Equipment Lease Calculator
Use our calculator to determine the approximate monthly payments your lease will cost you based on the lease type. You will also be able to calculate your annual average costs according to the terms of your lease.
The difference between operating and capital leases
A lot of companies, in particular, SMEs, may find leasing a more flexible and affordable choice than traditional equipment financing avenues, such as bank loans to purchase equipment outright.
Capital and operating leases are the two main categories of equipment leases. Under the terms of a capital lease agreement, the lessee is responsible for the management of the asset and all related tax and insurance payments. A capital lease is the right choice for businesses looking to lease equipment long term with the aim of owning the equipment at the conclusion of the lease period.
In contrast, under the terms of an operating lease agreement, the lessor remains the owner of the leased equipment and is responsible for any tax, insurance, and other associated obligations. This form of agreement is ideal for businesses that want to use equipment in the short term and then replace it at the conclusion of the lease agreement, most commonly with a newer version.
Equipment lease types
With our calculator, you can choose from three of the most popular equipment lease types to calculate your payments.
These are:
- The $1 buyout lease, a capital lease, in which the lessee makes fixed payments each month and then has the right to purchase the leased equipment for $1 at the conclusion of the lease period.
- The 10% purchase lease, which is a combination of an operating and capital lease. It gives you the right to purchase the leased equipment for 10% of its price when the lease ends. This residual cost to be paid at the end of the lease means that the lessee will pay lower average monthly payments, making this a popular lease type.
- The fair market value lease, an operating lease also known as a 'true' lease, provides the lessee with a great deal of flexibility at the conclusion of the lease period. When the lease ends, the lessee can give the equipment back, renew the lease, or opt to buy the equipment for its market value. This option is popular among companies that use equipment that typically reduce in value very quickly.
What is Equipment Lease Calculator
An Equipment Lease Calculator is a financial tool used to estimate the monthly lease payment and total cost associated with leasing equipment. It helps individuals and businesses assess the financial impact of leasing equipment, compare different lease options, and make informed decisions about acquiring equipment through leasing.
Here's how a typical Equipment Lease Calculator works:
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Equipment Cost: You input the total cost of the equipment you plan to lease. This includes the purchase price or value of the equipment.
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Lease Term: You specify the duration or time period for which you will lease the equipment. Common lease terms can range from 12 to 60 months, depending on the type of equipment and leasing agreement.
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Interest Rate or Money Factor: The calculator allows you to input the lease interest rate or money factor, which represents the financing cost associated with the lease. This rate may be provided by the lessor or can be estimated based on market conditions.
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Residual Value: The calculator may ask for the estimated residual value of the equipment at the end of the lease term. The residual value is the expected worth of the equipment after the lease expires.
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Other Fees: You may have the option to input any additional fees or costs associated with the lease, such as documentation fees or maintenance fees. These are factored into the calculation to determine the total lease cost.
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Calculation: Using the provided inputs, the Equipment Lease Calculator calculates the estimated monthly lease payment using a leasing formula. It takes into account the equipment cost, lease term, interest rate/money factor, residual value, and other fees (if applicable) to determine the monthly payment amount.
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Displaying the Result: The calculator presents the calculated monthly lease payment, along with the total cost of leasing over the lease term. It may also display a breakdown of the payment components, including principal, interest, and any additional fees.
The Equipment Lease Calculator allows individuals and businesses to evaluate the financial implications of leasing equipment. It helps them understand the monthly payment commitment, total lease cost, and potential savings compared to purchasing the equipment outright.
It's important to note that the calculated results are estimates based on the provided inputs and assumptions. Actual lease terms, interest rates/money factors, residual values, fees, and specific terms may vary depending on factors such as the lessor, creditworthiness, and market conditions. Therefore, it's advisable to consult with a qualified financial advisor or leasing provider for accurate and personalized information regarding equipment lease calculations and available options.
Equipment Lease Calculator Example
Certainly! Here's an example of an Equipment Lease Calculator that helps you determine the monthly lease payment and total lease cost based on the equipment cost, lease term, interest rate, and any additional fees:
Let's assume we have the following equipment lease details: Equipment Cost: $20,000 Lease Term: 4 years (48 months) Interest Rate: 6% per year Additional Fees: $500
Step 1: Calculate the Loan Amount Loan Amount = Equipment Cost + Additional Fees Loan Amount = $20,000 + $500 = $20,500
Step 2: Calculate the Monthly Interest Rate Monthly Interest Rate = (1 + Annual Interest Rate)^(1/12) - 1 Monthly Interest Rate = (1 + 6%)^(1/12) - 1 Monthly Interest Rate = 0.004878 (rounded to six decimal places)
Step 3: Calculate the Monthly Lease Payment Monthly Lease Payment = (Loan Amount * Monthly Interest Rate) / (1 - (1 + Monthly Interest Rate)^(-Lease Term))
Monthly Lease Payment = ($20,500 * 0.004878) / (1 - (1 + 0.004878)^(-48)) Monthly Lease Payment = $483.69 (rounded to two decimal places)
Therefore, the monthly lease payment for equipment with a cost of $20,000, a 4-year lease term, an annual interest rate of 6%, and additional fees of $500 would be approximately $483.69.
Step 4: Calculate the Total Lease Cost Total Lease Cost = Monthly Lease Payment * Lease Term
Total Lease Cost = $483.69 * 48 Total Lease Cost = $23,250.12 (rounded to two decimal places)
Therefore, the total lease cost for the equipment over the 4-year lease term would be approximately $23,250.12.
Please note that this calculation assumes a simple interest model without considering any taxes or other charges that may be associated with the lease agreement. Additionally, the values used in this example are for illustrative purposes and may not reflect actual equipment costs, lease terms, interest rates, or additional fees.
