Car Lease Calculator: Lease Payment Analysis for 2026

The Leasing Equation in 2026

With new car transaction prices exceeding $50,000 in the United States and £30,000 in the United Kingdom, leasing has emerged as the primary means by which many consumers access new vehicles. The mathematics of leasing differ fundamentally from traditional financing, yet understanding these calculations can save thousands over a typical three-year term.

Current market conditions present a compelling case for leasing consideration:

| Metric | Value | Source | |--------|-------|--------| | Average new car price (USA) | $50,326 | Cox Automotive | | Average monthly lease payment | $662 | Industry average | | Average monthly finance payment | $1,325 | 36-month term | | Typical 36-month residual value | 50-60% | Varies by vehicle | | Average lease buyout APR (2026) | 9.49% | All credit profiles | | Excellent credit buyout APR | 6.25% | 720+ credit score |

Sources: CarsDirect, LeaseEnd

The difference between leasing and financing the same vehicle can exceed $600 monthly—making leasing the only viable option for many households seeking reliable transportation.

Calculator Guide
How Lease Payments Are Calculated
February 2026: Current Lease Deals
Residual Values: Which Cars Lease Best
UK Personal Contract Hire
Lease Versus Buy: The 2026 Analysis
Electric Vehicle Leasing
Strategic Leasing Decisions
How This Calculator Works
Sources

Calculator Guide

The Vehicle Price (MSRP) field accepts the manufacturer's suggested retail price. This serves as the basis for residual value calculations, even if the negotiated price differs.

The Down Payment reduces the capitalised cost, lowering monthly payments. However, financial advisers often recommend minimising down payments on leases—if the vehicle is totalled, the down payment is lost whilst insurance pays off only the lease balance.

Residual Value is entered as a percentage of MSRP. This figure, provided by the leasing company, represents the predicted vehicle value at lease end. Higher residuals result in lower monthly payments. Typical ranges are 50-60% for 36-month leases, though vehicles that hold value exceptionally well (Toyota Tacoma, Porsche 911) may exceed 70%.

Lease Term options include 24, 36, 39 and 48 months. Shorter terms mean higher payments but more frequent access to new vehicles. Longer terms reduce payments but accumulate more mileage and may extend beyond warranty coverage.

The Interest Rate (APR) represents the financing cost. Dividing APR by 2,400 converts to money factor—the decimal used in lease calculations. A competitive money factor ranges from 0.001 to 0.002 (2.4% to 4.8% APR).

Sales Tax application varies by jurisdiction. Some states tax the full vehicle price; others tax only monthly payments.

Trade-in Value reduces the capitalised cost, lowering monthly payments. Positive equity in the trade-in (worth more than owed) provides maximum benefit.

How Lease Payments Are Calculated

Lease payments comprise two primary components: depreciation and finance charges. Understanding this structure enables evaluation of dealer offers.

Component 1: Depreciation

Depreciation represents the value consumed during the lease term:

Depreciation = (Capitalised Cost - Residual Value) ÷ Term

Component 2: Finance Charge

The finance charge covers the cost of capital:

Money Factor = APR ÷ 2,400
Finance Charge = (Capitalised Cost + Residual Value) × Money Factor

Example Calculation

Vehicle: £40,000 MSRP Negotiated Price: £38,000 Down Payment: £2,000 Capitalised Cost: £36,000 Residual Value (55%): £22,000 Term: 36 months APR: 4.8% (Money Factor: 0.002)

Depreciation: (£36,000 - £22,000) ÷ 36 = £388.89/month

Finance Charge: (£36,000 + £22,000) × 0.002 = £116.00/month

Base Payment: £504.89/month

With 8% Sales Tax: £545.28/month

Total Lease Cost: (£545.28 × 36) + £2,000 = £21,630.08

This calculation reveals that £14,000 covers depreciation whilst £4,176 covers financing—demonstrating why negotiating the capitalised cost and money factor matters significantly.

February 2026: Current Lease Deals

The elimination of the $7,500 federal EV tax credit in October 2025 has prompted manufacturers to offer aggressive lease incentives, particularly on electric vehicles.

Lowest Monthly Payments (USA, February 2026)

| Vehicle | Monthly Payment | Due at Signing | Term | Source | |---------|-----------------|----------------|------|--------| | 2025 Kia Niro EV | $159 | $3,999 | 24 months | CarsDirect | | 2025 Kia Niro Wind EV | $249 | $3,999 | 36 months | U.S. News | | 2025 Mini Countryman SE | $269 | $4,699 | 39 months | CarsDirect | | 2025 Hyundai IONIQ 6 | $273 | $2,000 | 36 months | InsideEVs | | 2025 Kia Niro EV | $284 | $3,999 | 36 months | TrueCar | | 2026 Subaru Solterra | $299 | $2,799 | 36 months | U.S. News |

Zero-Down Lease Option

The 2025 Ford Mustang Mach-E offers a zero-down lease at $363 monthly for 36 months (Select trim with Standard Battery). Only the first month's payment is required at signing, eliminating the substantial upfront outlay typical of lease transactions.

Manufacturer Cash Incentives

With federal credits eliminated, manufacturers are compensating through direct discounts:

Hyundai IONIQ 5: $10,000 cash discount (following a ~$10,000 price reduction)
Hyundai IONIQ 6: Aggressive lease pricing as shown above
Kia EV models: 0% APR financing available on select models

Source: InsideEVs

Residual Values: Which Cars Lease Best

Residual value is the single most important factor determining lease affordability. Higher residuals mean lower depreciation charges and thus lower monthly payments.

Best Residual Values (3-Year Projections)

| Vehicle | 3-Year Residual | MSRP | Est. Depreciation | |---------|-----------------|------|-------------------| | Toyota Tacoma | 77% | $42,854 | ~$9,000 | | Porsche 911 | ~75% | Varies | Minimal | | Toyota Tundra | 72% | $42,000+ | ~$11,760 | | Jeep Wrangler | 70%+ | $35,000+ | Varies | | Honda Civic | 65%+ | $25,000+ | Good | | Toyota RAV4 | 63% | $32,000+ | Good |

Source: CarEdge, U.S. News

ALG Residual Value Award Winners (2026)

Seven Toyota models earned ALG awards for best projected residual value:

Toyota Camry
Toyota Corolla
Toyota Corolla Cross
Toyota Highlander
Toyota Sienna
Toyota Tacoma
Toyota Tundra

Worst Residual Values (Vehicles to Avoid Leasing)

| Vehicle Type | 5-Year Depreciation | Notes | |--------------|---------------------|-------| | Luxury EVs | 60%+ | Tesla dominates worst depreciation list | | Maserati Quattroporte | 64.5% | Highest depreciation, 5 years | | BMW 7 Series | 61.8% | Second-worst depreciation | | Large luxury sedans | 55-65% | Poor lease candidates |

Source: iSeeCars

Practical Application:

A vehicle with 77% residual (Toyota Tacoma) versus 50% residual (average luxury sedan) on a £40,000 MSRP:

77% Residual: Depreciation = £9,200 over 36 months = £255.56/month
50% Residual: Depreciation = £20,000 over 36 months = £555.56/month
Difference: £300/month or £10,800 over the lease term

UK Personal Contract Hire

The United Kingdom employs Personal Contract Hire (PCH) as the standard consumer leasing arrangement, differing from the USA structure in several respects.

Current UK PCH Deals (February 2026)

| Vehicle | Monthly Payment | Initial Payment | Term | Mileage | |---------|-----------------|-----------------|------|---------| | Chery Tiggo 7 | £184.95 | £2,569.39 | 24 months | Standard | | MG IM5 | £242.90 | £3,154.76 | 24 months | Standard | | Tesla Model 3 | £307.20 | £3,686.40 | 24 months | 8,000/year |

Source: Auto Express

UK Pricing Structure

UK PCH deals follow predictable pricing tiers:

| Vehicle Class | Monthly Payment Range | Contract Length | |---------------|----------------------|-----------------| | Small hatchback/SUV | Under £200 | 2-3 years | | Small car (longer term) | ~£100 | 4 years | | Luxury vehicles | ~£400 | 2-3 years |

PCH Versus PCP

The UK market offers two primary options:

Personal Contract Hire (PCH):

Lower monthly payments
No balloon payment at end
No ownership option
Road tax included
Cannot terminate early (must pay full lease cost)

Personal Contract Purchase (PCP):

Slightly higher monthly payments
Balloon payment option at end
Can purchase the vehicle
More flexibility for early termination

MoneyHelper guidance recommends PCH for those certain they want to upgrade every few years, and PCP for those who may wish to retain the vehicle.

UK Excess Mileage Charges

Exceeding agreed mileage incurs per-mile charges:

| Charge Level | Per Mile | 5,000 Excess Miles Cost | |--------------|----------|------------------------| | Minimum | 3p | £150 | | Typical | 10p | £500 | | Maximum | 50p | £2,500 |

Source: Motorway

Lease Versus Buy: The 2026 Analysis

The lease-versus-buy decision depends on ownership duration, cash flow priorities and total cost tolerance.

36-Month Comparison: £45,000 Vehicle

Leasing:

Down payment: £3,000
Monthly payment: ~£550
Total payments: £19,800
Total cash outlay: £22,800
Asset owned at end: None

Financing (60-month loan at 7%):

Down payment: £3,000
Monthly payment: ~£831
36 months of payments: £29,916
Total cash outlay: £32,916
Remaining balance: ~£17,280
Vehicle value (55% residual): £24,750
Equity position: +£7,470

Source: CarBuzz

The Mathematics Explained

After 36 months:

Leasing cost: £22,800 (vehicle returned)
Financing net cost: £32,916 - £7,470 equity = £25,446

Leasing appears £2,646 cheaper over 36 months. However, the financed buyer owns an asset worth £24,750 with £17,280 owed—creating future options unavailable to the lessee.

Long-Term Perspective

Consumer Reports analysis demonstrates that two consecutive 36-month leases cost thousands more than financing and owning a vehicle for six years. The savings increase further if the vehicle is retained for nine years, even accounting for maintenance and repairs.

When Leasing Makes Sense

Monthly cash flow is constrained
Business deduction for vehicle is desired
Technology evolution is important (EV improvements)
Predictable costs are prioritised
No interest in vehicle ownership

When Buying Makes Sense

Long-term vehicle retention is planned
High annual mileage (exceeding 15,000)
Vehicle customisation is desired
Building equity is valued
Total cost minimisation is the priority

Electric Vehicle Leasing

The post-federal-credit landscape has fundamentally altered EV leasing calculations.

The Credit Elimination Impact

Prior to October 2025, manufacturers could claim the $7,500 federal credit on leased EVs (via the commercial vehicle provision) and pass savings to lessees. This mechanism produced exceptionally low lease payments.

In 2026, automakers are compensating through:

Direct price reductions (Hyundai IONIQ 5: ~$10,000 cut)
Manufacturer cash incentives
Subsidised lease rates
Extended promotional terms

EV Residual Value Concerns

Electric vehicles depreciate faster than petrol equivalents, creating lease complications:

| Category | 5-Year Depreciation | Best for Leasing? | |----------|--------------------|--------------------| | Hybrid vehicles | 40.7% | Yes—excellent lease candidates | | Industry average | ~60% | Standard | | Tesla Model 3 | ~50% | Best among EVs, still above average | | Luxury EVs | 60%+ | Poor—high depreciation |

Source: CarEdge

Strategic EV Leasing

Given rapid battery technology evolution, leasing EVs offers strategic advantages:

Access to improving range and charging speeds
Avoid long-term battery degradation concerns
Exit strategy if EV infrastructure disappoints
Manufacturer incentives often favour leasing

The Kia Niro EV at $159/month demonstrates manufacturers' willingness to subsidise EV leases heavily—likely accepting losses to build market share and meet regulatory targets.

Strategic Leasing Decisions

Money Factor Negotiation

The money factor is negotiable, yet many lessees accept marked-up rates without question.

Example Impact:

On a £35,000 capitalised cost with £19,000 residual over 36 months:

| Money Factor | APR Equivalent | Monthly Finance Charge | 36-Month Difference | |--------------|----------------|------------------------|---------------------| | 0.0010 | 2.4% | £54.00 | — | | 0.0015 | 3.6% | £81.00 | +£972 | | 0.0020 | 4.8% | £108.00 | +£1,944 | | 0.0025 | 6.0% | £135.00 | +£2,916 |

Source: CarLeases.org

Always request the "buy rate" from the manufacturer's captive finance company. Captive finance companies (Toyota Financial Services, Honda Financial, Ford Credit) typically offer the most competitive rates.

Capitalised Cost Reduction

The capitalised cost is negotiable precisely as purchase price is negotiable. A £2,000 reduction on a 36-month lease saves £55.56 monthly (£2,000 total).

Negotiation Approach:

Negotiate the vehicle price as if purchasing
Only then discuss lease terms
Request the money factor and buy rate
Calculate expected payment independently
Compare to dealer quotation

Mileage Strategy

| Strategy | Upfront Cost | Excess Charge | Recommendation | |----------|--------------|---------------|----------------| | Buy miles upfront | £0.10-0.15/mile | — | Cheaper if certain | | Pay excess at return | — | £0.20-0.30/mile | More expensive |

If annual driving typically reaches 15,000 miles, leasing with 10,000-mile allowance creates £1,500+ exposure per year. Purchasing adequate mileage upfront saves substantially.

Down Payment Minimisation

Unlike financing, where down payment reduces interest cost, lease down payment primarily shifts timing of expense. Additionally:

If the vehicle is totalled, insurance pays the lease balance—not you
Your down payment is lost
Gap insurance covers the lease, not your deposit

Financial advisers recommend first-payment-only leases where available (example: Ford Mustang Mach-E at $363 due at signing).

How This Calculator Works

Net Capitalised Cost:

netCapCost = vehiclePrice - downPayment - tradeIn

Residual Value:

residualValue = vehiclePrice × (residualPercentage ÷ 100)

Depreciation:

totalDepreciation = netCapCost - residualValue
monthlyDepreciation = totalDepreciation ÷ termMonths

Money Factor:

moneyFactor = (interestRate ÷ 100) ÷ 24

Finance Charge:

monthlyFinanceCharge = (netCapCost + residualValue) × moneyFactor

Base Payment:

basePayment = monthlyDepreciation + monthlyFinanceCharge

Sales Tax:

taxAmount = basePayment × (salesTaxRate ÷ 100)

Total Monthly Payment:

totalMonthly = basePayment + taxAmount

Total Lease Cost:

totalCost = (totalMonthly × termMonths) + downPayment

All calculations execute locally within the browser.

Sources

FAQs

What constitutes a competitive money factor in 2026?

A competitive money factor ranges from 0.001 to 0.002 (equivalent to 2.4% to 4.8% APR). Manufacturer promotional offers occasionally provide 0.0005 or lower (1.2% APR). Money factors above 0.0025 (6% APR) suggest dealer markup or subprime credit terms.

What residual value percentage indicates a good lease?

Residual values of 55-60% after 36 months are considered strong. Values exceeding 65% (typical of Toyota trucks and Porsche vehicles) produce exceptionally low payments. Values below 50% indicate rapid depreciation and correspondingly higher monthly costs.

Should substantial down payment be made on a lease?

Financial advisers recommend minimising lease down payments. Unlike financing, where down payment reduces interest cost, lease down payment primarily shifts expense timing. If the vehicle is totalled, the down payment is lost—insurance pays the lease balance, not the lessee.

How does UK PCH differ from US leasing?

UK Personal Contract Hire includes road tax in monthly payments and offers optional maintenance packages. PCH typically cannot be terminated early without paying the full remaining lease cost. US leases offer more termination flexibility. Both structures produce similar monthly cost calculations.

Are electric vehicles good lease candidates?

EVs present mixed considerations. Rapid technology evolution makes leasing advantageous (access to improvements without depreciation exposure). However, EVs depreciate faster than petrol vehicles, potentially producing higher monthly payments. Current manufacturer incentives (post-federal-credit elimination) make many EVs exceptionally affordable to lease.

Can the money factor be negotiated?

Yes. Dealers often mark up the money factor provided by the manufacturer's captive finance company. Requesting the "buy rate" reveals the baseline rate. The difference represents dealer profit that may be negotiated.

What occurs at lease termination?

Three options exist: return the vehicle (paying any excess mileage or wear charges), purchase the vehicle at the residual price, or trade toward a new lease. If market value exceeds residual, purchasing and reselling can produce profit.

How are excess mileage charges calculated?

Excess mileage charges typically range from £0.15 to £0.30 per mile in the USA and 3p to 50p per mile in the UK. On a 36-month lease with 10,000-mile annual allowance, driving 15,000 annually creates 15,000 excess miles—costing £2,250 to £4,500 at US rates.

What is a lease buyout and when is it advantageous?

A lease buyout involves purchasing the vehicle at lease end for the residual value. It is advantageous when market value exceeds residual value. Current average lease buyout loan rates stand at 9.49% across all credit profiles, reducing to 6.25% for excellent credit.

How do acquisition and disposition fees affect total cost?

Acquisition fees (£500-£1,000 at lease start) and disposition fees (£300-£500 at return) add to total lease cost. These fees are generally not negotiable and should be included when comparing lease offers across manufacturers.

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