Lease Calculator — Free Online Asset Lease Payment Tool

How to Use the Lease Calculator

This lease calculator computes monthly payments for any asset with a known value and residual amount. It works for commercial equipment, technology, vehicles, and other leasable assets where the lessor quotes a standard annual interest rate rather than a money factor. Follow these steps for an accurate payment estimate.

1. Enter the asset value. Input the total cost of the asset being leased. This is the purchase price the leasing company paid for the asset, also called the gross capitalized cost. For equipment, this includes installation and delivery charges. For vehicles, this is the negotiated selling price including any dealer-installed options.
2. Set the residual value. Enter the estimated value of the asset at the end of the lease term in dollars. The leasing company typically provides this figure based on industry depreciation schedules. For example, a $40,000 piece of construction equipment might have a $15,000 residual after 48 months, reflecting its expected resale value at that point. Higher residual values result in lower monthly payments.
3. Enter the annual interest rate. Input the yearly interest rate from your lease quote. This rate determines the finance charge portion of your payment. Equipment lease rates in 2026 typically range from 5% to 12% depending on the asset type, your business credit profile, and the lease term. Compare rates from multiple lessors, as they can vary significantly.
4. Choose the lease term. Select the lease duration in months. Common terms are 24, 36, 48, or 60 months. Shorter terms have higher monthly payments but lower total interest costs. The optimal term depends on the asset expected useful life, your budget, and whether you plan to purchase or return the asset at lease end.
5. Set your down payment. Enter any upfront payment that reduces the amount being financed. A down payment of 10-20% of the asset value is common for equipment leases. This reduces your monthly payment and total interest cost, but ties up cash that could be used elsewhere in your business.
6. Review the results. The calculator shows your monthly payment, total lease payments over the full term, total interest charges, and total lease cost (payments plus down payment). The pie chart breaks down how much of your total cost goes to depreciation, interest, and the down payment.

Experiment with different down payment amounts and terms to find the balance between monthly cash flow and total lease cost that best fits your situation.

Lease Payment Formula

The general lease payment formula calculates the periodic payment needed to cover the depreciation of the asset from its current value to its residual value, plus the interest on the financed amount. This is the standard approach used for equipment and commercial leases.

Where:

• Asset Value = The total cost or purchase price of the leased asset
• Residual Value = Estimated value of the asset at the end of the lease term
• Rate = Annual interest rate as a decimal (e.g., 7.5% = 0.075)
• Term = Lease duration in months

Worked Example

Calculate the monthly lease payment for a $40,000 piece of equipment with a $15,000 residual value, 7.5% annual rate, 48-month term, and $5,000 down payment:

1. Financed amount: $40,000 − $5,000 = $35,000
2. Monthly depreciation: ($35,000 − $15,000) ÷ 48 = $416.67
3. Monthly interest: ($35,000 + $15,000) × (0.075 ÷ 12) ÷ 2 = $156.25
4. Monthly payment: $416.67 + $156.25 = $572.92
5. Total monthly payments: $572.92 × 48 = $27,500
6. Total interest: $156.25 × 48 = $7,500
7. Total lease cost: $27,500 + $5,000 (down) = $32,500

The total lease cost ($32,500) includes $20,000 in depreciation (the difference between the financed amount and residual), $7,500 in interest, and the $5,000 down payment. The interest component represents the cost of using the lessor capital over the 48-month term.

Practical Lease Examples

These scenarios demonstrate how the lease calculator applies to different types of assets and business situations in 2026.

Construction Equipment Lease

Marcus owns a small excavation company and needs a mini excavator valued at $85,000. The equipment leasing company offers a 60-month lease with a $20,000 residual value at 8.5% annual interest. With $10,000 down, the financed amount is $75,000. Monthly depreciation is $916.67, monthly interest is $336.46, giving a monthly payment of $1,253.13. Total payments over 60 months are $75,188 plus $10,000 down for a total cost of $85,188. After 5 years, Marcus can purchase the excavator for the $20,000 residual, return it, or negotiate a new lease. The lease preserved his cash for fuel, labor, and other operating expenses instead of tying up $85,000 in a single asset purchase.

Medical Equipment Lease

Dr. Chen is opening a dental practice and needs to equip it with a digital X-ray system, dental chairs, and sterilization equipment totaling $120,000. She leases the package for 48 months with a $25,000 residual at 6.5% annual interest and $15,000 down. The financed amount is $105,000, monthly depreciation is $1,666.67, and monthly interest is $351.04. Her monthly payment is $2,017.71. Total lease payments are $96,850 plus $15,000 down for $111,850 total. Leasing allows Dr. Chen to preserve her startup capital for rent, staff salaries, and marketing while getting all the equipment she needs from day one. The monthly lease payments are also fully tax-deductible as a business expense.

Technology Equipment Lease

A software company needs 50 workstations at $2,200 each ($110,000 total) for a new office. Since technology depreciates rapidly, they lease for 36 months with a low residual of $10,000 at 5.5% annual interest and $0 down. Monthly depreciation is $2,777.78 and monthly interest is $275. The monthly payment is $3,052.78. After 3 years, they return the outdated equipment and lease new workstations with current specifications. Total cost is $109,900, slightly less than the purchase price, and they avoid owning 3-year-old computers worth only $10,000 at the end. For technology assets, leasing often makes more financial sense than buying because the rapid depreciation eliminates the ownership advantage.

Commercial Vehicle Fleet Lease

A delivery company is leasing five cargo vans at $48,000 each ($240,000 total fleet value). The 48-month lease has a 35% residual ($84,000), 7.0% annual rate, and $20,000 fleet down payment. Financed amount is $220,000, monthly depreciation is $2,833.33, and monthly interest is $886.67. Monthly payment is $3,720 for the entire fleet, or $744 per van. Total fleet lease cost is $198,560 ($178,560 payments + $20,000 down). At lease end, the company can purchase the vans at residual value, return them, or lease newer models. Fleet leasing simplifies budgeting with a fixed monthly cost and often includes maintenance packages.

Lease Tips and Complete Guide

Whether you are leasing equipment for a startup, upgrading technology for an established business, or financing a commercial vehicle, these strategies help you get the best terms and minimize your total cost.

Compare Lease vs. Purchase Total Cost

Before committing to a lease, calculate the total cost of ownership under both a lease and a purchase scenario. For a purchase, include the loan payments, interest, maintenance, and the resale value of the asset at the end. For a lease, include the total monthly payments, down payment, and any purchase option cost if you plan to buy the asset at lease end. Many business owners find that leasing technology (which depreciates quickly) and buying heavy equipment (which holds value longer) is the optimal mix.

Understand Your Lease End Options

Most leases offer three end-of-term options: return the asset, purchase it at the residual value, or extend the lease. If you plan to keep the asset long-term, negotiate a fair purchase option (FPO) or a dollar-buyout lease upfront. A $1 buyout lease has higher monthly payments but guarantees you own the asset at the end for virtually nothing. A fair market value (FMV) lease has lower monthly payments but the buyout price at the end is whatever the market determines, which could be more than you expected.

Negotiate the Residual and Rate Independently

When working with a leasing company, negotiate the residual value and the interest rate as separate items. A higher residual value lowers your monthly depreciation charge but may leave you with an unattractive buyout price at lease end. A lower interest rate reduces the finance charge component. The ideal combination depends on whether you plan to return or purchase the asset. If you plan to return it, push for the highest possible residual. If you plan to buy, a lower residual means a cheaper purchase option even if monthly payments are slightly higher.

Tax Advantages of Leasing

Lease payments for business-use assets are generally tax-deductible as a business expense. With an operating lease, you deduct the full monthly payment as a rental expense. With a capital (finance) lease, you deduct depreciation and interest separately. The Tax Cuts and Jobs Act provisions for bonus depreciation and Section 179 deductions may make purchasing more attractive from a tax perspective for some assets. Consult with your tax advisor to determine which structure provides the best after-tax cost for your specific situation.

Common Mistakes to Avoid

• Not reading the maintenance clause. Some leases require you to maintain the asset to specific standards and return it in good working condition or pay excess wear charges. Understand what maintenance is your responsibility and budget for it separately from the lease payment.
• Ignoring the implicit interest rate. Equipment dealers sometimes quote only the monthly payment without disclosing the effective interest rate. Back-calculate the rate using our calculator by adjusting the rate until the payment matches the dealer quote. Some equipment leases have implicit rates of 12-18%, far above what a bank loan would cost.
• Leasing assets with long useful lives. Leasing a piece of heavy equipment that lasts 20 years on a 5-year term means you pay for depreciation that never actually occurs at that rate. If the asset retains value well beyond the lease term, buying is almost always cheaper than leasing repeatedly.
• Not considering the opportunity cost of the down payment. Money used for a lease down payment is money that cannot be invested in the business or earn returns elsewhere. If your business earns 15% ROI on invested capital but the lease rate is 7%, the down payment costs you the spread of 8% in missed returns.
• Failing to negotiate end-of-lease terms upfront. The best time to negotiate the purchase option price, extension terms, and return conditions is before you sign the lease, not when the term is ending and you have less leverage.