To calculate how much it costs to lease a particular car, you will need the following information:

1. Manufacturer's Suggested Retail Price (MSRP). Every car has a retail price. Find it on the window sticker or the dealer's website.

2. Selling Price. This is the actual selling price of the car, before any incentives or taxes. Most people pay a selling price below MSRP because they negotiate with the dealer.

3. Incentives and Rebates. Think of this as free money directly from the manufacturer, which you apply against the cost of your lease.
   

4. Residual Value. This is the manufacturer's estimate of the car's value after a set period of time. The residual value is expressed as a percentage of the MSRP.
   

5. Months. This is the length of the lease. Most leases are for 36 months, but other terms are available.
   

6. Money Factor (MF). This is the interest rate, but expressed in a different way for a lease. Multiply the MF by 2400 to get the equivalent Annual Percentage Rate (APR).

Step 1: Calculate Monthly Depreciation

When you lease a car, you're paying for the depreciation that occurs from your use of the vehicle. Here is the formula for calculating monthly depreciation:

(Capitalized Cost - Residual Value) / Number of Months

Let's imagine that a particular car has an MSRP of $35,000. The manufacturer has set a residual of 60% (i.e., $21,000) for a 36-month lease. The dealer has agreed to a selling price of $33,000, and there's a rebate of $3,000 from the manufacturer.

The capitalized cost is the amount financed; it's the selling price minus any incentives and any down payment. In this case, the capitalized cost is $30,000: a selling price of $33,000 minus that $3,000 rebate. 

When we apply these numbers to the formula, we get a depreciation expense of $250 per month:

($30,000 - $21,000) / 36 = $250

Step 2: Calculate Monthly Finance Charge

Aside from depreciation, you'll also pay a finance charge. Fortunately, rates are pretty low these days. Here is the formula for calculating the monthly finance charge:

(Capitalized Cost + Residual Value) * Money Factor

In this example, let's imagine that the money factor is .00100, which is equivalent to 2.4% APR. When we apply this number to the formula, we get a monthly finance charge of $51 per month:

($30,000 + $21,000) * .00100 = $51

Step 3: Depreciation + Finance Charge = Lease Payment

The monthly lease payment is, quite simply, the sum of the monthly depreciation cost and the monthly finance charge. So, in this case, the monthly payment is $301. Congrats, you've just calculated the lease payment by hand.

Step 4: Taxes, Registration, And Fees

Here are the taxes and fees commonly associated with leases, which can vary from region to region:

• Acquisition Fee. Sometimes called the bank fee, this is an administrative fee charged by the manufacturer. It's imposed on nearly all leases.
   

• Sales Tax. In most states, you only pay sales tax on the leased portion of the vehicle. However, some states, such as Texas, impose sales tax on the selling price of the car. 
  

• Taxed Incentives. In most states, you will also pay sales tax on any capitalized cost reductions, such as the down payment and any customer rebates.
  

• Governmental Fees. This would include vehicle registration, title, and the like.
  

• Document Fees. These are imposed by the dealer. In California, document fees are capped at $80. In Florida, where document fees are not regulated, they can run upwards of $800.
  

• Garbage Fees and Other Add Ons. Although this is becoming rare, sometimes you'll find shady dealers charging hundreds for paint sealant, VIN etching, and the like.

The acquisition fee, taxes on incentives, governmental fees, and document fees are often paid upfront, along with the first month's payment. However, most manufacturers will allow you to add these fees to the capitalized cost, if you wish to have a true $0 drive-off lease.

Alternately, you can always use our Lease Calculator here.