Lease Calculator
From asset value, residual value, rate and term, compute monthly lease payment, total payments, interest and cost to own.
Input Data
Results
At a glance:The Lease calculator estimates the monthly payment, total payments, total interest and cost to own for leasing an asset (car, equipment). Rent mainly reflects depreciation over the term (asset value − residual) plus financing interest: monthly payment = (principal × r × (1+r)^n − residual × r) ÷ ((1+r)^n − 1), principal = asset value − down. Cost to own (asset value + total interest) can be compared with a direct loan purchase to decide lease vs buy.
Formula
Principal = asset value − down; r = annual ÷ 12; n = years × 12.
Monthly payment = (principal × r × (1+r)^n − residual × r) ÷ ((1+r)^n − 1); at 0 rate = (principal − residual) ÷ n.
Total payments = monthly × n.
Total interest = down + total payments + residual − asset value; cost to own = asset value + total interest.
$$Payment = \dfrac{P \cdot r (1+r)^n - RV \cdot r}{(1+r)^n - 1},\quad r=\dfrac{annual\%}{12},\ n=years\times 12$$$$P = Value - Down,\quad Cost\ to\ Own = Value + Total\ Interest$$How to Use
- Enter the asset value, residual value and down payment (0 if none).
- Enter the lease annual rate and term.
- View the monthly payment, total payments, total interest and cost to own.
Asset HK$300,000, down HK$50,000, 4%, 4 years — payment and interest by residual value
| Residual | Monthly | Total payments | Total interest |
|---|---|---|---|
| 100,000 | 3,720 | 178,569 | 28,569 |
| 140,000 | 2,950 | 141,617 | 31,617 |
| 180,000 | 2,181 | 104,666 | 34,666 |
Case Studies
Case 1: Equipment lease payment and cost to own
A company leases equipment: asset HK$300,000, down HK$50,000, residual HK$140,000, 4%, 4 years (48 months).
Principal = 300,000 − 50,000 = HK$250,000; monthly ≈ HK$2,950; total payments ≈ HK$141,617; total interest ≈ HK$31,617; cost to own if buying out ≈ HK$331,617.
Monthly is far below a loan buying the full amount, because rent only amortises depreciation (250,000 − 140,000 = 110,000) plus interest. But to own it you still pay the HK$140,000 residual buyout, so cost to own ≈ 330k — compare with a loan purchase.
Case 2: Car lease — lease vs buy
Lease a car: price HK$250,000, down HK$30,000, residual HK$100,000, 5%, 3 years.
Monthly ≈ HK$4,013; total payments ≈ HK$144,474; total interest ≈ HK$24,474; cost to own ≈ HK$274,474.
Residual at 40% of price keeps the monthly affordable at ~4,013. If you swap cars every 3 years and return at end, leasing gives a new car at low monthly; if you keep long term, a direct loan (no residual buyout) is usually cheaper overall. The decision hinges on holding period and buyout.
FAQ
How does residual value affect the monthly payment?
Residual is the estimated value at lease end. A higher residual means less depreciation to amortise over the term, so the monthly payment is lower; a lower residual raises the monthly payment.
What does 'cost to own' mean and how to use it?
Cost to own is the total you would pay to end up owning the asset (asset value + all financing interest) if you buy it out at residual at term end. Compare it with the total cost of a direct loan purchase to judge lease vs buy.
Lease vs direct loan purchase?
During a lease the lessor owns the asset; you have use only, monthly payments are usually lower but total interest may be higher and you must buy out or return at end. A loan purchase means you own it after payoff. Which is better depends on rate, residual and whether you intend to keep it long.
Why is the lease monthly usually lower than a loan?
Because you only pay for the value consumed during use, not the whole asset. A loan amortises the full asset value plus interest (you own it at end); a lease amortises only the depreciation over the term (asset value − residual) plus interest on that — you have not bought the residual unless you opt to. In the default: asset HK$300,000, down HK$50,000, residual HK$140,000, 4%, 4 years → lease ≈ HK$2,950 but a loan on the full HK$250,000 is clearly higher. The low lease payment costs you 'not owning it at end' — to own, pay the residual buyout. So low monthly ≠ low total cost; look at cost to own vs buying.
Is a higher residual always better for the lessee?
Not necessarily — split 'monthly cash flow' from 'overall cost'. Monthly: higher residual → lower payment (less depreciation). But if you buy out, residual is the buyout price, so higher residual = more to pay at end. Residual is an estimate; if market value at end is below it, returning (lessor bears the drop) is smarter; if it was set artificially low to inflate the payment, the opposite. So high residual suits those wanting low monthly and returning; if keeping long term, watch the residual and buyout terms.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.