello Krumb. I have heard that Illinois has come unfavorable sales tax rules as far as leasing vehicles is concerned. I believe that your state does indeed charge sales tax on the entire purchase prices of lease vehicles. You may be able to find out more information on how sales tax is calculated in your area by visiting the following sites: Illinois Department of Revenue or CyberDrive Illinois.

    One possible reason why the lease payment that you cane up with is different than the one that the dealership quoted you is the strange way that Toyota Financial Services calculates vehicles' residual values. While most banks allow the full residualization of most factory-installed options, TFS limits the number of and prices of options that can be residualized.

    Smart Shopper / Prices Paid Forums
  • Karen_SKaren_S Member Posts: 5,092
    ...please do not post your email address within a message. This is an invitation for those who may use it maliciously.

    Thanks for your cooperation!
  • mmanniko1mmanniko1 Member Posts: 1
    Can you please send me your spreadsheet? Thank You, you are a life saver!
  • mkfxmkfx Member Posts: 26
    Can you please send me this spreadsheet?
  • golicgolic Member Posts: 714
    You will need to email me, my email is not private, just click on my link.

    I would be happy to send, but your emails are "private" so I have no way of knowing how to email you.
  • subearusubearu Member Posts: 3,613
    I'd like the spreadsheet too. Are you on carspace? You can email me there.

  • krumb2krumb2 Member Posts: 2
    Thanks for the info. IL does have a way of lining their own pockets at the taxpayer expense.

    Looking at the two calculations, the one Car_Man provided and the Edmunds calculator the difference seems to be that Edmunds doesn't add the tax into the capitalized cost which it does on my lease.

    Just curious how do other states calculate tax? Maybe I can get a grass roots movement going here.
  • raybearraybear Member Posts: 1,795

    Very simplistic since you'll have to add the tax.
  • golicgolic Member Posts: 714

    There was legislation that stalled about 5 years ago to change it. Especially since, if you lease a vehicle, you pay tax on the full vehicle, say 30K.

    If you walk away and lease another vehicle- no trade in credit.

    Then if you decide to buy it at the 18K residual, you pay tax AGAIN on the 18K!

    This is Illinois *rattle* logic:

    The Leasing Company OWNS the vehicle and is SUBJECT to the tax. Ever notice in a lease you never sign the sales tax form.

    The Leasing Company is allowed to pass the tax on to you the lessee - which they always do. And this is common is about all states.

    So when YOU buy the vehicle at lease end YOU never were subject to the tax according to IL so you are not getting double whammied.

    I believe sales tax in most states is calculated either one of two ways.

    1. Based solely on the depreciation element.
    2. The tax is added on to the actual lease payment.

    After april 15th I will investigate and put a list together for all who read.
  • 3gaffz3gaffz Member Posts: 2
    Thank you for this info, I found it very helpful to use before I went to the dealer tonight. A couple things I'm not clear on though:
    1. How can you figure out how much more the lease should be for 12k vs 15k?
    2. The dealer said that the sales tax was 9% ( I live outside of Philly), is this true? Is there some reason that a lease would be taxed higher? PA sales tax is 6%

    On a 06 pilot EXL AWD 15k lease They offered me sale price 29780 with 2000 down, .ooo68 MF(forgot to write down the residual) with a monthly payment of 374. I wasn't comfortable with this and wanted to do some more research.
    Any answers to above questions or comments on the above deal would be greatly appreciated
  • CarMan@EdmundsCarMan@Edmunds Member Posts: 38,514
    You're welcome, 3gaffz. The higher your vehicle's mileage allowance is, the lower its residual value will be. Residual values are used to calculate the depreciation portion of vehicles' lease payments. The exact difference in payment for a lease with 12,000 miles per year versus a lease with 15,000 miles per year depends upon a number of variables, including the cost of the car that you want, how long a lease you want, and the bank that you are leasing it through. For a 36 month lease of a 2006 Pilot through Honda Finance, the residual value would be 2% lower for a lease with 15,000 miles per year versus a lease with 12,000 miles per year.

    I am not personally familiar with how sales tax is calculated on leased vehicles in your area, but you may be able to find out more information on this subject by visiting the following sites: Pennsylvania Driver & Vehicle Services or Pennsylvania Department of Revenue.

    Smart Shopper / Prices Paid Forums
  • keankean Member Posts: 11
    Does net capital cost inludes the doc, title, reg fees?thanks?
  • CarMan@EdmundsCarMan@Edmunds Member Posts: 38,514
    Hi kean. The net capitalized cost of the vehicle that you are considering includes whatever you want it to. It can be equivalent to just your vehicle's selling price minus any sort of down payment that you make or it can have all sorts of fees, like the ones that you mentioned rolled into it. If you choose not to add the fees that you mentioned to the cap cost you will have to pay them at lease signing.

    Smart Shopper / Prices Paid Forums
  • redline65redline65 Member Posts: 693
    If anyone is interested, I've uploaded a lease calculator spreadsheet I put together that allows different figures to be plugged in for leasing vs. buying, and you can compare the total cost of a lease to the total cost of a purchase (minus residual value). It will also calculate the money factor on the second tab if you know the cost of the lease. Please let me know if there are mistakes.

  • finfin Member Posts: 594
    Recently quoted $838. per month plus local taxes on a Lexus lease. We had the cap cost, residual and interest rate in writing. Pretty simple.

    BUT: When you plug the numbers into the formula given by Car_man here on Edmunds.com, the payment should have been $796. before taxes. The salesman said, "I don't do the actual numbers, they give them to me." Really.....

    The bottom line is that you need to check your proposed payment with the information and formula in this forum. It will save you money. And, no, I did not lease a car from this dealer.

    Thank you, Car_man. As several people have posted, car leasing is no longer a mystery. Just do the math and check the numbers.
  • bsedrishbsedrish Member Posts: 26
    Does anyone know if it is possible to replicate the car lease payment calculation (Depreciation + Rent Charge + Tax) on the HP17B given the MSRP, money factor, term, residual value, etc?

    Given the way the leasing industry calculates their pmts, the data entry is not equivalent to how you would input the data to calculate a standard mtg payment.

  • bsedrishbsedrish Member Posts: 26

    Can you send it over to me also? Thanks in advance.

    Also, I just posted this in a separate email:

    Does anyone know if it is possible to replicate the car lease payment calculation (Depreciation + Rent Charge + Tax) on the HP17B (or any fin calculator for that matter) given the MSRP, money factor, term, residual value, etc?

    Given the way the leasing industry calculates their pmts, the data entry is not equivalent to how you would input the data to calculate a standard mtg payment (I do get it to be very close on a pre-tax basis and then adding the tax is easy)
  • grandtotalgrandtotal Member Posts: 1,207
    I use this:


    Note that / should be entered using the divide key and * should be entered using the multiply key.

    PMT = Monthly Payment
    CC = Cap Cost
    RV = Residual Value ($ amount)
    N = Number of payments
    MF = Money Factor
  • nortsr1nortsr1 Member Posts: 1,060
    My wife's Caddy SRX lease is up in Oct. and the salesman called and said GM has a Pull Ahead program whereas GM will nullify the last three payments and put you in another GM vehicle (she wants a V6 SRX). Is there any special lease rates or incentives that I should look for. I know I negotiated the current lease from the invoice price (SRX was a new model V/8 at that time).
    Any help would be appreciated.
    Thanks, NORTSR1
  • Kirstie_HKirstie_H Administrator Posts: 11,148
    Your question is more likely to be seen in the Cadillac SRX: Lease Questions discussion.

    Need help navigating? kirstie_h@edmunds.com - or send a private message by clicking on my name.
    Share your vehicle reviews

  • nortsr1nortsr1 Member Posts: 1,060
    I posted st the Cadillac SRX as per your request. The host hasn't posted since July 2nd????
  • tidestertidester Member Posts: 10,059
    The host hasn't posted since July 2nd????

    That's because no one has posted a question since then. He'll be around to it!

    tidester, host
  • crepituscrepitus Member Posts: 5
    my wife is going to be leasing another grand cherokee. i am good with negoeatating purchase price but am lost with leasing. can you give me some insight into this? for example if i got a purchase price of the following:

    MSRP: 35650
    Selling Price: 28426
    Tax 7%
    Destination 650
    Mileage 15000 year.

    Now how would i figure out the lease price for a 27 month lease? how do you figure down payment? This will be leased in NJ. Is there a formula. Thanks in advance for any help.
  • frank379frank379 Member Posts: 2
    Can I get copy of your spreadsheet? The dealer is coming up with a higher number
  • frank379frank379 Member Posts: 2
    Anyone out there that can give me some guidance. The lease I had I recall that the lease origination fee was included in the MSRP and residual. The dealer is not including it in our current lease calculation. What is the rule?
  • kyfdxkyfdx Moderator Posts: 236,410
    The acquisition fee is usually added to the CAP cost (or paid upfront), but is not included in the MSRP or the resulting residual calculation.


    Edmunds Price Checker
    Edmunds Lease Calculator
    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • silverride1silverride1 Member Posts: 6
    i went to the dealer today and,

    i was told the $1000 rebate for the murano is not avalible for a lease??

    :mad: i was giving a price for the sl w/touring msrp around $36000. OK for 39mo 12k $5000 down $279 a month capilization of $34000 can i do any better??
  • dave_h2dave_h2 Member Posts: 100
    Thank you Car_Man for this very helpful and informative topic.

    Golic - I would love a copy of your spreadsheet. Unfortunately, I see your email is now set to private. However, mine is not. Could you please send it to me?

    FYI - I am now coming to the end (end of June) of my third consecutive lease. Two three-year Dodge Caravans, and now the latest, a 4 year Mazda MPV. I am going to break the "mini-van chain" and go SUV. So there is much research to do.

    I just want to let anyone know, that I now have 10 years of lease "experience" (yikes) so if anyone has any questions they think I can help them with, please do not hesitate to ask. I certainly will not.
  • dave_h2dave_h2 Member Posts: 100
    OK, I'm a little slow on the uptake. I didn't realize these April topics were from a year ago :blush:

    Anyway, I've grabbed this Excel file, so I will work with this.

    Thanks redline65, for uploading this.
  • sunshine20sunshine20 Member Posts: 20
    I am a newbie at all this stuff and would love to get my hands on your spreadsheet - is it still available and how would I go about getting it - thanks!
  • tidestertidester Member Posts: 10,059
    We have a handy lease calculator on the Calculators page.

    tidester, host
    SUVs and Smart Shopper
  • joel0622joel0622 Member Posts: 3,299
    I don't know if all manufactures do this but I know Ford does it quite often. They have off lease money. Meaning that if you are coming off of a lease you get an extra rebate. usually ranging from $500 to $1000. It usually swings to retail so you don't have to re-lease to get it. On some lines lines they offer a "Competitive Make" off lease rebate. Which means if you have something other then a Ford leased they will give you the rebate.

    Make sure to ask about off lease rebates.
  • dave_h2dave_h2 Member Posts: 100
    Thanks as well.

    I will make good use of it. :)
  • sphinxriddsphinxridd Member Posts: 10
    Hi golic, if you still have the spreadsheet, could you send me a copy? thanks!
  • jdls22jdls22 Member Posts: 7
    golic, I would like one as well...Looking to lease an Armada this weekend..I think I am getting screwed... :confuse: :confuse:

This discussion has been closed.