Lease Formula

Here are the mechanics of how to calculate your own lease, without a lease calculator. Understanding the formula comes in handy when you are at the dealership and do not have access to internet or a computer with a lease calculator. It’s pretty useful if you want to cross-check the dealers math.

What you need:

• MF: The Money Factor. (You can find out what your interest rate is by multiplying the money factor by 2400)
• RV: Residual Value. What the car is worth at lease-end.
• CC: The Capitalized Cost AKA Sale Price.
• LST: Local Sales Tax.
• M: Term of the lease (24,36,48,etc)

I am going use the latest quote I got for the G37 I was shopping for as an example.

Step 1: Monthly Depreciation Charge

(CC - RV) / M

(32,916 - 22,185) = 10,731 / 36 = $298.08

Step 2: Monthly Finance Charge

(CC + RV) * MF

(32,916 + 22,185) = 55,101 * 0.00186 = $102.49

Step 3: Total Monthly Charge (plus tax)

(Monthly Depreciation Charge + Monthly Finance Charge) * LST

(298.08+102.49) = 400.57 * 1.0825 (8.25% tax) = $433.62

The actual quote I got is $453 a month. Why the $20 difference? Because they rolled in the Acquisition fee (bank fee) of $595 into the Cap Cost of the car. So keep that in mind next time you lease. Its probably better to pay that upfront. Otherwise, that $595 ends up costing $720 after all is said and done.