Lease Calculator

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: $$M = \frac{C - R}{n} + (C + R) \cdot F$$

Who Uses a General-Purpose Lease Model

This page is built around the asset rather than any one industry: it fits a piece of machinery, a fleet of laptops, a delivery van, a commercial kitchen line, or any other item where a lessor buys it and rents it to you for a fixed term. Because there is no vehicle-specific machinery here, the inputs are deliberately minimal — the asset's capitalized cost, its expected residual value, the money factor, and a term in months. There is no down-payment field and no mileage or usage allowance; if your contract charges for wear, hours of use, or return condition, those charges sit outside this estimate and need to be added by hand.

Why the Payment Recovers Depreciation Evenly

The first term, (C − R) ÷ n, spreads the asset's expected drop in value equally across the term. Equipment rarely loses value in a perfectly straight line — a machine may lose a large share in its first year — but the lessor prices the contract as if the loss were even. So the depreciation piece is identical in month 1 and month 36, and only the gap between the capitalized cost and the residual moves it.

Reading the Finance Fee Against a Loan Rate

The second term, (C + R) × F, charges the money factor on the average value the lessor has tied up in the asset rather than on a shrinking loan balance. Multiplying the money factor by 2400 gives a rough APR, which is the number to hold beside a bank's quoted rate when you are deciding between a lease and an equipment loan. A quote that shows only a monthly payment and no money factor is worth asking about, since the factor is what lets you compare the financing cost on equal terms.

Fees, Taxes, and the End-of-Term Choice

Two optional fee fields change the picture. The acquisition fee is added into the capitalized cost, so it is paid back through the monthly payment rather than upfront. The disposition fee is not part of the payment at all — it appears in the Lease Summary as a cost you only face if you return the asset. Sales tax, where your jurisdiction applies it to lease payments, is applied as a multiplier on the monthly figure. At the end of the term you generally choose between returning the asset, buying it at the residual value shown in the summary, or negotiating a new lease, and the Buy vs. Lease panel lets you test the purchase path against a loan of your own.

Worked Example

Take equipment priced at 50,000 dollars whose residual is set at 20,000 dollars, financed at a 0.00125 money factor for 36 monthly payments: 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%.

Notice how the residual value does most of the work in this example: it is 40 percent of the capitalized cost, so only 60 percent of the asset's price is being paid down over the term. Raise the residual to 25,000 dollars and the depreciation fee falls to about 694 dollars a month, while the finance fee rises slightly because the (C + R) base grows.

Lease Vocabulary

Capitalized Cost — the agreed value of the leased asset that the payment is built from; in a business lease it may include delivery, installation, or setup charges if the lessor rolls them in.

Residual Value — the lessor's projection of what the asset is worth when the term ends, and the figure that usually doubles as the purchase option price.

Money Factor — the lease's financing rate expressed as a small decimal; times 2400 is the rough APR.

Lessor and Lessee — the lessor owns the asset and rents it out; the lessee (you) pays for its use over the term.

Sources & Further Reading

• Federal Trade Commission — Consumer Leasing Act: the federal statute covering disclosure of costs and terms for consumer leases of personal property longer than four months.
• Federal Trade Commission — Advertising Consumer Leases: guidance on which lease terms must be disclosed when a consumer lease is advertised.

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.