How to Calculate Car Lease Payments

How to Calculate Lease Payments on New Vehicles

Step 1: Calculate the Capitalized Cost
 
To calculate a vehicle's capitalized cost, take its selling price and 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 depreciation, subtract 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 the lease money factor that is being offered by the bank that you want to lease through.
 
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.

Tip: Computer savvy consumers can plug this formula into Excel and use it over and over again to calculate lease payments on vehicles fairly quickly or to play with different scenarios for one vehicle, like changing the length of the lease, changing the mileage allowance, etc...