MSRP – Manufacturers Suggested Retail Price. This is the "list price" or "sticker price" of the vehicle and can be found on the window sticker of every new car at the Dealership and it's always listed when doing internet research for vehicles. This information is needed for lease calculations because it is the starting point to determine the monthly payment and is not negotiable.

Cap Cost – Cap Cost is shorthand for Capitalized Costs and is basically the amount you will be paying for the vehicle. This value is negotiable and you should do everything in your power to reduce this value as much as possible during the lease negotiations with the Dealership. The value might also include additional dealer fees or the balance of a previous loan (if, for example, you trade-in a car and owe more than it is worth). Generally you can think of it as the negotiated sale price if you were going to purchase the vehicle.

Residual Value – The amount the vehicle is expected to be worth at the end of the lease. This is a projected value set by the financing company and is generally not negotiable. However, it’s a key number in determining the amount you will be paying during the lease.

Residual Percentage – The percentage of the MSRP that is the Residual Value. Sometimes the Residual Value is expressed as a percentage rather than a dollar amount.

Note: You can enter either the Value or the Percentage and the other element will be calculated (provided you have already entered the MSRP). For example, if the Dealership tells you the Residual Percentage the calculator will determine the Residual Value and if you know the Residual Value the Residual Percentage will be calculated.

Term – The length of the lease in months. Typical lease terms are 24 and 36 months, but other lease terms are available. This isn't really negotiable, but the Dealership will have several different lease terms that they offer.

Interest Rate – The cost of borrowing the money for the lease. Leasing is very similar to purchasing in that you are borrowing money to use the vehicle for a certain period of time.

Money Factor – The Money Factor is just another way to represent the Interest Rate, but the Money Factor is used in the lease payment calculation. Sometimes the Dealership will try to tell you that Interest Rates are not part of auto leasing, but that is wrong. For all practical purposes the Money Factor is just the Interest Rate expressed in a different way.

Note: Just like you did with the Residual Value, you can enter either the Interest Rate or the Money Factor and the other value will be calculated.

Tax Rate – The tax rate that will be applied to the monthly lease payment. In most states the tax rate is applied to the monthly payment so we require a tax rate to be entered. If your state does not apply the taxes in this way simply enter zero for this field.

Another benefit of requiring the Tax Rate to be entered is to help you during the negotiation process. When the Dealership talks about monthly lease payments you should always assume they are talking about the pre-tax payment amount.

They never really say they are talking about the pre-tax amount and I believe most people think about the total monthly payment (they are thinking about the number they have to write on their check each month). So the Dealership has sort of an advantage because the negotiations are happening on unequal ground.

Imagine you have spent hours negotiating your payments with the Dealership and you finally agree to sign the papers, only to find out that you have to pay 7% more per month (assuming the tax rate is 7%). This can all be avoided because the results of the calculator show both the pre-tax amount and the final payment. So you can negotiate with the Dealership using the pre-tax amount while at the same time knowing the final amount at the same time.

Calculate Button – Submits the form data and the monthly payment information is displayed. See the section lower on the page called "Monthly Cost"

Reset Button – Clears all form fields.

Depreciation – The difference between the Cap Cost (Sale Price) and the Residual value. This is amount of money you are paying for the use of the vehicle during the length of the lease.

Financing – The monthly cost of borrowing the money for the lease.

Pre-Tax Payment – The sum of the Depreciation and the Financing amounts. Again, the Dealership is always talking about this amount when they give you quotes for the monthly lease payments, and we've displayed this amount separately so you can talk apples-to-apples during negotiations and you can still see the final payment number.

Tax – The monthly tax assessed on the payment.

Payment – The number you are going to write on your check each month.