1. What is the Lease Payment Formula?

The lease payment formula calculates your monthly payment when leasing a vehicle or equipment. It consists of two main components: the depreciation charge and the finance charge.

2. How Does the Calculator Work?

The calculator uses the lease payment formula:

Where:

• \( Cap \) — Capitalized cost (negotiated price of the vehicle)
• \( Residual \) — Estimated value at lease end
• \( Term \) — Lease duration in months
• \( Money\ Factor \) — Lease financing rate (decimal)

Explanation: The first part calculates the monthly depreciation, while the second part calculates the financing charge.

3. Understanding Lease Components

Details:

• Capitalized Cost: The negotiated price of the vehicle plus any additional fees rolled into the lease
• Residual Value: The estimated value of the vehicle at lease end (set by the leasing company)
• Money Factor: The lease equivalent of an interest rate (divide by 2400 to approximate APR)

4. Using the Calculator

Tips:

• Enter all values in USD
• Money factor is typically a small decimal (e.g., 0.00125)
• Standard lease terms are 24, 36, or 48 months
• Residual is usually expressed as a percentage of MSRP

5. Frequently Asked Questions (FAQ)

Q1: How do I convert money factor to APR?
A: Multiply the money factor by 2400 (e.g., 0.00125 × 2400 = 3% APR).

Q2: What's a good money factor?
A: Rates vary, but below 0.00200 (equivalent to ~4.8% APR) is generally good.

Q3: How is residual value determined?
A: Set by the leasing company based on make/model, term, and mileage allowance.

Q4: Can I negotiate the money factor?
A: Typically no, but dealers may mark it up - compare with bank rates.

Q5: What fees are included in capitalized cost?
A: Acquisition fee, taxes, title, and any optional equipment or warranties.