Car Lease Calculator

Calculating Car Lease Payments

Once you are aware of the basics of the leasing process, knowing how to calculate it is also important. Half the customers are unaware of the finer details of lease calculations and so, they often leave out many important figures that should otherwise be included.

Car Lease canada Calculator

Car Lease canada Calculator

To make it easy for the reader, let’s divide the term ‘lease payments’ into three main components and see how they are calculated.


The formula for calculating depreciation is: Depreciation = (Net Capitalized Cost – Residual) ÷ Term.

The figure for Net Capitalized Cost is determined after negotiations with the dealer are finalized. The Residual value is determined by the leasing company and the term is decided by the customer. Remember, as you change the term of the contract, the residual value also changes.

Rent Charge:

The formula for calculating the rent charge is: Rent Charge = (Net Capitalized Cost + Residual) x Money Factor.

The rent Charge is in a lease as Interest Payment is in a loan. This finance fee is charged by the leasing company to make up for the money it spent on buying the car for you. Together with depreciation, the rent charge makes up 90% of the lease payment, the remaining filling in by taxes.


The formula for calculating the tax is Sales Tax Rate × (Depreciation per Month + Finance Fee Per Month).

The amount of taxation largely depends on State laws. However, for an idea of how much tax will be charged within the lease payment, this formula can be used.

Once these three principal amounts are calculated, simply adding them up gives you a total of the monthly lease payments that you will have to make at the beginning of each month.

Car Lease Calculation

Monthly Payment Calculation

Monthly Payment = Depreciation + Rent Charge + Taxes

To make leasing an attractive financial option for Canadians, leasing agents and companies have added an element of flexibility to it. Apart from varying terms, customers can also choose to make a down payment at the time the lease agreement is settled.  This payment, which is subjected to tax, is spread across the remaining monthly lease payments; reducing the amount to one that is easy to manage on a monthly basis. While down payments are optional, if you have a bad credit history, they may be made mandatory by the leasing company.

Another mandatory payment is the security deposit. This deposit is typically equal to one month’s payment and is returned to the customer when the term of the lease ends. However, if major damage has been done to the vehicle, the amount equivalent to the repair costs is subtracted from the security deposit.

Additional Fees

Two additional fees that are usually part of the deal are:

Acquisition Fee: The acquisition Fee is charged by the dealership you visit. It is a way for the car dealer to make some money out of the contract. It is usually included in the Capitalization Cost of the vehicle. Usually, the acquisition fee is charged by the bank or leasing company with an added markup to facilitate the dealer and his demands for profit.

Disposition Fee: The disposition Fee is assessed by the leasing company at the end of the lease. It is similar to the charge of managing the disposal or sale of the vehicle that you have turned in. The amount of this fee can be negotiated in advance.