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Car Leasing Calculator -- Monthly Payment

Calculate the monthly car lease payment with down payment, residual value, APR, and effective annual rate.

Sources: Bankrate -- Lease Calculator · Consumer Financial Protection Bureau

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How Is the Car Lease Payment Calculated?

Car leasing is a popular financing method that allows you to use a vehicle by paying a monthly payment without purchasing it immediately. This calculator simulates the monthly payment, total cost, and applicable tax deductibility.

Components of a Car Lease

  • Down payment: the initial payment, expressed as a percentage of the vehicle price. Typically 5-30%. A higher down payment reduces the monthly payment but requires more upfront cash.
  • Monthly payment: the periodic installment calculated based on the financed amount, duration, and interest rate.
  • Residual value (buyout): the amount to pay at end of lease to become the owner. Usually 1-20% of the original price.
  • APR: the Annual Percentage Rate that determines the interest cost on the financed capital.

The Calculation Formula

The monthly payment is calculated using the financial formula of a deferred annuity with residual value (balloon payment). The financed amount (price minus down payment) is distributed over the monthly payments accounting for interest and the residual value to be paid at maturity.

APR vs Effective Annual Rate

The APR represents the nominal interest rate applied to the lease. The effective annual rate includes compound interest effects and gives a more complete picture of the true cost. Always compare the effective rate when evaluating different lease offers.

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Frequently Asked Questions

What is the down payment in a car lease?▼
The down payment is the initial amount paid when signing the lease contract. It is expressed as a percentage of the vehicle price, usually between 5% and 30%. A higher down payment reduces the financed amount and therefore the monthly payment, but requires more upfront liquidity.
How does the buyout at end of lease work?▼
At the end of the lease contract, the lessee can exercise the buyout option by paying the agreed residual value (typically 1-20% of the original price). Alternatively, they can return the vehicle to the leasing company or start a new contract for a different vehicle.
What is the difference between APR and effective annual rate?▼
The APR (Annual Percentage Rate) is the nominal interest rate applied to the financing. The effective annual rate includes the compounding effect and other fees, making it always higher than the APR. The effective rate is the most reliable indicator for comparing different lease offers.