Lease Calculator

What is Lease Calculator?

A lease calculator is an easy-to-use tool that helps you figure out how much you will pay each month if you’re leasing something. Enter a few details such as asset value, residual value, lease term, and interest rate, and it does the math for you by calculating the monthly lease payments, total payments and total interest payable. It’s a simple way to see if leasing a particular asset fits your budget or not.

What is a Lease? 

A lease is similar to renting a property for a long period. You can use certain things such as a car or an apartment, for a fixed amount of time and you have to pay for them regularly. You can use the asset as if it belongs to you during the lease period. At the end of the lease, you usually return the asset. It’s a good option if you’re still unsure about making a long-term commitment of owning that particular asset.

How Can a Lease Calculator Help You?

A lease calculator will help you when you are considering leasing something. Rather than making a guess about your monthly payments, the calculator tells you exactly how much you’ll pay. Using this information, you can plan your budget better and compare available leasing options. It makes the process of leasing an asset quicker, saving valuable time.

How Does a Lease Calculator Work?

A lease calculator works in the following way:

1. Enter a few details – Enter the value of the asset, residual value, lease term and interest rate.
   
2. It processes the numbers – The calculator does the math for you and figures out what your monthly payments might look like, along with total payments and total interest payable.
   
3. Helps you plan your Finances: It gives you a monthly lease payment so that you get a clear idea of what you’d pay each month and can better manage your finances.
   
4. Helps you plan with confidence – It’s a quick and easy way to check if a lease fits your budget before making any decisions.

Formula to Calculate Lease Payments

The inputs used to calculate lease payments are:

• Asset Value 
• Residual Value
• Lease Term
• Interest Rate

Step-by-Step formula to calculate the lease payments is as follows, 

1. Depreciation Fee = (Asset Value – Residual Value) ÷ Lease Term (in months)

2. Money factor = Interest Rate / 2400

3. Finance Fee = (Asset Value + Residual Value) * Money Factor

4. Monthly Lease Payments = Depreciation Fee + Finance Fee

5. Total Payments = Monthly Lease Payments * Lease Term (in months)

6. Total Interest = Total Payments – Total Depreciation 

Where, Total Depreciation = Asset Value – Residual Value

Example of Lease Calculation

Let us understand the calculation of a lease with a simple example

Asset Value: ₹20,000
Residual Value: ₹10,000
Lease Term: 5 years (i.e., 60 months)
Interest Rate: 14% annually

• Depreciation Fee = (20,000 – 10,000) ÷ 60 = ₹166.67/month
• Money Factor = 14% ÷ 2400 = 0.00583
• Finance Fee = (₹20,000 + ₹10,000) × 0.00583 ≈ ₹175/month

So, 

• Monthly Lease Payment ≈ ₹166.67 + ₹175 = ₹341.67
• Total Payments: ₹341.67 × 60 = ₹20,500
• Total Interest = ₹20,500 – (₹20,000 – ₹10,000) = ₹10,500

How to Use the Pocketful Lease Calculator?

Here’s how to use the calculator easily:

1. Enter the Asset Value – This is the current price of the car or equipment you want to lease.
   
2. Enter the Residual Value – The expected value of the asset at the end of the lease term.
   
3. Set the Lease Term – Choose how many years you want to lease it (e.g., 5 years).
   
4. Adjust the Interest Rate – Input the interest rate (your financing or leasing rate).
   
5. View Your Results Instantly – The calculator shows your monthly lease payment, the total payments, and the total interest payable.

Benefits of Using the Lease Calculator

Some of the benefits of using the Lease Calculator are as follows; 

• Know your monthly payments upfront – It helps you in managing your finances better by letting you know the exact amount you will be paying each month.
  
• Easily compare leasing options– Thinking about a few different deals? The calculator helps you compare and select the deal which works best for you.
  
• Saves you time – No need for manual calculations as the calculator will give you results instantly.