In order to get the best deal when you lease a car, you should begin by getting a rough idea of what your lease payment will be for the vehicle in question. For many consumers, this seems like an overwhelming task. But it doesn't have to be. The calculations shown here can be done using a pocket calculator. Or, you can create an Excel spreadsheet to make the calculations automatic. Either way, this will be a valuable tool in saving money when you lease a car.Calculating a lease payment to the penny is nearly impossible, particularly when the lease is subsidized by the automaker, but you can arrive at a ballpark figure by using the following formula, which we will illustrate using a $23,000 car on a three-year lease.

Lease Payment Estimating

You can calculate a "bottom-line lease" that represents the very best deal you could get. If you get payments within $20 a month of this (in a 36-month lease), you will have done well.

To calculate a bottom-line lease payment you will need several figures:
MSRP of the vehicle. Find this price on Edmunds.com.
The money factor. This is the interest rate the lease is based on. To get this, call the dealer or get the information from your credit union. A common interest rate is 9 percent (as a money factor, this would be .00375).
Lease Term. Again, we recommend a 36-month lease to ensure warranty coverage.
Residual value of the car. Call the bank or dealer to find the residual value. Most cars have a residual value of between 50 and 58 percent for a 36-month lease.
Calculating A Sample Lease Payment


In the following example, we have chosen a vehicle that has a sticker price of $23,000. You have negotiated the price down to $20,000. We'll also assume that the interest rate is 9 percent and the residual value is 57 percent. What are the monthly payments on a three-year lease?

The first step is to find out how much of the car's value you will use. In other words, down the road three years, what will it be worth? In this example, the MSRP of $23,000 is multiplied by the residual value of 57 percent.

$23,000 X .57 = $13,110

The car will be worth $13,110 at the end of the 36-month lease. Since the car was worth $20,000 (after you negotiated it down) and it will be worth $13,110, you will be using $6,890 of the car's value.

$20,000 - $13,110 = $6,890

The $6,890 is then broken into 36 monthly payments of $191.39.

Before you get excited about how low this payment is, remember that this figure doesn't include interest or tax. Finding the interest amount is the second half of the calculation. Interest on a lease is computed in a weird way. You add the negotiated price of the car to the residual value and multiply this by the money factor.