How is a car lease payment calculated?

US lease payment = Depreciation Fee + Finance Charge. Depreciation Fee = (Vehicle Price − Residual Value) ÷ Lease Term. Finance Charge = (Vehicle Price + Residual Value) × Money Factor. Money Factor × 2400 = equivalent APR. UK PCP is calculated similarly but using APR directly with a balloon (Guaranteed Future Value).

What is the difference between US leasing and UK PCP?

US lease: You never own the car. At the end, you return it (or buy for residual price). Monthly payments are often lower. Finance charge shown as 'money factor' (a proprietary number). UK PCP (Personal Contract Purchase): Similar structure, but the 'balloon payment' (GFV) is optional — you can pay it to own the car, or trade it in as equity. UK PCH (Personal Contract Hire) = pure lease, no ownership option.

What is a good money factor for a car lease?

Money factor is the lease equivalent of an interest rate. Multiply by 2400 to convert to APR. Good money factors (2024): 0.00100–0.00150 (equivalent to 2.4–3.6% APR). Average: 0.00200–0.00250 (4.8–6% APR). High: 0.00300+ (7.2%+ APR — avoid). Manufacturer-subsidized leases often have MF as low as 0.00050. Always ask the dealer for the 'buy rate' money factor.

🇺🇸 Money Factor 🇬🇧 UK PCP / PCH 🚗 Residual Value

Lease Calculator

Calculate monthly vehicle lease payments. US leases use a 'money factor' (a proprietary interest rate). UK leases use PCP (Personal Contract Purchase) with an APR and Guaranteed Future Value balloon.

Quick Answer

Monthly lease = Depreciation Fee + Finance Charge. Money Factor × 2400 = APR equivalent. $45K car, $27K residual, MF 0.00125 (3% APR), 36 months: ~$600/month. UK PCP on £35K car, 10% deposit, 7.9% APR, 48 months: ~£420/month (+ optional balloon).

💡 Money Factor × 2400 = equivalent APR. Typical US lease MF: 0.00100–0.00200

Vehicle MSRP ($)

Residual Value ($)

Money Factor

Lease Term (months)

Down Payment / Cap Cost Reduction ($)

Vehicle Finance Types by Country

Product	Country	Own at End?	Key Feature
Lease (Closed-End)	🇺🇸 US	No (return car)	Money factor + residual value
PCP (Personal Contract Purchase)	🇬🇧 UK	Optional (pay balloon)	GFV balloon — flexible exit
PCH (Personal Contract Hire)	🇬🇧 UK	Never	Pure lease — no ownership path
Chattel Mortgage	🇦🇺 AU	Yes (from day 1)	Business vehicle — tax deductible
Novated Lease	🇦🇺 AU	Optional	Pre-tax salary deduction — tax efficient