Lease Calculator
Calculate a monthly lease payment for equipment or machinery from the capitalized cost, residual value, money factor, and lease term.
Calculator verified • Last updated: August 2026
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Payment Breakdown
Lease Summary
| Total Lease Cost | — |
| Total Payments | — |
| End-of-Term Buyout | — |
| Disposition Fee (if returned) | — |
How a Lease Payment Is Calculated
A lease payment isn't financing the full value of the asset — it's financing only the portion of value you'll actually use up, plus a financing charge. That splits the monthly payment into two fees:
M: the monthly lease payment.
C: the capitalized cost of the asset.
R: the residual value at the end of the term.
n: the lease term in months.
F: the money factor.
The Depreciation Fee Is a Straight-Line Split
The first term, (C − R) ÷ n, is the depreciation fee — the total expected loss in value over the lease spread evenly across every month. It's the same number every month regardless of how much of the asset's usable life is actually consumed in any given period.
The Finance Fee Uses the Money Factor, Not an Interest Rate
The second term, (C + R) × F, is the finance fee — conceptually similar to interest, but calculated as a flat charge on the sum of the capitalized cost and residual value, rather than on a shrinking loan balance. Multiplying the money factor by 2400 gives a rough equivalent APR, useful for comparing a lease's financing cost against a loan's stated rate.
Worked Example
A 50,000-dollar piece of equipment with a 20,000-dollar residual value, a money factor of 0.00125, over a 36-month term: the depreciation fee is (50,000 − 20,000) ÷ 36, or about 833 dollars a month. The finance fee is (50,000 + 20,000) × 0.00125, or 87.50 dollars a month. Added together, the monthly payment is about 921 dollars — with an approximate APR of 0.00125 × 2400, or 3%.
Lease Terms You Should Know
Capitalized Cost — the negotiated value of the asset that the lease payment is calculated from, similar to a vehicle's negotiated price in an auto lease.
Residual Value — the asset's projected value at lease-end, which is also typically the buyout price if you choose to purchase it then.
Money Factor — a small decimal figure used in place of an interest rate for lease financing; multiply by 2400 for an approximate APR equivalent.
This calculator provides an estimate for planning purposes only, not a lease offer or financial advice. Actual lease terms, fees, and money factors depend on the lessor and the specific asset.
Frequently Asked Questions
What is a money factor and how does it relate to APR?
A money factor is a small decimal (like 0.00125) used instead of an interest rate to compute a lease's finance charge. To convert it to an approximate APR, multiply by 2400 — a money factor of 0.00125 is roughly a 3% APR.
Why does the depreciation fee stay the same every month?
A lease payment is built to recover the asset's expected loss in value evenly over the term, not on a shrinking-balance schedule like a loan. The depreciation fee is simply the total expected depreciation (capitalized cost minus residual value) divided equally across every month of the lease.
Is the finance fee the same as interest on a loan?
It's a similar idea but calculated differently. A loan charges interest on the actual remaining balance each month; a lease's finance fee is a flat monthly charge based on the sum of the capitalized cost and the residual value, multiplied by the money factor — it doesn't change as the lease progresses.
Would buying this equipment be cheaper than leasing it?
It depends on the loan APR and down payment you could get for a purchase, and how the equipment's residual value compares to what you'd still owe. Use the Compare to Buying Instead section on this calculator to check your own numbers against a purchase loan — leasing tends to win on lower monthly cash flow and no resale hassle at term-end, while buying tends to win if you can get a low APR and plan to keep using the equipment well past the lease's residual value point.