A lease charges you for the part of the car you use up, plus interest on the money tied up in the car. The calculator works it out the way lease contracts do in the US and Canada, and also for the balloon finance deals common in the UK (PCP) and in much of Europe. Enter the numbers from the offer; the result is the payment before fees due at signing.
Example: a car with an MSRP of $35,000. You agree a price of $33,000, $650 of fees are rolled in and you put $3,000 down, so the adjusted capitalized cost is $30,650. The residual after 36 months is 58% of MSRP, $20,300. Depreciation: (30,650 − 20,300) ÷ 36 = $287.50. Rent charge at a money factor of 0.0025 (6% APR): (30,650 + 20,300) × 0.0025 = $127.38. Payment: $414.88 a month, before sales tax.
Money factor and APR
| APR | Money factor |
|---|---|
| 3% | 0.00125 |
| 4% | 0.00167 |
| 5% | 0.00208 |
| 6% | 0.00250 |
| 7% | 0.00292 |
| 8% | 0.00333 |
| 9% | 0.00375 |
How the residual and rate change the payment
Same deal as above (adjusted cost $30,650, MSRP $35,000, 36 months), before tax:
| APR | Residual 50% | 55% | 60% | 65% |
|---|---|---|---|---|
| 3% | $425 | $379 | $333 | $286 |
| 5% | $466 | $421 | $376 | $331 |
| 6% | $486 | $441 | $397 | $353 |
| 7% | $506 | $462 | $419 | $375 |
| 9% | $546 | $504 | $462 | $420 |
The residual matters more than the rate: ten points of residual change the payment by about $90 a month here; two points of APR by about $40.
Lease or balloon finance (PCP)
| US-style lease | Balloon finance / PCP | |
|---|---|---|
| What you pay monthly | depreciation + rent charge | an ordinary loan payment on everything except the balloon |
| At the end | hand the car back, or buy it for the residual | pay the balloon and keep it, hand it back, or trade it in |
| Who owns the car meanwhile | the leasing company | the finance company, until the last payment |
| Mileage limit | yes, with a charge per extra mile | yes, if you hand the car back |
Example (PCP): a €30,000 car, €3,000 deposit, a 40% balloon (€12,000) after 48 months at 7% APR: €429.19 a month. Keeping the car costs €35,601 in all; an ordinary 48-month loan for the same €27,000 would be €646.55 a month and €34,034 in all, because the balloon keeps accruing interest until you pay it.
Before you sign
- Negotiate the price first, as if you were buying; a lower capitalized cost lowers every payment.
- Ask for the money factor and the residual in writing, and check the payment with this calculator.
- Know the mileage allowance (often 10,000–15,000 miles a year in the US) and the charge per extra mile; and what counts as excess wear.
- Up-front money: a large down payment lowers the payment, but if the car is written off early, insurance (and gap cover) may not give it back.
Prices and rates stay on your device; nothing is sent anywhere. Once zet4u is saved there, the calculator works offline too – in a dealership with no Wi-Fi.
Frequently asked questions
How is a lease payment calculated?
It has two parts. Depreciation: (the price you agreed − the residual value) ÷ the number of months – the share of the car you use up. Rent charge: (the price + the residual) × the money factor – the interest. Add sales tax where your state taxes lease payments. With a $30,650 adjusted price, a $20,300 residual and a money factor of 0.0025, 36 months come to $287.50 + $127.38 = $414.88 a month.
What is a money factor?
The lease's interest rate written as a small decimal. Multiply it by 2,400 to get the APR it matches: 0.0025 × 2,400 = 6%. Divide an APR by 2,400 to go back. Ask the dealer for it in writing; a higher factor than your credit justifies is extra profit for the dealer.
What is a good residual value?
A higher residual means a smaller payment, because you pay for less depreciation. For a 3-year lease, 50–65% of MSRP is common; the lender sets it, from what it expects the car to be worth. You cannot negotiate it, but you can choose cars that hold their value.
Is a lease the same as PCP?
They are close. A US lease ends with handing the car back (or buying it at the residual). A UK PCP (personal contract purchase), and much European leasing, is a loan with a large final payment, the balloon: pay it and keep the car, or hand the car back instead. Choose "Finance with a final balloon" for those.
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