Auto Lease Calculator

The Auto Lease Calculator can help estimate monthly lease payments based on total auto price or vice versa. For more information about or to do calculations involving leases in general, please use the Lease Calculator.

Auto Leases

A lease is a contract allowing a party to convey property to another party for a specified time, usually in return for a periodic payment. A car lease allows a person to drive a car for a fixed period of time as they make a down payment as well as monthly lease payments until the lease ends. It can help to think of a car lease as a long-term car rental; while car rentals generally last for as little as a day or even just a few hours, car leases average between two and four years. Many leases allow the purchase of the leased vehicles through a purchase option agreement at a specified price once the lease ends. It is important to note that choosing to add such an option at the beginning of a lease will add a small amount to the monthly lease payment. Most car leases can be found at dealerships or private car dealers.

Several variables are required to calculate the monthly lease on any vehicle:

• Auto Price—Also known as capitalized cost, it refers to the retail price of the car. It is possible to negotiate this figure down (the same strategy used for buying cars) for a more affordable lease. Actually, many experts claim it is better to negotiate with car salesmen as if buying the car outright, and only when the desired figure is reached should a potential lessee reveal that they intend to lease the car and not buy.
• Money Factor—This is the interest rate expressed differently and used specifically in the context of car leases. Lessors use the money factor as a way to determine lease rates that correspond to each lessee’s credit history. They generally work very similarly: the poorer the credit history of the lessee, the higher their money factor, and the pricier the lease. To get the money factor, divide the APR on the lease by 24 or 2400, depending on whether it is expressed as a decimal or percent.
• Lease Term—This is the length of the lease. Most leases run between 2 to 4 years.
• Residual Value—Sometimes called lease-end value. In essence, the residual value of a car is the amount it can be bought for at the end of the lease. Financial institutions that issue lease contracts, not the dealers, set residual values on vehicles. It is an estimation of the worth of the car at the end of the lease period. The difference between the price of the car minus residual value will result in the depreciation of the car after a lease, which is amortized throughout the lease loan. Therefore, auto leases tend to be more affordable for slowly-depreciating vehicles because they hold their residual values well.

Mileage

Most leases will have a mileage cap, which is the maximum number of miles the car can be driven during the life of the lease. In the U.S., standard auto leases generally allow annual mileage limits of 10,000 to 15,000, with most coming in at 12,000. If the lessee exceeds this limit, there will be a penalty charge per mile over the limit when the lease ends. In the U.S., the average cost is between 5 to 20 cents per mile over.

There exist certain car leases called “high mileage leases,” which give lessees several thousand additional miles to work with annually. Although the monthly lease payments for high mileage leases tend to cost more than the standard leases, they may be helpful to those who are prone to racking up a ton of miles. Keep in mind that the average American drives around 18,000 miles a year. Lessees that go over their mileage limits have the option to avoid the penalties by buying the vehicle at the end of the lease.