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Lease Calculator
Is leasing that car — or any depreciating asset — better than buying it? This lease calculator splits your monthly payment into depreciation and finance charge, then shows the effective APR and the end-of-lease buyout price so you can weigh both paths.
See how this works on a $45,000 lease — 3 real examples
Monthly lease payment
$0
Base payment
$0
before tax
Finance fee
$0
rent charge/mo
Effective APR
0%
End-of-lease buyout
$0
= residual value
Lease cost breakdownWhere every dollar goes
| Item | Per month | Over the lease |
|---|
How your lease payment is calculated
A lease payment is the sum of a depreciation fee and a finance (rent) charge, taxed on the monthly total:
Depreciation = (cost − down − residual) / term
Finance fee = (cost − down + residual) × MF
Base = Depreciation + Finance fee
Monthly = Base × (1 + tax%)
MF = APR / 2400 Buyout = residual
The depreciation fee spreads the value the asset loses (cost down to residual, after any cap-cost reduction) evenly across the term. The finance fee is the money factor applied to the sum of the net cost and the residual — the average capital tied up during the lease. A down payment lowers both components because it reduces the net cost. The money factor and APR are two views of the same rate (APR = money factor × 2400), so the effective APR shown always matches the rate you entered. The end-of-lease buyout equals the residual value: you have already paid the asset down to that figure, so it is the price to own it outright. Sales tax, when entered, is applied to the monthly payment (the method used in most US states); leave it at 0 for equipment or tax-exempt leases.
One $45,000 asset, three residual guesses
A $45,000 asset over 36 months at 5%. The residual — what it should be worth afterward — sets almost everything about the payment.
Fast depreciation: 40% residual
per month$881.25
- Losing $27,000 of value in three years means $750 a month of depreciation alone.
- The finance charge adds $131.25 on the capital tied up.
- Payments total $31,725; keeping it afterward costs the $18,000 residual on top.
The heaviest payment of the three buys the cheapest path to owning it at the end.
Load this example (opens in a new tab)The middle estimate: 55% residual
per month$707.81
- Depreciation eases to $562.50 once the asset is expected to hold $24,750 of its value.
- A higher residual leaves more capital on rent, so the finance fee rises to $145.31.
- Payments come to $25,481, and the buyout price climbs to $24,750.
Each residual point you negotiate up moves cost from every month to the final buyout.
Load this example (opens in a new tab)Slow depreciation: 70% residual
per month$534.38
- Only $13,500 of value gets used up, so depreciation falls to $375 a month.
- At $534.38 the payment runs $346.87 under the 40% scenario.
- Walking away is cheap at $19,238 total — owning it means finding $31,500 at the end.
Return it and the residuals differ by thousands; buy it and all three land near $50,000.
Load this example (opens in a new tab)Illustrations only, not financial advice. Your own rate, taxes and insurance will differ — check with a qualified financial advisor before acting on any of this.
Car and equipment leasing, in plain English
- You pay for use, not ownership. A lease charges the depreciation between the cap cost and the residual, plus a finance charge — not the whole asset.
- The money factor is just an APR in disguise. Multiply it by 2400 to sanity-check the rate; a 0.00208 factor is about 5% APR.
- A higher residual means a lower payment. Less value is used up during the term — but it also raises the buyout if you want to keep the asset.
- The buyout equals the residual. At lease-end you can return the asset or buy it for its residual value; compare that price against its real market value.
- Works for equipment too. The same formula covers machinery, IT hardware and vehicles — leave tax and down payment at 0 for a plain business lease.
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Frequently asked questions
How is a monthly lease payment calculated?
A lease payment has two parts. The depreciation fee spreads the value the asset loses over the lease — (cap cost − down payment − residual) ÷ term in months. The finance (rent) fee is (cap cost − down payment + residual) × the money factor. Add them for the base payment, then multiply by (1 + sales-tax rate) for the total. On a $45,000 asset with a 55% residual, 36-month term and 0.00208 money factor, that is about $562 in depreciation plus $145 in finance charge — roughly $707 a month before tax.
What is residual value (salvage value) in a lease?
Residual value is what the asset is expected to be worth at the end of the lease — the leasing company’s estimate of its resale or salvage price. You only pay for the value used up during the term, so a higher residual lowers your depreciation fee and your monthly payment. It is usually quoted as a percentage of the original cost — in a car lease calculator you will often see 45–60% for a 36-month term, while heavy equipment varies widely by type and hours.
What is a lease buyout option and how is it valued?
A buyout (or purchase option) lets you keep the asset at lease-end by paying its residual value, sometimes plus a small purchase fee. Because you have already covered the depreciation down to the residual through your payments, the residual is the price to own it outright. This calculator surfaces that figure as the end-of-lease buyout so you can compare buying versus returning the asset.
How do I convert between a money factor and an APR?
They describe the same finance charge two ways. Multiply the money factor by 2400 to get the equivalent APR, and divide an APR by 2400 to get the money factor. A 0.00208 money factor is about 5.0% APR; a 6% APR is a 0.0025 money factor. This tool lets you enter whichever the leasing company quotes and shows the other instantly.
What is the difference between a capital lease and an operating lease?
An operating lease is a rental — you use the asset, return it, and expense the payments, with no ownership on your books. A capital (finance) lease behaves like a purchase financed over time: the asset and a liability sit on your balance sheet and you typically own it, or buy it out, at the end. The payment math here applies to both; the difference is accounting treatment, so check with your accountant on how to record it.
Can I use this for equipment and business leases, not just cars?
Yes — this general asset-lease tool works as a vehicle lease calculator and an equipment lease calculator alike. The same depreciation-plus-finance formula covers cars, machinery, IT hardware and other equipment. For a business, commercial or equipment lease you will usually leave the down payment and sales-tax fields at 0 and enter the lease rate as an APR or money factor. The end-of-lease buyout figure is especially useful for equipment leases with a purchase option.
Disclaimer: these calculators are educational tools, not financial advice. They model your inputs with published formulas, but they cannot know your full situation — for decisions with real stakes, talk to a qualified professional. Formulas and defaults last reviewed .