1. What is a Lease Calculator with Residual Value?

Definition: This calculator determines the monthly payment for a lease that includes a residual value at the end of the term.

Purpose: It helps individuals and businesses understand their lease payment obligations for vehicles, equipment, or property.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( P \) — Monthly payment (USD)
• \( C \) — Capital cost (USD)
• \( R \) — Residual value (USD)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Number of months

Explanation: The formula calculates the monthly payment needed to amortize the difference between the capital cost and residual value over the lease term.

3. Importance of Lease Calculation

Details: Accurate lease calculations help in budgeting, comparing lease offers, and understanding the true cost of leasing versus buying.

4. Using the Calculator

Tips: Enter the capital cost, expected residual value, annual interest rate, and lease term in months. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is residual value?
A: The estimated value of the leased asset at the end of the lease term, often guaranteed by the lessor.

Q2: How is the monthly interest rate calculated?
A: The annual rate is divided by 12 (months) and converted from percentage to decimal (e.g., 6% becomes 0.005 monthly).

Q3: Why subtract residual value from capital cost?
A: You're only financing the depreciation (C - R) during the lease, not the full asset value.

Q4: What's included in capital cost?
A: The total amount being financed, including purchase price plus any fees minus down payment.

Q5: How does lease term affect payments?
A: Longer terms typically mean lower monthly payments but higher total interest costs.