Lease Calculation Tool

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 provide an accurate monthly 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 or purchase price of the asset ($)
$ Residual $ — Estimated value of the asset at the end of the lease term ($)
$ Term $ — Duration of the lease agreement (months)
$ Interest $ — Monthly interest/finance charge ($)

Explanation: The formula calculates the monthly depreciation cost plus the monthly interest charge to determine the total 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 and residual should reflect the actual negotiated prices. Term should be in months. 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 that forms the basis for lease calculations.

Q2: How is residual value determined?
A: Residual value is typically set by the leasing company based on the asset's expected depreciation over the lease term.

Q3: Can I negotiate the lease terms?
A: Yes, both the capitalized cost and residual value are often negotiable, which can affect your monthly payment.

Q4: What additional costs might be involved in leasing?
A: Additional costs may include acquisition fees, disposition fees, taxes, insurance, and maintenance costs not covered by the lease.

Q5: Is leasing better than buying?
A: This depends on individual circumstances. Leasing typically offers lower monthly payments but no ownership at the end, while buying builds equity but has higher monthly costs.