Estimate your monthly car lease payment, including depreciation, finance charge, and sales tax.
Rates as of Q2 2025 (example)
This calculator estimates your monthly car lease payment, breaking it down into depreciation (the portion of the vehicle's value you "use up" during the lease), the finance charge (the lease equivalent of interest), and sales tax — plus the total cost of the lease over its full term.
A lease payment has two main components: depreciation (the difference between the vehicle's adjusted price and its residual value, spread evenly over the lease term) and a finance charge (calculated using a "money factor," which is roughly equivalent to an APR divided by 2400). Sales tax in most provinces is charged on each monthly lease payment, rather than on the full vehicle price upfront as with a purchase.
Formula: Adjusted Capitalized Cost = Vehicle Price − Down Payment. Residual Value = Vehicle Price × Residual %. Money Factor = (APR ÷ 100) ÷ 24. Depreciation = Adjusted Cap Cost − Residual Value. Monthly Depreciation = Depreciation ÷ Lease Term (months). Monthly Finance Charge = (Adjusted Cap Cost + Residual Value) × Money Factor. Monthly Sales Tax = (Monthly Depreciation + Monthly Finance Charge) × Sales Tax Rate. Total Monthly Payment = Monthly Depreciation + Monthly Finance Charge + Monthly Sales Tax.
Example: A CA$35,000 vehicle (MSRP) with a CA$2,000 down payment, a 55% residual value (CA$19,250 at lease end), a 36-month term, a 5% APR (example rate — enter your offered rate, converted here to a money factor of about 0.00208), and a 13% sales tax rate (example — Ontario's HST rate) gives a monthly depreciation of about CA$382, a monthly finance charge of about CA$109, and monthly sales tax of about CA$64 — a total monthly payment of roughly CA$555, and a total lease cost (including the down payment) of about CA$21,966 over the 36-month term. (Note: this example is for illustration purposes only and does not represent a lease offer.)
Leasing differs fundamentally from financing a purchase (see our Auto Loan Calculator): with a lease, you're paying for the vehicle's depreciation and a finance charge over the term, not the full purchase price, and you don't own the vehicle at the end unless you exercise a purchase option (often at the pre-set residual value). Leases typically come with annual mileage limits (commonly 16,000-24,000 km/year), and exceeding these limits results in excess-kilometre charges at lease-end, which can add up significantly if your driving needs change. Sales tax treatment differs from purchasing too — in most provinces, GST/HST/PST is charged on each monthly lease payment rather than on the full vehicle price upfront, which is reflected in this calculator's monthly tax calculation. At lease-end, you typically have three options: return the vehicle (subject to any excess wear or mileage charges), purchase it at the residual value, or lease or finance a new vehicle. Leasing often suits drivers who prefer driving a newer vehicle every few years, have predictable mileage needs, and want to avoid the uncertainties of resale value — while financing (see our Auto Loan Calculator) suits those who want to build equity and eventually own the vehicle outright.
A money factor is a small decimal number used in lease calculations to represent the finance charge - it's roughly equivalent to an APR divided by 2400 (or, equivalently, APR/100 divided by 24). Dealers sometimes quote a money factor directly rather than an APR; this calculator accepts an APR-style percentage and converts it internally for the finance charge calculation.
Leases include an annual mileage allowance (commonly 16,000-24,000 km/year). If you exceed this over the lease term, you'll typically owe an excess-kilometre charge per kilometre over the limit at lease-end. If you expect to drive more than a standard allowance, you may be able to negotiate a higher mileage allowance upfront, often for a higher monthly payment - compare the costs of each approach for your expected driving.
When financing a purchase, sales tax is generally charged on the full vehicle price (minus any trade-in, depending on the province) at the time of purchase - see our Auto Loan Calculator. When leasing, most provinces charge sales tax on each monthly lease payment as it's made, since you're effectively "renting" the vehicle's use over time rather than buying it outright.
Residual value is the leasing company's estimate of what the vehicle will be worth at the end of the lease term, expressed as a percentage of its original price (MSRP). A higher residual value reduces the depreciation portion of your payment (since less value is "used up" over the lease), generally lowering your monthly payment - it also represents the price you'd pay if you choose to buy the vehicle at lease-end.
It depends on your priorities. Leasing often has lower monthly payments and lets you drive a newer vehicle more frequently, but you don't build equity and face mileage limits and end-of-lease charges. Buying (financing) typically has higher monthly payments but builds equity toward eventual ownership, with no mileage restrictions. Compare the total costs using this calculator and our Auto Loan Calculator for the same vehicle and term.
Yes - the vehicle price (capitalized cost), down payment, money factor/APR, and sometimes the residual value and mileage allowance can be negotiable, similar to negotiating a purchase price. Negotiating a lower capitalized cost (the vehicle's effective price for lease purposes) can reduce your monthly payment just as it would reduce a loan amount when financing.
Disclaimer: The information, rates, and figures provided on this page are for educational and illustrative purposes only and do not constitute a lease offer or financial advice. The default APR/money factor, residual value, and sales tax rate are sample values and do not reflect terms currently available from any specific dealer or leasing company. Mileage allowances, excess-kilometre charges, and end-of-lease terms vary by leasing company and contract. Always obtain a personalised quote and review the full lease agreement before making leasing decisions.