A lease payment schedule is the part of your lease contract that lists every payment you owe, when it’s due, and how each one breaks down between depreciation, financing charges, taxes, and fees. Federal law requires the lessor to give you this schedule before you sign, and it’s the document you use to confirm the numbers actually add up before you commit.
The rules come from the Consumer Leasing Act (15 U.S.C. §§ 1667–1667f) and its implementing rule, Regulation M (12 CFR Part 1013).1Office of the Law Revision Counsel. 15 USC 1667a – Consumer Lease Disclosures Consumer leases are not governed by the Truth in Lending Act, which is a common point of confusion. Motor vehicle leases must follow a format substantially similar to the model forms published by the Consumer Financial Protection Bureau.
What the Schedule Must Show
Regulation M, at 12 CFR § 1013.4, sets out the specific items a lessor has to disclose on or alongside the payment schedule:2eCFR. 12 CFR 1013.4 – Content of Disclosures
- The number of payments, the amount of each, the due dates, and the total of all periodic payments.
- An itemized breakdown of everything due at signing or delivery, including any security deposit, first month’s payment, capitalized cost reduction, and trade-in credit.
- Every charge not folded into the periodic payments, itemized by type and amount.
- The total of payments, meaning the full amount you’ll have paid by lease end.
- License, registration, title fees, and taxes connected to the lease.
- Any late payment penalty, with the amount or the calculation method shown and kept to a reasonable figure.
The statute also requires disclosure of your purchase option, the conditions for early termination, warranty information, and any insurance the lessor requires you to carry.1Office of the Law Revision Counsel. 15 USC 1667a – Consumer Lease Disclosures
How Each Payment Is Built
Checking the schedule means knowing where the monthly number comes from. A lease payment has two main parts: a depreciation charge and a financing charge. Taxes and fees are then added on top.
Depreciation
Depreciation covers how much value the asset is expected to lose during your lease. Start with the gross capitalized cost: the negotiated price plus any fees rolled in. Subtract any upfront payment you make, called a capitalized cost reduction, to get the adjusted capitalized cost. Subtract the residual value, which is the projected worth of the asset at lease end. Divide the result by the number of months in the lease.
Say a vehicle has an adjusted capitalized cost of $35,000 and a residual value of $20,000 on a 36-month lease. The depreciation portion is $15,000 ÷ 36, or about $417 per month. The residual value is locked in at signing and doesn’t move.
Financing Charge and the Money Factor
Leases don’t use a stated interest rate. They use a money factor, a small decimal like 0.0015. Multiply the money factor by 2,400 for an approximate annual percentage rate, so 0.0015 is roughly 3.6% APR. The monthly financing charge equals the money factor multiplied by the sum of the adjusted capitalized cost and the residual value. You pay a financing charge on the full value of the asset, not only on the depreciation, which is one reason lease math surprises people used to loan interest.
Your base monthly payment is depreciation plus financing charge. Taxes and fees get added to produce the number on your schedule. Run the calculation yourself. If your figure doesn’t match the contract, ask for an explanation before signing.
Timing, Due Dates, and Late Fees
Most schedules run monthly, though some commercial and equipment leases use quarterly or other intervals. The schedule states whether payments are due at the beginning of each period (in advance) or at the end (in arrears). Vehicle leases almost always require payment in advance, so your first payment is due at signing.
The first entry often looks different from the rest because it may bundle upfront charges: first month’s payment, security deposit, registration, and any capitalized cost reduction. The remaining entries should be uniform unless the contract specifically structures payments to vary.
Each entry has a due date, and most contracts include a grace period before a late fee hits. Grace windows of 10 to 15 days are common on vehicle leases, though some contracts allow less. Any late penalty must be disclosed up front and must be reasonable in amount. Once a payment slips past the grace window, the schedule becomes the primary evidence of when default began.
Fees and Taxes That Ride On Top
The schedule should itemize every charge beyond the base depreciation and financing amounts. Missing one of these is a common mistake when comparing lease offers.
Sales tax. In most jurisdictions, sales tax on a lease is calculated on each monthly payment rather than the full value of the asset. Rates vary by state and sometimes by county or city. Your schedule should show tax separately from the base payment so you can verify the rate.
Acquisition fee. Charged by the leasing company to originate the lease, this typically runs from several hundred dollars to over $1,000. Some lessors fold it into the capitalized cost and spread it across your monthly payments; others list it as a separate upfront charge.
Documentation fee. Charged by the dealership for processing paperwork, these vary widely by jurisdiction and dealership. Look for it either at signing or inside the capitalized cost.
Mileage. The lease sets an annual allowance, commonly 10,000, 12,000, or 15,000 miles. Exceeding the total allowance over the term triggers a per-mile charge, often $0.15 to $0.25, with luxury vehicles higher. Going 5,000 miles over at $0.20 per mile is $1,000 at turn-in.
Gap coverage. If the asset is totaled or stolen, there’s often a gap between what your insurer pays (market value) and what you still owe. Some lessors fold gap coverage into the lease payments; others require you to buy it separately. Check which applies to you.
Closed-End vs. Open-End Leases
The lease type changes what the schedule means for your obligations at the end.
A closed-end lease, the standard for individual consumers, puts the residual value risk on the lessor. Stay within the mileage limit and return the asset in reasonable condition, and the schedule’s fixed payments are what you owe, period. You hand back the keys.
An open-end lease, more common in commercial and fleet leasing, shifts that risk to you. If the actual market value at turn-in is less than the stated residual, you owe the difference. If it’s more, you may get a credit. Regulation M requires open-end leases to carry a notice that you’ll owe an additional amount if actual value falls short of residual value.2eCFR. 12 CFR 1013.4 – Content of Disclosures The three-payment rule, below, caps part of that exposure.
Early Termination Warning
Walking away before the term ends is one of the most expensive moves you can make. Regulation M requires motor vehicle leases to carry a notice that early termination may result in a substantial charge of up to several thousand dollars, and that the earlier you end, the larger the charge is likely to be.
The termination charge typically combines the gap between the remaining scheduled payments and the current value of the asset, plus any fees. Early in a lease, the asset’s value drops faster than your payments pay down the balance, so the shortfall can be large. Federal law requires that any early termination penalty be reasonable relative to the lessor’s actual harm.3Office of the Law Revision Counsel. 15 USC 1667b – Lessee’s Liability on Expiration or Termination of Lease Reasonable still means thousands. Your contract has to spell out either the exact amount or the formula, so read that section before assuming an easy exit.
End-of-Lease Charges
The last entry on the schedule is the last installment, but it’s not necessarily the end of what you owe. Condition, mileage, and your buyout decision all matter.
Excess Wear and Tear
Your lease should define what counts as normal wear versus excessive damage. Federal Reserve guidance says the standards must be reasonable, and typical examples of excessive wear include broken or missing parts, dented panels, cuts or burns in fabric, excessively worn tires (often below 1/8 inch of tread), and cracked glass.4Federal Reserve. Vehicle Leasing: Up-Front, Ongoing, and End-of-Lease Costs
The Three-Payment Rule
If the lessor claims the asset is worth less than the stated residual value, federal law creates a rebuttable presumption that the estimated residual was unreasonable to the extent it exceeds the actual value by more than three times your average monthly payment.3Office of the Law Revision Counsel. 15 USC 1667b – Lessee’s Liability on Expiration or Termination of Lease If your monthly payment is $400 and the lessor claims you owe $2,000 because the car depreciated more than expected, the lessor can’t collect beyond $1,200 (three times $400) without winning a lawsuit and paying your attorney’s fees. The protection does not apply to shortfalls caused by physical damage beyond normal wear or by excessive mileage.
You also have the right to get an independent professional appraisal at your own expense. If both parties agree on the appraiser, that valuation is final and binding.
Disposition Fee
Return the asset instead of buying it and most lessors charge a disposition fee covering inspection and resale, commonly a few hundred dollars. It should be in your lease. If you plan to buy the asset or sign a new lease with the same lessor, you can sometimes negotiate the fee away.
Purchase Option
Your lease must disclose whether you can buy the asset at term end and at what price.1Office of the Law Revision Counsel. 15 USC 1667a – Consumer Lease Disclosures In a closed-end vehicle lease, the buyout is usually the residual value in the contract. If the market has held up, buying at the preset residual can be a good deal. If it hasn’t, return the asset. The buyout also carries sales tax, registration, and title, which vary by jurisdiction.
If You Use the Leased Property for Business
Lease payments tied to business use are generally deductible as a business expense. The IRS lets you include lease payments as part of your actual vehicle expenses, allocated by the percentage of miles driven for business.5Internal Revenue Service. Topic No. 510, Business Use of Car You can instead use the standard mileage rate, but for a leased vehicle you must stick with that method for the full lease, including renewals. Section 179 expensing doesn’t apply to leased property. IRS Publication 463 contains additional rules on depreciation limits and income inclusion amounts that can reduce the deductible portion for higher-value leased vehicles.