How this number is made
A lease payment has two pieces: depreciation, which is the cap cost minus the residual spread over the months, and a rent charge, which is the money factor times the cap cost plus the residual. Sales tax is extra and local. The money factor is not an APR. Multiply it by 2,400 for a rough APR.
- Adjusted cap cost is the negotiated price plus fees you rolled in, minus the down payment and rebates.
- Residual is the contract’s residual, usually a percent of MSRP already converted to dollars.
Formula
Depreciation = (cap − residual) ÷ months. Rent = (cap + residual) × money factor. Payment before tax = depreciation + rent.
Worked example
With the figures already in the form, payment before tax is $496.89.
Questions
What is a money factor of 0.002 in APR?
About 4.8%, because 0.002 × 2,400 = 4.8. The conversion is the industry’s rule of thumb.
Where is the tax?
Not included. Some states tax the payment monthly. Some tax the whole lease up front. Add that on top.