Lease Calculator

What this lease calculator does

This calculator handles two common lease questions. In Fixed Rate mode, it calculates the monthly payment from the asset value, residual value, term, and interest rate. In Fixed Payment mode, it solves for the effective annual rate when the monthly payment is known.

The lease is modeled as a balloon loan: the lessee pays down the difference between the asset value and the residual value, plus interest on the outstanding balance.

How to use this calculator

1. Choose Fixed Rate or Fixed Payment.
2. Enter the asset value and residual value.
3. Enter the lease term in years and months.
4. Enter the interest rate or the monthly payment, depending on the mode.
5. Click Calculate.

The default fixed-rate example uses a $20,000 asset, $8,000 residual, 36-month term, and 6% rate. The monthly payment is $405.06.

Lease payment formula

The payment is the amortizing payment on the asset value with the residual value treated as a balloon:

Payment = (Asset value − Residual value / (1 + r)^n) × r / (1 − (1 + r)^−n)

r is the monthly interest rate and n is the number of months. Total interest is total payments minus the amount financed, which is the asset value minus the residual value.

In Fixed Payment mode, the same equation is solved for the annual rate.

What the results include

• Monthly payment: the fixed lease payment.
• Total payments: monthly payment multiplied by the term.
• Total interest: total payments minus the asset value less residual.
• Annual rate: the rate used or solved.
• Term: the lease length in months.

Assumptions and limitations

The calculator assumes a constant rate and a known residual value. It does not include taxes, fees, insurance, maintenance, excess mileage, or lease-end charges. The Fixed Payment mode may have more than one mathematical solution in unusual cases; the calculator reports the rate found within its supported range.

Frequently asked questions

What is a lease residual?

The residual is the expected value of the asset at the end of the lease. The lessee finances the difference between the asset value and the residual.

How is lease interest different from a loan?

A lease payment includes depreciation and a finance charge on the asset and residual. The resulting rate can be compared with a loan APR, but fees and tax treatment may differ.

Can I use this for equipment leasing?

Yes, as a simplified fixed-rate lease. Equipment leases may have different residual, tax, and end-of-term terms.

Why does a higher residual lower the payment?

A higher residual means less of the asset's value is consumed during the lease, so the depreciation portion of the payment is smaller.

Source

References:

• Consumer Financial Protection Bureau — Auto Loans
• Consumer Financial Protection Bureau — What is a car lease?

Disclaimer

This calculator is for informational purposes only. It is not a lease offer or financial advice. Confirm the lease terms with the lessor.