What does it do?
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.
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.
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))))
Pmt = Periodic lease payment
i = Lease interest rate
n = Number of lease payments required by the lease agreement
a = Number of payments made in advance
C = Original cost of the asset
R = Residual value of the asset (negative number)
The Excel monthly lease payment calculator, available for download below, is used to compute 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. The calculator is used as follows:
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.
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.
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).
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.
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.
The monthly lease payment calculator works out the periodic payment (Pmt) required.
Monthly Lease Payment Calculator Download
The monthly lease payment calculator spreadsheet is available for download in Excel format by following the link below.
The monthly lease payment calculator is one of many used when preparing financial projections, discover another at the links below.
Users use this free monthly lease payment calculator at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of a payments calculator that you might use for example when considering how to calculate monthly car payments. It is purely illustrative of a equipment lease payment calculator. This is not intended to reflect general standards or targets for any particular business, company or sector. If you do spot a mistake in this lease finance calculator, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Plan Projections. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.