How to Calculate Car Lease Payments

Before you decide to lease a car it is important to find out what your lease payments will be to make sure you get a good deal. You can use an online lease payment calculator for this purpose or you can work the numbers yourself.

This article will show you how to calculate "bottom-line" car lease payments using only a pocket calculator.

1. First, you will need to estimate how much your car will be worth after the end of the lease term. For this purpose you will need the MSRP of the car (MSRP stands for Manufacturer Suggested Retail Price and is also called "sticker price") and the residual value of the car (the residual value gauges the future value of the car in terms of percentage of depreciation of the initial value).

   Multiply the MSRP by the residual value.

   For example, if the MSRP is $25,000 and the residual value is 58% you will get:

   $25,000 x 58% = $14,500

2. This can get you how much of the car's value you will use.

   Subtract the car's value at the end of the lease from the negotiated initial price.

   For example, if you have negotiated a price of $23,000 for your car you will get:

   $23,000 - $14,500 = $8,500

3. Find out how big your monthly payments will be before interest and tax.

   Divide the car's value you will be using by the number of months of the car lease.

   For example, if you will be leasing the car for 36 months you will get:

   $8,500 / 36 = $236.11

4. To find out how much you will pay for interest you will need to know the lease factor. You can get that by your car dealer or calculate it yourself by dividing the interest rate of your car lease by 2400. Thus, for an interest rate of 8% you will have a lease factor of 8 / 2400 = 0.0033.

   Sum up the negotiated car price and the residual value and multiply this sum to the lease factor.

   For example, if your lease factor is 0.0033 you will get:

   ($23,000 + $14,500) x 0.0033 = $123.75

5. Estimate your car lease monthly payment before taxes and fees.

   Add your interest payments to the previous monthly payment estimation.

   In this example you will get:

   $236.11 + $123.75 = $359.86

6. Find out how big your monthly payments will be plus taxes.

   Multiply your monthly car lease payment from step 5 by your state sales tax. Then sum up the estimated tax amount and the monthly payment.

   For example, if your state sales tax is 8% you will get:

   $359.86 + ($359.86 x 8%) = $388.65

As you can see, calculating car lease payments is not at all difficult. However, by using an online car lease calculator you will be also able to add factors such as down payment and fees which are not included in the instructions above.

The information and interactive car payment calculators that are provided on this site are made available as general assistant guidance in regards to car loans and payments. We do not guarantee that any information or calculations will be accurate or applicable to your personal financial situation, circumstances, or objectives. Accordingly, before making any final decisions we encourage you to consult a qualified professional and get personalized advice.

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