1. What is the Equipment Lease Payment Formula?

The Equipment Lease Payment formula calculates the monthly payment for leasing equipment. It accounts for the equipment cost, its residual value at lease end, the lease term, and the money factor/rate.

2. How Does the Calculator Work?

The calculator uses the lease payment formula:

Where:

• \( Cost \) — Original equipment cost (USD)
• \( Residual \) — Equipment value at lease end (USD)
• \( Term \) — Lease duration (months)
• \( Rate\ Factor \) — Lease rate factor (decimal)

Explanation: The first part calculates the monthly depreciation, while the second part calculates the monthly finance charge.

3. Importance of Lease Payment Calculation

Details: Accurate lease payment calculation helps businesses budget for equipment costs and compare leasing vs. purchasing options.

4. Using the Calculator

Tips: Enter all values as positive numbers. The rate factor is typically provided by the leasing company (often the interest rate divided by 2400).

5. Frequently Asked Questions (FAQ)

Q1: What is a typical rate factor?
A: Rate factors typically range from 0.0015 to 0.004 (equivalent to 3.6% to 9.6% APR).

Q2: How is residual value determined?
A: Residual is estimated by the leasing company based on equipment type, term length, and expected usage.

Q3: Can this be used for vehicle leases?
A: Yes, this formula works for any capital lease, including vehicle leases.

Q4: What's the difference between lease and loan payments?
A: Lease payments are typically lower as you're only financing the depreciation, not the full cost.

Q5: Are there other lease calculation methods?
A: Yes, some leases use different methods like the "10% rule" or "$1 buyout" formulas.