How does the Lease Calculator work?
You lease the value minus down payment minus residual value, with interest over the term – plus interest on the residual.
Background & details
The result shows the monthly lease payment and the total cost (all payments plus the down payment). Unlike a loan, you are not paying off the whole asset – you are mainly funding its depreciation during your use. That is why lease payments are usually lower than loan payments for the same item – but you own nothing at the end of the term.
What values are normal?
For car leasing, the lease factor (payment divided by list price, times 100) often sits between 0.5 and 1.2 depending on the model and promotion – below that the deal is considered good value. After three years the residual value is frequently 45–60 % of the original price, depending on the brand. Watch the annual mileage limit: it partly determines the assumed residual.
Common mistakes
- Looking only at the payment: Acquisition fees, the down payment and delivery charges all belong to the true cost.
- Underestimating extra miles: Every mile over the contract limit costs extra and can add up sharply at the end.
- Ignoring return condition: Wear beyond normal use is charged back to you when you hand the asset over.
- Forgetting mandatory insurance: Many leases require fully comprehensive cover, which comes on top of the payment.
Practical tips
Always compare a lease against a loan for the same asset: the loan calculator shows what ownership would cost. Leasing makes sense if you want a new vehicle regularly, dislike the hassle of reselling, or – as a business – can deduct the payments for tax. Negotiate the asset price (the basis of the payment) just as you would for a purchase, and check whether a higher contracted residual sensibly lowers your payment.
When leasing fits – and when not
Leasing works well for business use, predictable mileage and people who value a new, serviced vehicle. It is less suitable if you plan to keep the asset for a long time, drive heavily or irregularly, or want to build ownership at the end – in those cases buying or a loan is often the cheaper overall deal.