Equipment Lease Calculator
Calculate monthly payments, total costs, and compare leasing vs. buying equipment
Equipment Lease Details
The retail price or transaction value of the equipment (Standard Equipment)
16.67% of equipment value
46.67% of original value
Annual percentage rate (APR) for the lease
Ownership transfer at end, asset on balance sheet
Number of years to lease
Additional months (0-11)
Lease Payment Results
Cost Breakdown
Lease Terms
Formula used: Monthly Payment = (Lease Amount × r × (1 + r)^n - Residual × r) / ((1 + r)^n - 1)
Where: Lease Amount = $25,000.00, r = Monthly Rate (0.33%), n = Total Months (48), Residual = $14,000.00
Lease vs. Buy Comparison
Leasing
Current OptionBuying (Loan)
Alternative💡 Lease Analysis & Recommendations
Buying could save you $1,066.88 compared to leasing and purchasing the equipment at the end.
Example: Equipment Lease Calculation
Scenario: Manufacturing Equipment Lease
Equipment Value: $30,000
Down Payment: $5,000 (16.67%)
Interest Rate: 4% annually
Lease Term: 4 years (48 months)
Residual Value: $14,000 (46.67%)
Lease Type: Capital Lease
Step-by-Step Calculation
Step 1: Calculate Lease Amount
Lease Amount = Equipment Value - Down Payment
= $30,000 - $5,000 = $25,000
Step 2: Calculate Monthly Interest Rate
Monthly Rate = Annual Rate / 12
= 4% / 12 = 0.3333%
Step 3: Apply Lease Payment Formula
Monthly Payment = (Lease Amount × r × (1 + r)^n - Residual × r) / ((1 + r)^n - 1)
= ($25,000 × 0.003333 × 4.9268 - $14,000 × 0.003333) / (4.9268 - 1)
= $295.04 per month
Final Results
Monthly Payment: $295.04
Total Lease Payments: $295.04 × 48 = $14,161.92
Total Interest: $5,000 + $14,161.92 + $14,000 - $30,000 = $3,161.92
Total Cost to Own: $30,000 + $3,161.92 = $33,161.92
Common Equipment Types
Lease Types Explained
Capital Lease
- • Ownership transfers at end
- • Asset appears on balance sheet
- • Can claim depreciation
- • Better for long-term use
Operating Lease
- • Return equipment at end
- • Off balance sheet
- • Lower monthly payments
- • Better for short-term needs
Key Lease Factors
Residual Value
Higher residual = lower payments but higher buy-out cost
Down Payment
Larger down payment reduces monthly costs
Interest Rate
Shop around for the best money factor
Lease Term
Match term to equipment's useful life
Tax Benefits
Capital Lease
- ✓ Depreciation deduction
- ✓ Interest expense deduction
- ✓ Section 179 may apply
Operating Lease
- ✓ Full payment is deductible
- ✓ Easier accounting
- ✓ Predictable expenses
Consult a tax professional for specific advice
Understanding Equipment Leasing
What is Equipment Leasing?
Equipment leasing is a contractual agreement where a business (lessee) pays to use equipment owned by a lessor for a specified period. Instead of purchasing equipment outright, businesses can conserve capital while accessing the equipment they need.
Benefits of Leasing
- •Preserve Cash Flow: Lower upfront costs compared to purchasing
- •Tax Benefits: Potential tax deductions on lease payments
- •Flexibility: Upgrade to newer equipment at lease end
- •Budget Certainty: Fixed monthly payments for better planning
Lease Payment Formula
Monthly Payment =
(Lease Amount × r × (1 + r)^n - Residual × r) / ((1 + r)^n - 1)
- Lease Amount: Equipment value minus down payment
- r: Monthly interest rate (annual rate / 12)
- n: Total number of months in lease term
- Residual: Estimated value at end of lease
Pro Tip: Negotiate the residual value and interest rate. Even small improvements in these terms can significantly reduce your total lease cost.
Lease vs. Buy Decision Factors
Consider Leasing If:
- ✓ Equipment becomes obsolete quickly
- ✓ You want to preserve capital
- ✓ You need equipment short-term
- ✓ You want tax benefits
- ✓ You prefer off-balance-sheet financing
Consider Buying If:
- ✓ Equipment has long useful life
- ✓ You have capital available
- ✓ You need equipment indefinitely
- ✓ You want to build equity
- ✓ Equipment holds resale value
Financial Considerations:
- • Total cost to own
- • Cash flow impact
- • Tax implications
- • Balance sheet treatment
- • Residual value risk
⚠️ Important Considerations
Before Signing a Lease:
- • Read all terms and conditions carefully
- • Understand early termination penalties
- • Check maintenance and insurance requirements
- • Verify residual value reasonableness
Hidden Costs to Watch:
- • Lease initiation fees
- • Disposition fees at lease end
- • Excessive wear and tear charges
- • Insurance and maintenance costs