The Lease Calculator finds the monthly payment, or the effective interest rate, of a fixed-rate lease from the asset value, residual value, term and interest rate.
Monthly payment: $403.05
| Monthly payment (paid at the start of each month) | $403.05 |
| Total of 36 payments | $14,509.73 |
| Total interest | $2,509.73 |
| Interest rate | 5.740% |
| Money factor | 0.00239 |
A lease lets you use an asset such as a vehicle, equipment or property for a set time in exchange for regular payments, without owning it. At the end you return the asset, renew, or buy it for the residual value. Leases are common for cars, office equipment and commercial property.
Lease payments are usually made at the start of each month. The payment covers the drop in value from the asset value to the residual value plus interest: Payment = (PV − FV ÷ (1 + i)^n) × i ÷ (1 − (1 + i)^−n) ÷ (1 + i).
Worked example (defaults): a $20,000 asset with $8,000 residual over 36 months at 6% has a payment of about $416.
Leasing has lower payments and no resale worries, and businesses can often deduct lease payments. Buying builds ownership and is usually cheaper over the long term. Leases may limit use (mileage limits on cars) and charge for excess wear.
What is a money factor? A way of quoting the lease rate; multiply by 2,400 for an approximate APR.
What is a good residual value? Higher residuals mean lower payments.
For car leases with taxes and trade-ins, use the Auto Lease Calculator.