This page shows the formula and assumptions behind the calculator so you can check the math yourself and see what is and is not included. It uses the standard money factor method for U.S. consumer car leases. The structure matches the payment derivation that Regulation M requires in a motor vehicle lease disclosure: gross and adjusted capitalized cost, capitalized cost reduction, residual value, depreciation, and rent charge.
Residual value = MSRP × residual percentage. The residual percentage is set by the leasing company and appears on the worksheet. This calculator asks you to type it in, because it differs by vehicle, term and mileage allowance.
Adjusted cap cost = negotiated price + fees rolled into the lease − capitalized cost reduction. The reduction is the sum of your cash down payment, rebates and net trade-in credit. This is a simplified version: a real worksheet can also include negative equity from a trade-in, taxes or add-ons rolled into the cap cost. If yours does, add them to the fees field.
Depreciation = (adjusted cap cost − residual value) ÷ term in months. It is a straight-line amount. If the residual is higher than the adjusted cap cost, the formula would give a negative number; the calculator sets depreciation to zero and shows a note so you can check your inputs.
Rent charge = (adjusted cap cost + residual value) × money factor. It is applied each month. The money factor sets the rate, and the dollar amount also depends on the cap cost and residual because the formula uses both.
Monthly tax = (depreciation + rent charge) × tax rate. Total monthly payment = base payment + tax. This models a state that taxes the monthly payment. Some states tax a different base or at a different time, so the real figure can differ. Total of payments = total monthly payment × term, which does not include fees due at signing, the down payment or end-of-lease charges.
The equivalent rate shown in the result is the money factor × 2,400. It exists so you can compare a lease with a loan. It is not an APR and is not a disclosed rate.
Inputs: MSRP $35,000; price $33,000; residual 58%; money factor 0.00125; 36 months; $2,000 down; no fees; 7% tax. Residual $20,300; adjusted cap cost $31,000; depreciation $297.22; rent charge $64.12; base $361.35; tax $25.29; total $386.64 a month.
Negative values are treated as zero. The residual is limited to 0 to 100%, the money factor to 0 to 0.01, the term to 1 to 120 months, and the tax rate to 0 to 30%. Results are shown to the cent; the calculation uses unrounded numbers, so the displayed lines can differ by a cent from their sum.
Registration, title and documentation fees; the first payment and other items due at signing; optional products such as gap coverage and service contracts; negative equity or taxes rolled in; excess mileage and wear charges; disposition fees; and state-specific lease tax methods.
Pages and rules change; check the current text at each agency before relying on a summary. Last reviewed October 2026.
A straight-line depreciation charge is how the standard payment formula works, even though real cars lose value unevenly. Using one tax rate on the payment keeps the tool simple and clear, at the price of not matching every state. We chose to show cents and a full breakdown so you can compare each line with a worksheet. We treat the fee field as an amount added to the cap cost, which is how acquisition fees are often handled, but your lessor may charge them up front instead.
Before each release we run the calculator's own code against hand-calculated cases: the default example, a higher money factor, no down payment, a shorter term, a fee added to the cap cost, and a case where the residual is higher than the cap cost. Each result must match the hand calculation to the cent. Run the same inputs yourself with a spreadsheet; if you ever find a difference, tell us on the contact page.
Why is tax applied to depreciation plus rent charge only? Because that is the monthly payment before tax. If your state taxes the cap cost, the price, or the up-front payments instead, the tax line here will not match.
Why does the rent charge not shrink over time? In the standard lease formula it is a constant monthly amount calculated at the start from the cap cost, residual and money factor, rather than a declining interest charge.
Can I use the calculator for a used car? Yes, if you know the residual and money factor. Use the car's price as the selling price and the lessor's residual percent against the stated base value.