A lease payment has two parts. The depreciation charge is (cost − residual) ÷ months. The finance charge is (cost + residual) × money factor, where the money factor is the annual rate ÷ 2,400. For a $40,000 asset with a $15,000 residual at 5% over 36 months, that is $694.44 + $114.58 = $809.03 a month before tax.
Leasing a car? Use the auto lease calculator.
Businesses use this form for machines, tools, and other assets where the lessor sets a residual and a money factor style rate. For $1 buyout vs FMV examples and the exact formula, see how to calculate an equipment lease payment.
Payment formula
Depreciation per month = (principal – residual) ÷ months. Finance charge = (principal + residual) × (rate÷100÷24). Payment = depreciation + finance charge.
Worked example
Principal $40,000, residual $15,000, rate 5 percent, months 36. Depreciation = (40,000 – 15,000) ÷ 36 ≈ $694.44. Finance = (40,000 + 15,000) × (0.05÷24) ≈ $114.58. Payment ≈ $809.03.
| Input | Value |
|---|---|
| Asset / financed amount | $40,000 |
| Residual / buyout | $15,000 |
| Annual rate | 5% |
| Lease months | 36 |
| Lease payment | ~$809.03 |
Lease payment by term ($40,000 cost, $15,000 residual)
| Term | 5% (MF 0.002083) | 7% | 9% |
|---|---|---|---|
| 24 months | $1,156.25 | – | – |
| 36 months | $809.03 | $854.86 | $900.69 |
| 48 months | $635.42 | – | – |
| 60 months | $531.25 | – | – |
Calculated with the residual/money-factor method above. The residual is held fixed for illustration. In practice, a longer term usually comes with a lower residual.
How to use the fields
- Asset amount is the capitalized cost of the equipment.
- Residual is the planned end value or buyout used in the quote.
- Annual rate feeds the finance factor in this model.
- Lease months is the contract term.
Equipment lease versus auto lease
Auto lease pages often start from MSRP, money factor, and mileage bands. This lease calculator starts from a financed asset amount and residual, which fits many equipment contracts better. Pick the tool that matches the worksheet in front of you.
Business leases vs consumer leases
Regulation M (12 CFR 1013.2) covers consumer leases: personal property leased primarily for personal, family or household use, for a term over four months, with total contractual obligations at or below a threshold that is $73,400 for 2026 ($71,900 for 2025). Leases for business purposes are not covered. Source: CFPB Regulation M §1013.2.
Equipment leases between businesses do not get Reg M disclosures, so ask the lessor for the residual, the rate or money factor, and the end-of-term options in writing.
Common mistakes
- Entering a car deal into this form instead of the auto lease tool
- Ignoring tax on payments
- Assuming residual is optional when the contract includes a buyout
- Forgetting advance payments or fees due at signing
Before you sign
- Residual: how it was set, and whether it is guaranteed
- Rate or money factor, and whether it is fixed or variable
- Fees: documentation, advance payments and early termination
- Insurance and maintenance responsibility
- Buyout and return options at the end of the term
Multiply the payment by the months, then add the residual if you plan to buy out. Compare that path with a loan payment on the same principal using the loan calculator.
Limitations
Results omit tax, insurance, maintenance, and documentation fees. Lessor worksheets may use different day counts. Treat this as a first pass before you sign.