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How to Calculate Monthly Lease Payments

Kirstie_HKirstie_H Posts: 11,077
edited August 13 in General
Calculating lease payments can be tricky, but we're here to help! You can try it yourself using the steps below, or provide info and we'll do it for you.

In this example, we use a vehicle with a cap cost of $24,000 leased for 36 months, with 72% residual value and a money factor of .0038.

Step 1: Capitalized Cost
The cap cost is the selling price you've negotiated for the vehicle, minus any downpayment. (example: price is 24,000 - 3,000 downpayment = 21,000 cap cost)

Step 2: Calculate Your Vehicle's Residual Value
To calculate your vehicle's residual value, multiply its full MSRP times its residual value percentage. The residual value percentage is determined by the bank that you are leasing through. (example: MSRP = 25,000 x 72% residual = 18,000 residual value).
(note that 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)

Step 3: Determine Your Vehicle's Total Depreciation
To determine your vehicle's depreciation, subtract its residual value from your capitalized cost. (example: $21,000 - $18,000 = $3,000 depreciation).

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. (example: $3,000 / 36 = $83.33 monthly depreciation)

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. (example: $21,000 + $18,000 = $39,000 x .0038 = $148.20)

Step 6: Calculate Pre-Tax 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. (example: $83.33 + $148.20 = $231.53)

If you would like help, we'll need the following info about the vehicle you plan to lease:
Capitalized cost (negotiated price minus any downpayment)
Residual value percentage
Bank/Finance company's money factor
Lease term, in months


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  • Am I missing something . Two dealers where around this price per month
    The other dealers where 40 dollars more per month on LEASE

    Am I missing something? here below is the quote from NJ dealer. I have read the lease buying guide and used the calculator

    2009 Infiniti Coupe AWD Journey with Premium and Navigation Packages
    MSRP: $44825.00
    Internet Selling Price $39661.00
    Total Savings $5164.00

    Money Factor .00191
    Cap cost reduction is 152.00
    Residual .51 60%
    Bank fee $595.00
    Sales tax for 19002 9% (PA)

    $1000 down
    39 months/10K
    $499.42 per month

    39 months/12K
    511.89 per month
  • Kirstie_HKirstie_H Posts: 11,077
    My calculations indicate that the two lower numbers you received didn't include the sales tax. You might call the lower-quoting dealers and check, but that's where I'm coming up with an extra ~$40 per month.


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  • Thank you
    kirstie h
  • Thanks for the help. Here is what the dealer provide me regarding Lease info on a 2009 G37 Coupe with Nav and Premium packages:
    MSRP 42,975
    Cap cost 39,946
    Residual % 57%
    39 months lease term
    Nothing down
    Dealer to pay off remaining lease payments of 2800.
    Dealer said payments would come to 659.50 plus tax of 07%. This sound high to me as the car is a year old. Still new though. Any help, thoughts or comments>>>>
  • Kirstie_HKirstie_H Posts: 11,077
    The calculation doesn't seem high, but the cap cost seems high - I don't see the money factor there, but in any case, it appears that people are getting better deals on the 2009 G37 than $40K.

    I really don't think this is your best deal. It sounds like you are currently leasing, and the lease is not yet over. How much longer do you have on that vehicle, and why get rid of it now?


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  • ppierce2ppierce2 Posts: 11
    Please help calculate my payments. I live in Illinois and sales tax is based off sales price.
    Honda Pilot EX-L
    nothing down, taxes rolled in.
    Due at signing 1st months, Doc Fee and License/Title

    MSRP 36,155
    Invoice 32814.31
    Cap Cost 30,854
    Residual 19,885.25
    money factor .00183
    Term 36 months
    12,000 miles
  • jayriderjayrider Posts: 3,602
    $396 based on the figures you posted. Taxes on 30854 [your rate] divide by 36 and roll into lease. In st. clair county in s.w. illinois that would add about $56 to the 396.
  • isellhondasisellhondas Issaquah WashingtonPosts: 20,225

    You are forgetting the Aquisition Fee that (I believe) all manufactures charge on leases. Honda charges 595.00 and that is probably typical.
  • Kirstie_HKirstie_H Posts: 11,077
    You're right - however, I've seen higher & lower amounts, depending on manufacturer and the deal-of-the-day. I'll try to remember to ask for follow-up if the person requesting assistance leaves out the acquisition fee!


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  • I was running my lease calculator on the deal Hyundai has on their new 2011 Sonata GLS. Are my calculations correct?

    Here are my numbers:

    MSRP: 20,195
    Down: 2,200
    Payment: 199 (w/o tax)
    Term: 36 mo
    ALG Residual: 54% after 36 mo
    Net Cap: 17,995 (MSRP - Down)
    Residual: 10,905.30 (MSRP * ALG Res)
    Financed: 7089.70 (Net Cap - Residual)
    Dep. Fee: 196.94 (Financed / Term)
    Fin. Fee: 2.06 (Payment - Dep. Fee)
    Money Factor: 0.00007 ((Net Cap + Residual) / Fin. Fee)
    Equiv. APR: 0.17% (Money Factor * 2400)
  • kyfdxkyfdx Posts: 128,420
    1) Manufacturer lease promotions rarely use ALG residuals. To do a proper calculation, you have to know the actual residual percentage.

    2) The disclaimer in the ad gives you the MSRP ($20915) and the capitilized cost ($19,165.11). Now, what they don't tell you, is if the Capitalized cost is the price of the car, to which you add the $595 acquisition fee, then subtract the down payment to get the Net CAP, or if the $19,165.11 is the actual Net Cap that the lease payment is based on.

    3) To apply the money factor, you have to add the net cap and the residual, not subtract. The amount financed is actually an average of the net cap and residual, not the depreciation.

    To actually figure a lease payment, you need four items:

    Net CAP cost
    Residual percentage (or actual residual)
    Money factor

    Including the lease payment as the 5th variable, you can solve for any variable, as long as the other four are known quantities.

    In Hyundai's example, only two numbers are known quantities (MSRP and lease payment), with possibly the CAP cost as 3rd known (but, even that is shaky). We don't know the residual or the money factor.

    So, everything else is just a guess.

    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • kyfdxkyfdx Posts: 128,420
    We can get the answer here: Hyundai Sonata Lease Questions

    Looks like the residual is 60% and the MF is .00048

    Using my handy-dandy spreadsheet, that means the actual NET CAP cost after accounting for acquisition fee and down payment is $19,165.11 (which, by the way... means they are only giving a discount from MSRP of $245!!)


    $183.78 depreciation
    $ 15.22 finance charge

    $199/mo. total..

    Great residual/MF, but not much of a discount.... I would guess with some negotiation, you could get the same payment while only putting $1500 or less, down..

    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • Interesting - thanks :)
  • cquenzcquenz Posts: 3
    I started negotiating the price of the ML 350 2WD in March. I have the price down around 45K but now the lease factor has changed.

    Questions -
    Does anyone know the current money factor? I
    s it based on credit rating?
    Does it change based on credit rating?
    Initially they told me .002 in March, then it changed to .0025 in April. after checking out this forum, I told them I saw .0015 - they told me that was available if my credit was over 750.

    Does money factor change based on the number of miles?

    What about the residual value? What %?
    Thanks so much!
  • rose33rose33 Posts: 28
    I would appreciate some help with my monthly lease payment. The numbers that the dealer has given me don't add up to the monthly payment. Here are the numbers:

    Net Cap Cost - 35,693
    Residual - 20319
    Finance Fee - .00241
    Sales Tax - 6%
    36 Month Lease

    The dealer is telling me that my monthly payment will be $561 (that includes tax - I double checked this) but I get a monthly payment of $595.77 when I calculate it. I thought for sure it was the tax, but I checked that with the dealer and he said tax is already included. Obviously, this mistake would be in my benefit, but I am leery of anything where the numbers don't add up right. And I don't want to put a deposit down and order the car only to have them say they made a mistake when I go to pick the car up. I would like to know what they could potentially be up to, if anything, before I raise this issue with him. Is this a huge red flag that I should be concerned with? Any advice would be greatly appreciated. Thanks!
  • delta737hdelta737h Posts: 625
    edited April 2010

    PMT = 0.00241 x (35693 + 20319) + (35693 - 20319) / 36 = 595.77

    Given the information that you provided, the only way your 595.77 payment includes tax would be if (a) you live in a state that collects all the tax upfront (like Ohio and New Jersey) and (b) the tax was capitalized in the lease (i.e., the net cap of 35693 includes the total sales tax). Otherwise, your payment, with tax, would be 595.77 x (1.06) = 631.52 if you live in a state that taxes the monthly payment and collects it monthly.

    Assuming that all the information you provided is correct, it appears as though the dealer has understated the payment. In order to determine this definitively, I would need to see the dealer's LEASE WORKSHEET. If you like, I can critique it for you. Just ask the dealer to FAX it or email it to you and, then, email it to me at

    [email protected]

  • rose33rose33 Posts: 28

    Thanks so much for your help. I really appreciate it. I don't have the dealer's lease worksheet but I can get it.

    Regarding the payment, I calculated that the $595.77 payment already included the 6% sales tax - so I must be missing something. Here is how I determined the payment:

    Depreciation Fee (35,693 - 20319) / 36 = 427.06
    Finance Fee (35,693 + 20319) x .00241 = 134.99
    Sales Tax (427.06 + 134.99) x .06 = 33.72

    This adds up to $595.77 and includes the tax. The problem is that he's telling me my payment will be $561 including the tax. I just don't understand how he's arriving at that number given the cap cost, residual and money factor. I currently lease a car in my state and I pay my sales tax each month in my payment so that's why I added it into my calculation above.
  • delta737hdelta737h Posts: 625
    edited April 2010

    Sorry, you're quite right. My calc should be...

    PMT = 0.00241 x (35693 + 20319) + (35693 - 20319) / 36 = 562.04

    IF the net cap (35693) DOES INCLUDE SALES TAX, then the payment, including tax, is 562.04 and so the dealer would be correct.

    Unless you're absolutely certain, I need to know your state in order to determine how the tax is computed. Not all states tax the payment. If your state does tax the monthly payment and collects it monthly, then you are 100% correct when you calculated the monthly payment with tax to be...

    562.04 x 1.06 = 595.76

    The dealer's LEASE WORKSHEET will speak volumes and will tell me everything I need to know.

  • kl07rphkl07rph Posts: 22
    edited May 2010
    Hello, hopefully one of the moderators can assist me.

    I was previously shopping around for a 2010 X5, with a 36month, 15k mile/yr lease.
    Ended up purchasing instead.

    Just for my curiousity and guidance in the future, could one of the mods calculate a lease for me?
    MSRP 59175
    Initial Negotiated Price (Cap cost?): 56914
    Illinois State Sales Tax: 4568.18
    Registration: 194
    Docs: 154
    Electronic Filing: 25
    OTD Price incl. fees 61855.56
    Residual 60%
    MF 0.0023

    With my offered $5000 Cash Due, dealer was coming up with $891/month (inc tax), which for the life of me can not come up w/ those numbers! My calculations have been yielding a number in the high 700s/low 800s (i.e., calc gave me 804, w/ tax).

    I hope one of the mods can assist me. Thanks in advance!

    BTW, my wife and I purchased much lower than this dealer's quotes.
  • kyfdxkyfdx Posts: 128,420
    Yeah... I get around $805/mo, as well..

    But... more likely.. are you sure these are the correct residual and money factor for a 2010 model? Did the dealer give you these numbers? Because.. they look like the 2011 model numbers, to me...


    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • kl07rphkl07rph Posts: 22
    Hi kyfdhx, thanks for helping out w/ the numbers =). The dealer quoted me on the residual and MF (after some pushing), but I know they're a off from what ridewithg and leasecompare have (they have a 2010 X5 3.0 w/ 58% and 0.00175 base). I'm just glad my calculations weren't different from yours...I know this would have been our first time leasing but the dealer's 892/mo did NOT seem right to me at all.
  • kyfdxkyfdx Posts: 128,420
    My guess is he was reading from the wrong sheet... but, his computer program put in the correct numbers..

    I don't know the numbers for the 2010 model, but the ones you have there seem a little too good.. But, each month, the mix of incentives, money factor and residual can be all over the map, and usually work out to about the same payment..

    Another thing to remember... the dealer can quote any number he wants over the phone or e-mail, but the residual is the only one you can verify from the lease paperwork.. BMW dealers are famous for marking up the money factor by the full 0.0004, and the acquisition fee to $925 (from $725). If the numbers don't match up, those are the first two places to look for discrepancies.


    Did you get a good deal? Be sure to come back and share!

    Edmunds Moderator

  • kl07rphkl07rph Posts: 22
    edited May 2010
    Thanks for the insight kydfx,

    Actually, I confused the money factor from the's base rate for the 2010 X5 :blush: . Still, even with the money factor I was quoted (which is on the HIGHER side from what I've read here and on other bimmer forums), that sales guy or general manager goofed up enough (to their advantage) to get the monthly ~$85 more than what you and I calculated. I guess it'll be a mystery as to how they really did it...

    Thanks for your assistance though kydfx! I now have the needed confidence to calculate a monthly in the event I opt to lease in the future :shades:
  • lola225lola225 Posts: 20
    How difficult is it to obtain the dealer's LEASE WORKSHEET ? I assume it's different than the Spec sheet? When I ask for it, I get the spec sheet and separate numbers for tax etc typed into an email. What does the Lease Worksheet contain and why do dealers seem reluctant to provide one?

  • delta737hdelta737h Posts: 625
    edited June 2010
    Hi lola225,

    The dealer's LEASE WORKSHEET is a computer generated docment that contains all pertinent lease data including sell price, doc fees, bank fees, gross cap, cap reduction, adj cap, money factor, residual, term, payment, taxes, etc. Dealers are reluctant to provide them because they assume customers will take it to another dealer and play the game "can you beat this"? If you really want it, then they should give it to you. Otherwise, refuse to do business with them. Once a lease has been consumated, most fund providers require that the dealer submit a similar document together with the lease agreement and other miscellaneous documents. It's different from a SPEC sheet which describes the vehicle attributes... kind of like the window sticker.

    I wouldn't be too concerned about the lease worksheet or place too much credence in what the dealer is offering. Don't let the dealer control the deal. You must be in control. A good start is to create a lease proposal. I've posted several samples on different message boards (Honda Accord, Infiniti G37, etc). Just click on my screen name and feel free to peruse my posts. These are one-page proposals that provide all the details of the lease and are designed to save time, money, and aggravation. Once created, you can FAX/email it to the dealer and do all your negotiating via phone/email in the comfort of your home/office.

    Hope this helps.

  • jerrykenjerryken Posts: 14
    Can you please tell me how to calculate sales tax on a lease in NJ? Is it .07 x the depreciaton or .07 x the selling price and spread over the lease term? Or just .07 thime the monthly lease payment which includes the finance charge? Thanks so much.
  • delta737hdelta737h Posts: 625
    edited June 2010
    Greetings jerryken!

    Thanks for asking. You didn't describe your particular lease situation, if any, so I have to cover all bases. In short, the answer is none of the above. On October 1, 2005, New Jersey joined a 22 state coalition and bought into the Streamlined Sales and Use Tax Law. The key points governing sales tax treatment given to motor vehicle leases in New Jersey, under this law, are briefly summarized in the following document…

    An important provision is described at Item 12 in the above doc…

    "12. The Division has indicated that the tax base will be reduced by the value of a trade-in of property owned by the lessee that is accepted by the lessor as partial payment.

    (a) Does this rule apply under both the original purchase price method and the total lease payments method?

    (b) In determining whether the lessee is the owner of property, what is controlling (i.e. GAAP, UCC, tax treatment)? For example, a lessee trades in property subject to a finance lease. Is the tax base reduced if the lessee is considered the owner for GAAP purposes?

    Since the tax is imposed on the lessee, the trade-in credit is applicable under both calculation methods. However, in both cases, the lessor must disclose the tax base (purchase price or lease payments), as well as the amount of sales tax due, on the paperwork provided to the lessee. As long as the property traded in was originally acquired by the lessee, it does not matter if there is an amount owed to pay off a loan. The trade in credit is based on the amount of value allowed by the dealer/lessor against the lease."

    This document also describes the two methods for computing sales tax in NJ:
    (1) tax rate x manufacturer’s invoice price (Item 7) and;
    (2) tax rate x total taxable lease payments; otherwise, known as the total payment
    method (Item 8)

    Either way, you can roll the tax (finance) into the lease (see below). More than likely, you’ll want to opt for (2- total payment method) as it is usually the cheaper of the two methods.

    The best way to illustrate the sales tax calculation methodology is to use a concrete example. Because the first method is straight forward, I’ll describe the second using a hypothetical example. What follows is somewhat long-winded, so please hang-in. Consider a lease, originating in NJ, with the following data…

    MSRP…………………….…… 30,000
    Sell Price (S)...…………….…... 27,000
    Acq. Fee (A)…………….…….. 600 (Acq Fees are taxable in NJ)
    Trade Equity (Q)...………..…… (1,000) (we’ll assume financed negative equity- taxable in NJ)
    Gross Cap………………..…… 28,600
    Cap reduction (D)…………...… 500 (assume $500 cash down- taxable in NJ)
    Cap reduction- trade-in credit… 4,000 (assumed trade-in allowance- not taxable in NJ)
    Adjusted Cap (C)……………… 24,100
    Money factor (F)………………. 0.00200
    Residual Factor………………. 0.60
    Residual Value (R)…………. 18,000 (Residual Factor x MSRP)
    Term (N months)....…………. 36
    NJ sales Tax Rate (t)………… 7%

    Note that the financed items, A & Q, are taxable items and are assumed to be rolled into the lease (i.e., capitalized). The $500 cash down payment (D) is also taxable (see below). However, the entire trade-in value of $4,000 is non-taxable; regardless of the fact that a $5,000 loan balance remains outstanding producing negative equity in the amount of $1,000.

    Taxable Payment = F x (C + R) + (C – R) / 36
    = 0.00200 x (24,100 + 18,000) + (24,100 – 18,000) / 36
    = 253.64

    Total NJ Sales Tax Liability = Total payment tax + Tax on cash cap reduction
    = (t x N x Taxable Payment) + (t x D)

    = (0.07 x 36 x 253.64) + (0.07 x 500)
    = 674.17

    The taxable payment is NOT the "lease payment". It's only purpose is to compute tax liability and is, therefore, an intermediate calculation.

    Now, if you wish to roll the tax into the lease, then your payment, including taxes, is…

    = 0.00200 x (28,100 + 674.17 + 18,000) + (28,100 + 674.17 – 18,000) / 36
    = 392.83... this is your "lease payment"

    Observe that 24,100 becomes 28,100 in the last calculation. This is due to the fact that the trade-in value ($4,000) is exluded as you owe $5,000 on the trade. The only roll that the trade-in value plays, in this example, is to compute the taxable payment. Beyond that, it's irrelevant and is not used to compute the lease payment (including taxes) or your regular lease payment, with or without taxes, for that matter. And so, the $4,000 was added back in order to compute the "lease payment". Again, this is triggered by the fact that you still owe money (which the dealer pays) on your trade.

    Your intitial costs, payable at lease inception, are assumed to be the the 1st payment of $392.83 plus DMV fees and dealer doc fees plus any applicable taxes on the dealer doc fee or other miscellaneous fees.

    Questions? Please let me know.

  • I just don't get it. I don't understand the whole leasing process or the numbers or the residuals.

    Does this mean I shouldn't lease?

    I've been looking at used RDXes and Lexi and have been worried about their health.

    Today, I saw many cars including a Honda crossover car, that could be leased. I figure if I can pay under $400 for a NEW car that I like, Im ahead of the game. I just don't know how to get eher without my head spinning.

    To wit: Honda Accord Crosstour EX V-6 Automatic 5Speed 2WD
    $309.00 per month for 36 months. $2,299.00 total due at signing.
  • delta737hdelta737h Posts: 625
    edited June 2010

    I suggest that you educate yourself about leasing. Edmunds offers some outstanding easy-to-understand articles on leasing at...

    I'm not sure how you "figure" $400 as a threshold value for a Crossover but the danger of not knowing how a lease is structured or how to compute payments can be very costly. It's not unusual that a vehicle can be leased for much less than their advertised specials.

    Hope this helps.

  • jayriderjayrider Posts: 3,602
    If you drive a lot of miles per year you probably shouldn't lease. Over 15k per.
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