1. What is the Lease Payment Formula?

The lease payment formula calculates monthly payments for an 18-month equipment lease, factoring in depreciation and finance charges. It's commonly used for hourly work equipment leasing.

2. How Does the Calculator Work?

The calculator uses the lease payment formula:

Where:

• \( Capitalized\ Cost \) — Total cost of the leased equipment
• \( Residual\ Value \) — Estimated value at lease end
• \( Money\ Factor \) — Lease finance rate (decimal)
• \( 18 \) — Fixed term in months

Explanation: The first part calculates monthly depreciation, while the second part calculates the finance charge.

3. Importance of Lease Calculation

Details: Accurate lease payment calculation helps businesses budget for equipment costs and compare leasing versus purchasing options.

4. Using the Calculator

Tips: Enter capitalized cost and residual value in dollars, money factor as a decimal (e.g., 0.0025). All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why is the term fixed at 18 months?
A: This calculator is designed for short-term equipment leases common in hourly work contexts.

Q2: How is money factor determined?
A: The money factor is set by the leasing company and is similar to an interest rate (divide APR by 2400 to get money factor).

Q3: What's a typical residual value?
A: Residual values typically range from 50-70% of capitalized cost for 18-month leases, depending on equipment type.

Q4: Are there additional fees not included?
A: This calculates base payment only - taxes, insurance, and other fees may apply to actual leases.

Q5: Can this be used for auto leases?
A: While similar, auto leases often have different terms and fees - use an auto-specific calculator for those.