Lease Calculator — Calculations & Slabs for FY 2026-27

It depends on your financial priorities. Leasing offers lower monthly payments and allows you to drive a new car every few years with minimal maintenance worries, but you never build equity and will always have a car payment. Buying has higher initial monthly payments, but you eventually own the vehicle outright, can drive it without mileage restrictions, and can sell it to recover some value.

Lease payments consist of three parts: Depreciation (the cost of the car's drop in value over the term), Rent Charge (the interest fee for using the leasing company's capital), and Sales Tax. Depreciation is (Adjusted Cap Cost - Residual Value) / Term. Rent is (Adjusted Cap Cost + Residual Value) × Money Factor.

The Money Factor (also called the lease factor) is how leasing companies express the interest rate on a lease. It is written as a small decimal (e.g., 0.0025). To convert a Money Factor to a standard interest rate (APR), multiply it by 2,400. For example, 0.0025 × 2400 = 6.0% APR.

Residual value is the estimated value of the car at the end of the lease term, set by the leasing company (typically as a percentage of the original MSRP). A higher residual value lowers your monthly payment because you are paying for less depreciation, but it means a higher purchase price if you decide to buy the car at lease end.

For a purchase, a larger down payment reduces your loan amount, saving you money on interest. For a lease, a down payment (capitalized cost reduction) lowers your monthly payment, but is highly risky: if the leased car is stolen or totaled shortly after drive-off, insurance pays the lender, and your down payment is completely lost. Most experts recommend $0 down on a lease.