Equipment Lease Payment Calculator

Lease Payment Formulas:

\[ Dep = (CC - RV) / T \] \[ Fin = (CC + RV) \times MF \] \[ MP = Dep + Fin \]

Capitalized Cost (CC):

Residual Value (RV):

Term (T):

months

Money Factor (MF):

decimal

Depreciation (Dep):

Finance Fee (Fin):

Monthly Payment (MP):

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1. What is Equipment Lease Payment?

The equipment lease payment consists of two components: depreciation (the value the equipment loses during the lease term) and finance charge (the cost of borrowing the money to lease the equipment). The sum of these two components gives the monthly lease payment.

2. How Does the Calculator Work?

The calculator uses these formulas:

\[ Dep = (CC - RV) / T \] \[ Fin = (CC + RV) \times MF \] \[ MP = Dep + Fin \]

Where:

$ Dep $ — Depreciation ($/month)
$ Fin $ — Finance fee ($/month)
$ MP $ — Monthly payment ($)
$ CC $ — Capitalized cost ($)
$ RV $ — Residual value ($)
$ T $ — Term (months)
$ MF $ — Money factor (decimal)

Explanation: The depreciation represents the monthly cost of the equipment's value loss, while the finance charge represents the cost of leasing the equipment.

3. Importance of Lease Calculation

Details: Understanding lease payment components helps businesses make informed decisions about equipment financing options and compare lease offers from different providers.

4. Using the Calculator

Tips: Enter the negotiated price of the equipment (capitalized cost), estimated residual value at lease end, lease term in months, and the money factor (provided by the lessor). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is money factor?
A: Money factor is the lease's interest rate expressed as a decimal. You can convert APR to money factor by dividing by 2400 (e.g., 6% APR = 0.0025 MF).

Q2: How is residual value determined?
A: Residual value is typically set by the leasing company based on equipment type, term length, and expected market value at lease end.

Q3: What's included in capitalized cost?
A: Capitalized cost includes the negotiated equipment price plus any fees or additional items being financed in the lease.

Q4: Are there other lease fees?
A: Yes, leases may have acquisition fees, disposition fees, or other charges not included in this calculation.

Q5: How does this compare to a loan?
A: Leases typically have lower monthly payments than loans for the same equipment because you're only financing the depreciation, not the full value.