How to Calculate Car Lease Payments

by Contributor

When leasing a car, it's vitally important to calculate the monthly payments yourself. Car dealerships will, of course, calculate the payments for you, but the only way to make sure those calculations are correct is to do them yourself. Calculating lease payments is not as hard as it looks if you know what you're doing.

Gather all the necessary figures to calculate your lease payments. These include the MSRP of the car, the money factor/interest rate the lease is based on, the term of the lease and the residual value the lease is based on. All of this information can be found online or by contacting the dealer or the bank financing the lease.

Calculate how much you will use of the car's value by multiplying the MSRP by the residual value and subtracting the product from the negotiated price of the car. If the MSRP is $20,000, the residual value is 50 percent and the negotiated price is $18,000, then you will be using $8,000 of the car's value.

Break down the amount of the car's value into monthly payments by dividing it by the number of months in the lease. Continuing with the above example, if the lease term is 36 months, the payments would be $222.22 ($8,000/36).

Calculate the interest on the loan by adding the residual value of the car and negotiated price of the car and multiplying the sum by the money factor. In the above example assuming a money factor of .003, the calculation would look like this: (20,000 + 18,000) x .003 = 114. The interest portion of the monthly payment would be $114.

Add the two portions of the lease payment together to get the monthly lease payment less taxes and additional fees. (ex. 222.22 + 114 = 336.22)

Multiply the monthly lease payment by the state sales tax to get the monthly tax payment and add that to the monthly lease payment.

Factor in any fees, security deposits anddown payments into your calculations for a more accurate lease estimate.

Tip

  • check Use an online lease payment calculator like the one at Edmunds.com to simplify the process (see Resources below). These calculators have pre-designed fields that include all of the necessary variables.

Warning

  • close It's almost impossible to calculate a lease payment exactly on your own, but you should be able to get within a small range so that you know what is fair and what is not.

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