# Monthly Lease Payment Calculator

## What does it do?

This monthly lease payment calculator works out the monthly payment (Pmt) needed at the end of each month, taking into account the cost of the asset (C), its residual value (R), the lease interest rate (i), the number of payments (n), and the number of advance payments (a) required by the lease agreement.

A lease is a method of financing the use of an asset, and is an agreement between a lessee (who rents the asset), and a lessor (who owns the asset). The lessor is usually a lease company or finance company.

## Lease Calculator Formula

The calculator uses the monthly lease payments formula based on the present value of an annuity as follows:

```Pmt = (C + R/(1 + i)n) x (i/((a x i) + (1 - 1/(1 + i)(n-a))))
```
Variables used in the formula
Pmt = Periodic lease payment
i = Lease interest rate
n = Number of lease payments required by the lease agreement
C = Original cost of the asset
R = Residual value of the asset (negative number)

## Monthly Lease Payment Calculator Instructions

The Excel monthly lease payment calculator, available for download below, computes the monthly lease payment by entering details relating to the cost and residual value of the asset, the lease interest rate, and the number of payments and advance payments required by the lease agreement. Instructions for using the calculator are as follows. ### Step 1

Enter the asset cost (C). This is the amount the lessor (finance company) pays for the asset today, at the start of the lease term.

### Step 2

Enter the residual value (R). This is residual or salvage value of the asset at the end of the lease term. The residual value (R) should be entered as a negative number. For example, if the residual value is 3,000 enter -3,000.

### Step 3

Enter the interest rate. The interest rate should be the annual interest rate used in the lease agreement. The monthly lease repayment calculator works out the monthly rate (i).

### Step 4

Enter the number of payments (n). This is the total number of monthly payments required by the lease. For example, if the lease has a 3 year term, the number of payments (n) will be 3 x 12 = 36 monthly lease payments. The total number of payments includes the advance payments referred to below.

### Step 5

Enter the number of payments in advance (a). This is the number of monthly payments required to be paid in advance (today) at the start of the lease agreement. For example, if the total number of payments (n) is 36, and the number of advance payments (a) is 2, a further 34 payments will be made at the end of each month for the following 34 months.

### Step 5

The monthly lease payment calculator works out the periodic payment (Pmt) required.