Calculate your exact monthly car lease payment using money factor, residual value, and capitalized cost. Compare lease vs buy total cost — free auto lease calculator.
Money factor, residual value & depreciation fee
Your monthly car lease payment has three components: a depreciation fee, a finance fee, and sales tax. The depreciation fee covers how much the car loses in value during your lease term — calculated as (cap cost minus residual value) divided by the number of months. The finance fee is essentially interest, calculated by multiplying the money factor by the sum of the cap cost and residual value. On a $35,000 car with a 55% residual over 36 months and a money factor of 0.00125 (equivalent to 3.0% APR), the base payment works out to roughly $400–$450 before taxes and fees.
Understanding these numbers gives you real negotiating power at the dealership. The money factor and residual value are set by the manufacturer's captive finance arm and are non-negotiable, but the cap cost — essentially the selling price — absolutely is. Negotiating $2,000 off the selling price saves you roughly $55 per month over 36 months and lowers your total lease cost by more than $2,000. Many lessees also skip large cap cost reductions (down payments), because that cash is lost if the car is totaled — gap insurance or a lower up-front payment protects you better.
Money factor is the lease equivalent of an interest rate. Multiply it by 2,400 to convert to approximate APR. A money factor of 0.00125 equals 3.0% APR. Dealers sometimes mark up the money factor — know the buy rate before you sign.
Residual value is what the manufacturer says the car is worth at lease end, expressed as a percent of MSRP. A higher residual (e.g., 60%) means lower monthly payments. Luxury brands and hybrids often carry the highest residuals.
Cap cost is the agreed selling price minus any down payment or trade-in. Always negotiate the selling price just as you would for a purchase — then convert it to lease terms. Never negotiate based on monthly payment alone.
Leasing typically costs less per month but builds no equity. Buying costs more monthly but you own the vehicle outright. If you drive 15,000+ miles per year or keep cars 8+ years, buying usually wins on total cost over time.