Equipment Lease
With the Equipment Lease calculation you can calculate the periodic payments for leases and compare how different residual values and advance payments affect the periodic payments.
Leasing is based on the concept that you pay for the amount by which the value of the object that's leased depreciates during the time you're using it. Depreciation is the difference between the original value and the residual value at the end of the contract.
A lease is different than a loan in that payments are made at the beginning of the month in which they're due, while loan payments are paid at the end of the due month. This means you'll make your first lease payment at the time you sign the contract.
Advance payments affect lease cost: the higher the value, the less interest you'll pay on the outstanding debt.
Note: The Equipment Lease calculation uses the "annuity" type formulas to calculate payments and not the "money factor" type formula used by car dealers and car lease companies.
For an advanced equipment lease calculator with a wide range of compounding and payment frequencies and which lets you use deferred, advance, step up, seasonal, step down and residual payments, please have a look at FinLease.
To see the amortization schedule, select the Show Details command in the Calculation menu. In the schedule, the residual value is adjusted to account for rounding.
To toggle between date and year/period view, click the header of the first details column.
To change the start date, select the Start Date command in the Edit menu to open the Date Options dialog.
Input
| • nominal annual rate (compounding frequency and payment frequency are assumed to be monthly) | |
| • equipment cost | |
| • points | |
| • residual value | |
| • number of monthly payments | |
| • number of advance payments: | |
|
0 = first payment is made at the end of the first month, identical to a
balloon payment loan 1 = ordinary lease 2...n = more than one lease payment is made at lease-start |
|
Results
| • periodic payment rounded to two digits after the decimal point |
| • amount paid off over time (i.e. total depreciation) |
| • total amount paid |
| • total interest |
Examples
| • | A
machine costing $10,000 is leased for a period of 36 months. Interest
is at 6 % compounded monthly.
Answer: $239.48. |
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| • | What would the monthly payments be for the above example if there were three advance payments?
Answer: $237.20 or $239.48 - $237.20 = $2.28 less. |
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| • | What would the monthly payments if there were three advance payments and the leasing company charges 5 points?
Answer: $252.19. |
Related topics
| Capitalized Cost |
| Compounding and payment frequencies |