Lease Calculator
= $25,000
Lease Tips
- ✓Higher residual value = lower monthly payments
- ✓Negotiate the asset price before discussing lease terms
- ✓Understand all fees (acquisition, disposition, excess wear)
- ✓Consider total cost, not just monthly payment
Related Calculators
Understanding Leases
How Lease Payments Work
Lease payments are based on the asset's depreciation during the lease term plus finance charges. You're essentially paying for the portion of the asset you use.
Monthly Payment = Depreciation + Finance Charge + Tax
Where Depreciation = (Cap Cost - Residual) / Term
Key Lease Terms
Capitalized Cost
The negotiated price of the asset plus any fees, minus your down payment. Lower cap cost = lower payments.
Residual Value
The asset's estimated value at lease end. Higher residual = lower payments. Also your purchase price if you buy at lease end.
Money Factor / Lease Rate
The interest rate expressed as a money factor. Multiply by 2400 to get approximate APR equivalent.
Acquisition Fee
An upfront fee charged by the lessor (typically $500-$1,000). Sometimes negotiable.
Types of Leases
| Asset Type | Typical Term | Typical Residual |
|---|---|---|
| Vehicle | 24-48 months | 45-60% |
| Equipment | 36-84 months | 10-30% |
| Commercial Property | 5-20 years | Varies |
| Technology | 24-36 months | 5-15% |
Lease vs. Buy Comparison
Advantages of Leasing
- Lower monthly payments
- Less money down upfront
- Always have newer equipment
- Potential tax benefits for businesses
- No resale hassle
Disadvantages of Leasing
- No ownership at end
- Mileage/usage restrictions
- Costly early termination
- Wear and tear charges
- Higher long-term cost
End of Lease Options
- Return: Give back the asset and walk away (watch for fees)
- Purchase: Buy at the predetermined residual value
- Extend: Continue leasing on a month-to-month basis
- New lease: Start a new lease on newer equipment
Watch Out For
- Excess mileage/usage charges
- Wear and tear fees at lease end
- Disposition fees when returning
- Early termination penalties
- Gap insurance requirements
Frequently Asked Questions
How are lease payments calculated?
Lease payments consist of depreciation (the difference between capitalized cost and residual value divided by term) plus finance charges (the sum of cap cost and residual multiplied by money factor) plus taxes. Higher residual values mean lower monthly payments since you're paying for less depreciation.
What is residual value in a lease?
Residual value is the estimated worth of the leased asset at the end of the lease term. It's set by the lessor at the start and determines both your monthly payment and your buyout price at lease end. Higher residual values reduce monthly payments but may not reflect true market value.
What is a money factor and how do I convert it to APR?
The money factor is how lease companies express interest rates. To convert money factor to APR, multiply by 2,400. For example, a money factor of 0.00250 equals 6% APR (0.00250 x 2,400 = 6%). Lower money factors mean lower financing costs.
Is it better to lease or buy?
Leasing offers lower monthly payments and always having a new vehicle/equipment, but you build no equity and have mileage/usage restrictions. Buying costs more monthly but you own the asset outright. Lease if you want lower payments and frequent upgrades; buy if you keep things long-term or need flexibility.