Formula
The lease payment is depreciation plus a rent charge. The rent charge uses the money factor:
lease payment = (cap − residual) / months + (cap + residual) × money factor
The buy side is a fixed loan on the cap cost. Its net cost is every payment minus the residual, as if you sold the car for that residual at the end. The result shown is the lower of the two totals.
Assumptions
- The money factor is the lease factor, not the annual rate.
- The buy rate is a separate annual percentage, compounded monthly.
- The residual is credited in full at the end of the buy side. Tax, fees, and a down payment are not included.
Worked example
A $30,000 cap cost, an $18,000 residual, 36 months, and a 0.00125 money factor costs $14,159.88 to lease, which is less than buying at 6.5% and crediting that residual.
Input definitions
- Money factor
- The lease finance factor. A rough annual rate is the factor times 2,400.
- Residual value
- The car's expected value at the end of the term, typed by you.
Limitations
This is an estimate, not a loan offer, a lease quote, or tax advice. A lender can add fees, and sales-tax rules differ by place. The currency control changes the symbol only.
Questions
Why can the lease total be lower while its payment looks smaller?
The buy comparison subtracts the residual, because the buyer still has the car. The page compares those two net totals, not the monthly payments alone.
Does this include a down payment?
No. Both sides start from the cap cost. A taxed purchase with a down payment is the car loan page.