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# Car Lease Calculator

## What is a Car Lease?

A Car Lease is a contractual agreement where a user rents a vehicle for a fixed time period on a monthly fee basis. The user does not hold any ownership over the car, and must return it to the owner (the dealer) at the end of the lease period. Notable advantages of leasing a car include affordability, lower maintenance costs, potential tax benefits, and freedom from the hassles of selling a used car.

## How to use a Car Lease Calculator?

A Car Lease Calculator is a tool that estimates your monthly car lease payments. To use this calculator, follow these steps:

1. Enter the MSRP (manufacturer's suggested retail price or the sticker price) and the final negotiated selling price of the car.

2. Type in the duration of your lease and the sales tax rate of your state.

3. Input the money factor (or the lease charge) and the residual value percentage of the car. This information can be obtained from your dealer.

4. Optionally, add additional information, like the dealer fee, registration fee, down payment amount, trade-in value, and any other reductions.

After entering these details, the calculator will display an estimate of your monthly lease payment amount (with and without taxes).

## An actual example to demonstrate the calculator

Let's assume a car with an MSRP of \$30,000. However, after negotiations, you manage to bring down its price to \$28,000. The dealer fee and the registration fee are \$300 and \$1,000 respectively. The dealer mentions that at the end of your lease period (36 months), the car will have a residual value of 60% and a money factor of 0.001. You trade in your old car for \$5,000 and make a down payment of \$2,000.

The calculations would then proceed as follows:

1. Calculate the net capitalized cost: (\$28,000 + \$1,000 + \$300) - (\$5,000 + \$2,000) = \$22,300

2. Find the residual value: \$30,000 × 60 / 100 = \$18,000

3. Calculate monthly depreciation: (\$22,300 - \$18,000) / 36 = \$119.44

4. Compute monthly rental: (\$22,300 + \$18,000) × 0.001 = \$40.30

5. Get pre-tax lease amount: \$40.30 + \$119.44 = \$159.74

6. Deduce monthly sales tax: 6 × \$159.74 / 100 = \$9.58

7. Total monthly lease payment: \$9.58 + \$159.74 = \$169.33

So, for this example, you would make a monthly payment of \$169.33 for the term of your car lease.

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