Enter the asset's value, lease term, expected residual value, and implied interest rate to see the monthly payment for equipment or property leases.
A lease payment has two parts: a depreciation portion — the asset's value minus its expected residual value, spread evenly across the term — and a finance charge portion — interest applied to the average of the starting value and residual value. Together they cover the asset's expected loss in value plus the cost of financing it, rather than the asset's full purchase price the way a loan payment would.
Leasing usually means lower monthly payments and the flexibility to return or upgrade the asset at term end, but you build no equity in it and may face usage restrictions or excess-wear charges. Buying costs more upfront or via a loan but leaves you owning the asset outright at the end. The right choice depends on how long you actually need the asset, your cash flow priorities, and whether ownership matters for your situation — compare against the Auto Lease Calculator if the asset in question is a vehicle, since that tool applies these same mechanics to car-specific conventions like money factor and mileage caps.
At lease end you typically have the choice to return the asset, renew the lease, or purchase it outright for the residual (buyout) value set at the start of the lease. A higher residual value lowers your monthly payment during the lease but means a larger buyout cost if you decide to keep the asset afterward — it's a trade-off between cash flow now and cost later.
In many jurisdictions, operating lease payments for business equipment can be deducted as an ordinary business expense, which is one common reason businesses choose to lease rather than buy outright. Rules vary meaningfully by country, lease structure (operating vs. finance lease), and local tax code, so confirm the treatment that applies to you with an accountant before assuming a deduction applies.
Worked example: a $40,000 asset leased for 36 months with a $22,000 residual value at a 6% implied annual rate: depreciation portion = (40,000 − 22,000) ÷ 36 ≈ $500.00/month; finance charge = (40,000 + 22,000) × (6 ÷ 100 ÷ 12) ÷ 2 = $155.00/month; total payment ≈ $655.00/month, or $23,580.00 over the full term — versus an outright cost-to-own difference of $18,000 (asset value minus residual) if you bought and later sold at the same residual value.
Leasing a vehicle instead? See the Auto Lease Calculator for money-factor and mileage-specific math.