Car Lease Calculator: Monthly Lease Payment with Money Factor and Tax

Estimate a monthly car lease payment from the price, residual value, money factor or APR, lease term, fees and sales tax, and see how much of it pays for depreciation and how much is interest. Leasing a car with a $40,000 MSRP, negotiated down to $38,000, for 36 months with a 58% residual, a 0.00250 money factor (6.00% APR), $1,000 of fees and $2,000 down costs $533.83 a month before tax, or $571.20 with 7% sales tax.

How a lease payment is calculated

• Residual value = MSRP × residual percentage. This is what the leasing company expects the car to be worth at the end: $40,000 × 58% = $23,200.
• Adjusted capitalized cost = negotiated price + fees − down payment, rebates and trade-in equity: $38,000 + $1,000 − $2,000 = $37,000.
• Depreciation part = (adjusted cap cost − residual) ÷ months: ($37,000 − $23,200) ÷ 36 = $383.33.
• Rent charge = (adjusted cap cost + residual) × money factor: $60,200 × 0.00250 = $150.50.
• Monthly payment = depreciation + rent charge = $533.83, plus sales tax where your state taxes each payment.

This is the same method used in the sample lease disclosure from the Federal Reserve's consumer leasing guide. In that example, an adjusted capitalized cost of $18,800, a residual of $12,350 and a total rent charge of $5,295 over 48 months give a base payment of $244.69, exactly what the formula above produces.

Money factor and APR

Leases quote the finance charge as a money factor, a small decimal. Multiply it by 2,400 to get the equivalent annual rate, or divide an APR by 2,400 to get the money factor. Ask the dealer for the money factor in writing so you can compare it with what you would pay on an auto loan.

Sales tax on a lease

States tax leases in different ways. In most states, sales or use tax is charged on each monthly payment, which is how this calculator works. Some states also tax the down payment, and a few tax the whole adjusted capitalized cost upfront. If your state taxes the lease upfront, set the tax rate to 0 and add the tax to the amount due at signing.

Ways to lower your lease payment

• Negotiate the price. The capitalized cost works like the price of the car, and every $1,000 off cuts the payment by roughly $1,000 ÷ term plus the rent charge on it.
• Pick a car with a high residual. Cars that hold their value cost less to lease because you pay for less depreciation.
• Get a lower money factor. Your credit score matters, and some makers offer subsidized rates on certain models.
• Think twice about a big down payment. It lowers the payment, but if the car is stolen or written off early in the lease, that money is usually gone.

Costs at the end of the lease

• Excess mileage, usually 10 to 25 cents for each mile over the allowance in the contract.
• A disposition fee to cover preparing and selling the car if you return it.
• Excess wear and tear charges for damage beyond normal use.
• The buyout price if you keep the car: the residual value plus any purchase option fee.

Lease or buy: the 2026 tax angle

For 2025 through 2028, you can deduct up to $10,000 a year of interest on a loan for a new car, SUV, pickup or motorcycle assembled in the United States, with the deduction phasing out above $100,000 of modified adjusted gross income ($200,000 for joint filers). Lease payments don't qualify, so compare the after-tax cost of financing with the auto loan calculator before you sign.

FAQ

What is a good money factor?

Convert it to an APR by multiplying by 2,400 and compare it with the rates you are offered on auto loans. A money factor of 0.00250 is the same as a 6.00% APR.

Can I negotiate the residual value?

The residual is usually set by the leasing company for each model and term, so there is little room to change it. The price, the money factor, fees and the value of your trade-in are where you can negotiate.

Is it better to put money down on a lease?

A down payment lowers the monthly payment but doesn't reduce the total much, because you pay less rent charge only on the amount you put down. Many people prefer to keep the down payment small and accept a slightly higher payment.

What does the payment include?

Depreciation, the rent charge and sales tax where it is charged monthly. Insurance, registration and maintenance are extra, and your contract may require higher insurance limits than you would choose for an owned car.

Related calculators

• Auto Loan CalculatorCompare with financing the car
• Gas Cost CalculatorFuel cost for your commute
• Paycheck Calculator 2026See what fits your take-home pay

Sources

• Federal Reserve Board: Keys to vehicle leasing, sample lease disclosure
• Edmunds: How to calculate your own lease payment
• Consumer Reports: Guide to car lease terms
• J.D. Power: What is a money factor on a lease?
• IRS: One, Big, Beautiful Bill Act tax deductions (car loan interest)