How it works
A lease payment has two parts. You pay for the value the car loses while you drive it — the price after your down payment, minus the residual value it is expected to keep — spread over the term. On top comes a finance charge, worked out with the money factor.
Payment = (C − R) ÷ n + (C + R) × MF
- C — capitalised cost: price minus down payment and trade-in
- R — residual value
- n — number of months
- MF — money factor = APR ÷ 2400
A high residual value lowers the payment because you pay for less depreciation. Large down payments also lower it, but if the car is written off early that money is usually lost, which is why many people lease with little or nothing down.