Build a lease payment from scratch

Two things plus tax. Depreciation is the adjusted capitalised cost minus the residual value, divided by the number of months. Rent charge is the adjusted cap plus the residual, multiplied by the money factor. Add them together and that is your payment. Texas motor vehicle tax is capitalised into the cap cost at inception rather than added monthly, which is why a Texas payment looks higher than the same deal quoted in a monthly tax state.

It is the lease equivalent of an interest rate, written as a small decimal. Multiply it by 2,400 to get the APR equivalent. A money factor of 0.00142 is roughly 3.41 percent. Every offer on this site shows both numbers. If a dealer will not tell you the money factor, that is the answer to a different question.

Because the residual is the bank's forecast of what the car will be worth at the end of the term, and it is set as a percentage of manufacturer's suggested retail price before any discount. That is why negotiating the selling price down helps your payment but does not change the residual. It is also why a car with a big discount and a low residual can still be an expensive lease.

Usually not. A capitalised cost reduction lowers the payment but it is not refundable if the car is written off or stolen early in the term, and gap cover pays the lessor, not you. We normally recommend the smallest cap reduction that gets you the tier you want, and putting the rest nowhere.

Yes, in full, as a capitalised cost reduction shown as its own line on your worksheet. Because the lessor takes the credit on a lease rather than the driver, there is no income cap and no assembly location requirement to satisfy. Talk to your own tax advisor about your circumstances; we are not tax advisors and this is a sample figure.