Auto Lease Calculator

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How to use the Auto Loan Lease Calculator
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1. Input Vehicle Information

• Vehicle Price: Enter the full price of the car (e.g., $25,000).
• Vehicle Residual Value: Enter the estimated value of the car at the end of the lease (e.g., $15,000). This reflects depreciation.

2. Enter Financial Details

• Down Payment Percentage: Input the percentage of the car’s price you’ll pay upfront (e.g., 20%). The calculator automatically converts this into a dollar value.
• Loan Term: Choose the lease duration, such as 36 months (3 years).
• Credit Score Range: Select your credit score bracket, since it can affect your interest rate. (In the example, "Good (670–739)" is chosen.)
• Interest Rate: The calculator fills this based on your credit score, or you can adjust manually (e.g., 4.20%).

3. Loan Start Date

• Select when your lease begins (e.g., December 2025). The calculator uses this to generate a payment schedule.

4. Review the Lease Summary

On the right side, you’ll see:

• Monthly Payment: Your estimated monthly lease cost (e.g., $279).
• Loan Term: The duration of the lease (e.g., 36 months).
• Interest Rate: The applied annual percentage rate (APR).
• Total Cost: The sum of all lease payments over the term (e.g., $15,040).

5. Review the Lease Schedule

Below the summary, you get a detailed breakdown of each payment:

• Payment Date: When each payment is due.
• Principal: The portion that reduces the lease balance.
• Interest: The portion that goes to interest charges.
• Balance: The remaining balance after each payment.

For example, in Dec 2025:

• Principal: $139
• Interest: $140
• Balance: $4,861

This shows how your payments gradually reduce the balance.

What is a Car Lease?

A car lease is a long-term rental agreement that allows you to use a vehicle for a fixed period and number of miles. Instead of owning the car, you make monthly payments to the leasing company for the duration of the contract to cover the car's depreciation.

• Lease Term: This is the length of your lease agreement, which typically ranges from 24 to 48 months.
• Mileage Limit: Leases include an annual mileage cap, and you will face penalties if you exceed this limit by the end of the term.
• Down Payment: Often called a capitalized cost reduction, this is an optional upfront payment that lowers your subsequent monthly payments.
• Monthly Payments: This is the fixed amount you pay each month to use the vehicle for the duration of the lease.
• Wear and Tear: Your agreement will define acceptable wear and tear, and you may be charged for any damage that exceeds these standards upon returning the car.
• End-of-Lease Options: When the lease ends, you can typically return the vehicle, purchase it for a predetermined price, or lease a new car.

How does a Car Lease work?

A car lease allows you to drive a new vehicle for a set period by paying for its depreciation rather than its full purchase price. Your monthly payments are calculated based on the difference between the car's initial value and its projected worth at the end of the lease, known as the residual value. According to an explanation of how car leases work, most agreements last two to three years and include an annual mileage limit, typically between 10,000 and 15,000 miles.

When your lease term concludes, you return the vehicle to the dealership for a final inspection. The dealer will check for mileage overages and any wear and tear beyond what is considered normal, and you will typically pay a disposition fee. After settling any final charges, you have the option to walk away, purchase the car, or start a new lease on a different vehicle.

Why Lease instead of Finance?

Deciding between leasing and financing a car often comes down to your personal finances and lifestyle preferences. There are several pros and cons to consider when weighing your options.

Pros of Leasing

• Lower Payments: Lease payments are typically less than loan payments, freeing up cash for other expenses.
• Newer Vehicles: You can drive a new car with the latest technology every few years without a long-term commitment.
• Minimal Upfront Costs: Leasing often requires a smaller down payment compared to buying a car.
• Warranty Coverage: Most leased vehicles are covered by the manufacturer's warranty, protecting you from unexpected repair bills.
• No Depreciation Risk: You only pay for the vehicle's depreciation during the lease term, avoiding the risk of its value dropping significantly.
• Access to Luxury: Lower payments can make higher-end or luxury vehicles more accessible than they would be to purchase.
• Potential Tax Benefits: If you use the vehicle for business, you may be able to deduct your lease payments as a business expense.

Cons of Leasing

• Mileage Restrictions: Leases come with annual mileage limits, and exceeding them results in costly fees.
• No Equity: At the end of the lease, you don't own the car and have no asset to show for your payments.
• Extra Fees: You can face charges for excessive wear and tear, early termination, or going over your mileage cap.
• Limited Customization: Modifying or personalizing a leased vehicle is generally not allowed.
• Perpetual Payments: Unlike financing, where payments eventually end, leasing means you'll have a car payment for as long as you continue to lease.
• Higher Insurance Costs: Lease agreements often require more comprehensive insurance coverage, which can lead to higher premiums.

Frequently asked questions