Calculate A Lease

Lease Payment Formula:

\[ Lease\ Payment = \frac{(Cap\ Cost - Residual)}{Term} + Interest \]

Cap Cost ($):

Residual ($):

Term (months):

months

Interest ($):

Lease Payment:

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1. What is Lease Payment Calculation?

Lease payment calculation determines the monthly cost of leasing an asset, typically a vehicle. It considers the capitalized cost, residual value, lease term, and interest to calculate the periodic payment amount.

2. How Does the Calculator Work?

The calculator uses the lease payment formula:

\[ Lease\ Payment = \frac{(Cap\ Cost - Residual)}{Term} + Interest \]

Where:

$ Cap\ Cost $ — Capitalized cost of the leased asset ($)
$ Residual $ — Estimated residual value at lease end ($)
$ Term $ — Lease duration in months
$ Interest $ — Monthly interest/finance charge ($)

Explanation: The formula calculates the monthly depreciation portion plus the finance charge to determine the total monthly lease payment.

3. Importance of Lease Payment Calculation

Details: Accurate lease payment calculation helps individuals and businesses budget effectively, compare leasing options, and make informed financial decisions about asset acquisition.

4. Using the Calculator

Tips: Enter all values in dollars. Cap cost should be greater than residual value. Term must be at least 1 month. Interest represents the monthly finance charge.

5. Frequently Asked Questions (FAQ)

Q1: What is capitalized cost in a lease?
A: Capitalized cost is the negotiated price of the vehicle or asset being leased, similar to the purchase price.

Q2: How is residual value determined?
A: Residual value is the estimated value of the asset at the end of the lease term, typically set by the leasing company based on market projections.

Q3: Can interest be calculated as a percentage?
A: Yes, but this calculator requires the dollar amount of the monthly interest/finance charge. You may need to calculate this separately if given an annual percentage rate.

Q4: Are there other factors that affect lease payments?
A: Yes, factors like taxes, fees, down payments, and mileage allowances can affect the total lease cost but are not included in this basic calculation.

Q5: Is leasing better than buying?
A: It depends on individual circumstances. Leasing typically offers lower monthly payments but no equity buildup, while buying builds equity but may have higher monthly costs.