Car Lease Calculator

A money factor is how lease companies express interest rates—it's a small decimal number like 0.00125. To convert money factor to APR, multiply by 2,400. So 0.00125 × 2,400 = 3% APR. Conversely, divide APR by 2,400 to get money factor. A good money factor is typically below 0.0025 (6% APR). The money factor significantly affects your finance charge—the lower the better. Always negotiate the money factor along with the selling price.

Residual value is the predicted value of the car at lease end, expressed as a percentage of MSRP. A $40,000 car with 55% residual after 36 months has a residual value of $22,000. Higher residual = lower monthly payments because you're financing less depreciation. Luxury brands (BMW, Lexus, Mercedes) often have higher residuals. Residuals are set by the leasing company and aren't negotiable, but you can compare across brands. A 3-year residual above 55% is generally good.

Lease payments have two parts: depreciation and finance charge. Depreciation = (Net Cap Cost − Residual) ÷ Term. Finance Charge = (Net Cap Cost + Residual) × Money Factor. Net Cap Cost = Negotiated Price + Fees − Down Payment − Trade-in. Example: $35,000 net cap, $20,000 residual, 36 months, 0.00125 money factor. Depreciation: ($35,000 − $20,000) ÷ 36 = $417. Finance: ($35,000 + $20,000) × 0.00125 = $69. Base payment: $486/month before tax.

Generally, no. Unlike buying, a lease down payment doesn't build equity—if the car is totaled or stolen, you lose that money. GAP insurance doesn't cover down payments. Instead, keep cash for monthly payments. If you must lower payments, negotiate the selling price or find a car with better residual. Exception: if lease specials require money down for advertised rate, calculate if the deal is still good. Multiple security deposits (MSD) can lower money factor without the risk of a down payment.

You have three options: 1) Return the car—pay any excess mileage fees ($0.15-0.30/mile over limit) and wear-and-tear charges. 2) Buy the car for the residual value—good if the car's market value exceeds residual. 3) Lease or buy a new car—dealer may waive fees to keep your business. Before lease end, get the car inspected to know potential charges. Budget for disposition fee ($300-500) if returning. Start shopping 3 months before expiration to allow time for a smooth transition.