Reviewed September 2026.
A lease payment on the whiteboard is not the full price of driving the car. True cost stacks capitalized cost, residual value, money factor (rent charge), fees, taxes, and end-of-lease bills for miles and wear. This worksheet is lease-specific. Loan-vs-lease framing stays in Car loan vs lease. Ownership-style total cost (insurance, fuel, maintenance) pairs with Estimate the total cost of a car.
What five numbers should I pull from the lease contract?
- Gross capitalized cost: negotiated price of the car plus fees rolled in
- Cap cost reduction: cash, rebates, or trade equity paid at signing (lowers depreciation you finance)
- Residual value: preset end value as a percent of MSRP (not of your negotiated price)
- Money factor: lease finance charge; rough APR ≈ money factor × 2400
- Fees: acquisition (start), disposition (end), title/registration, and any dealer add-ons
Also note term (often 24–36 months) and mileage allowance (for example 10,000 or 12,000 miles/year) plus the per-mile overage rate.
How do I calculate true cost if I return the car?
For a lease you return at term end:
True lease cost ≈
(all payments over the term)
- due-at-signing cash (excluding refundable deposits if any)
- disposition fee
- expected excess-mile and wear charges
− any refundable security deposit you expect back
Depreciation piece in plain language: (net cap cost − residual) spread over the term, plus rent charge from the money factor. You do not need dealer software to sanity-check: if net cap is $32,000, residual $20,000, term 36 months, depreciation is about $12,000 total (~$333/month) before rent charge, taxes, and fees.
Worked example
Jordan leases for 36 months at 12,000 miles/year.
| Item | Amount |
|---|---|
| Monthly payment (tax included) | $349 |
| Payments over term (36 × $349) | $12,564 |
| Due at signing (first month, acquisition, docs) | $1,890 |
| Disposition fee at return | $395 |
| Expected 3,000 excess miles × $0.25 | $750 |
| Illustrative true cost to return | ~$15,599 |
Money factor on the contract is 0.00290 (about 6.96% APR equivalent). Residual is 58% of MSRP. Jordan compares that ~$15,600 three-year cost to buying with a loan and selling after 36 months (Comparing financing offers).
How does a buyout path change the math?
If you might keep the car, add the purchase-option price (often tied to residual plus fees) and compare to market value at lease end. That fork: Lease buyout, Lease-end buyout options, and Buyout vs refinance.
Checklist before you sign
- Convert money factor × 2400 and write the APR-equivalent on the worksheet.
- Separate cap cost reduction from “dealer discounts” that only lower payment optics.
- Multiply your realistic annual miles by the overage rate; budget that as a likely cost.
- Ask whether acquisition and disposition fees are waivable or capped.
- Decline packing unrelated products into cap cost until the base lease math is clean.
Educational only. Not personalized leasing advice. Tax treatment varies by state.