Auto Lease Calculator: Payment, Money Factor and Interest Rate

How the payment is built

The calculator follows the payment worksheet Regulation M requires on a lease disclosure (12 CFR 1013.4(f)). The gross capitalized cost is the negotiated price plus any fees rolled into the lease: $40,000 plus $995 here. A down payment or trade-in equity is a capitalized cost reduction, and what is left, $40,995 with nothing down, is the adjusted capitalized cost.

The residual is what the lessor expects the car to be worth at the end of the lease, set as 58% of the $42,000 sticker price, or $24,360. Depreciation is the gap between the adjusted capitalized cost and the residual, $16,635 spread over 36 payments, or $462.08 a month.

Add the rent charge of $163.39 and sales tax of $43.78 and the payment is $669.25 a month. Over the term the lease costs $24,093. Each monthly part is rounded to the cent. The worksheet follows Regulation M: total depreciation is the adjusted capitalized cost less the residual, $16,635, and the total rent charge is the total of the base payments less that depreciation, so line 3 less line 4 equals line 5 whenever there is a rent charge, and lines 5 and 6 add up to line 7.

The money factor and the rent charge

Dealers work the monthly rent charge as the adjusted capitalized cost plus the residual, times the money factor. That formula is a common dealer convention; no regulation states it. It is interest on the average balance: the lease starts at the capitalized cost and ends at the residual, so the average balance is their sum divided by 2, and a month of interest on it at an annual rate r is (cap + residual) × r ÷ 24. With r written as a percent, the divisor becomes 2,400.

That gives the conversion both ways, also a common dealer convention: a money factor times 2,400 is roughly the equivalent interest rate, and a rate divided by 2,400 is the money factor. A money factor of 0.0025 is about 6%.

When the Federal Reserve wrote the lease disclosure rules it described these rates this way: “Typically these rates are based on the lessor’s ‘money factor’—representing only the ‘rent’ or the ‘interest’ charge—and are sometimes labelled as an ‘annual percentage rate.’” (61 FR 52246, 52254, October 7, 1996). Regulation M now bars that label. A lessor that quotes a lease rate in an ad or the lease documents must add that it may not measure the overall cost of financing the lease. It may not use “annual percentage rate,” “annual lease rate” or an equivalent term (12 CFR 1013.4(s)).

Sales tax

Here sales tax is charged on each monthly payment at the rate you enter, which on the default lease is $43.78 a month. States differ: some tax each payment, others tax the full price or the amount due at signing, which this calculator does not model.

What this does not model

It does not say whether to lease or buy. The auto loan calculator works out financing the same car as a purchase, and cash back vs low APR compares a rebate with a low-rate offer on one.

It leaves out charges outside the monthly payment: the disposition fee at turn-in, a purchase option fee, a security deposit, and mileage or excess-wear charges. Early termination is not modelled either.

A money factor is not a loan APR. The APR calculator shows how a loan’s APR folds upfront fees into one yearly rate, which a money factor does not attempt.