equipment lease calculator

Equipment Lease and Payment Calculator for Businesses

Leasing might be the more practical option for small businesses that do not foresee long-term use of equipment or don’t have enough capital to purchase it outright. When you lease equipment, you have the option to either buy the item at a lower price or lease another brand new machine at the end of the term.

Knowing how an equipment lease calculator works and the steps to compute a lease allows you to estimate the possible cost of doing so. This guide discusses the typical equipment lease rates, terms, and costs and some advice on computing how much you can afford to lease.

How an Equipment Lease Payment Calculator Works

Equipment leasing providers might have unique ways of calculating payments, depending on the type of lease you are getting. In general, equipment lease rate calculators will require the following information to come up with pricing.

  • Total purchase price (after any rebates)
  • Your down payment (deducted from the purchase price)
  • Sales tax rate (computed against the total sale amount)
  • Loan term in months (usually 36, 48, 60, or 72 months)
  • Annual loan interest rate and other fees (title transfer fees, license fees, etc.)
  • Annual depreciation rate (10 to 20 percent per year)
  • Residual percent (the value of the equipment after the lease ends)
  • Refundable security deposit (returned at the end of term)

How you calculate your lease payments is contingent on the type of equipment lease you acquire, so ask your potential provider about this detail so you can start computing on your own.

Types of Leases That Use an Equipment Lease Payment Calculator

There are three types of equipment leases that utilize these elements to compute monthly lease payments:

1. Fair market value lease

An FMV equipment lease is similar to when you’re purchasing a car or a house. You pay monthly to use the machine with the expectation that it will be returned at the end of the term. You can then choose to buy the equipment when the lease expires at a lower but fair price.

2. $1 buyout lease

Payments to this type of lease go toward interest and fulfilling the full price of the equipment, similar to when you buy a machine through a loan. Monthly payments will be similar. When your lease term expires, you will owe the provider a symbolic $1 to finally own the machine.

3. 10 percent option lease

In this type of equipment lease, the purchase price will be locked in at the start of the term. When the lease expires, you can buy the machine for 10 percent of the predetermined price. Monthly payments will be lower than what is charged in a $1 buyout lease, but they will be higher than what you might pay for an FMV lease.

Factors To Calculate Equipment Lease Costs

To help determine if you are ready to lease equipment, here are the factors that a typical equipment lease calculator would consider in its computation.

Computing the Interest Rate

Using the equipment lease interest rate calculator will tell you the interest rate for your lease. The computation will be based on the following:

  • The value of the equipment
  • The lease amount and residual amount (if any)
  • Number of years for the lease
  • Down payment amount or number of advanced payments

Computing Monthly Payments Based on the Payment Period

Your lease provider might offer monthly, quarterly, bi-annual, and yearly payment options. The equipment lease calculator can help determine your monthly payouts based on the following information:

  • The value of the equipment
  • The lease amount and residual amount (if any)
  • Number of years for the lease
  • Down payment amount or number of advanced payments
  • Payment period

As mentioned, the type of equipment leasing calculator used will depend on many factors and who will be providing the lease. If all this information is overwhelming, know that there’s a much easier way to find out if an equipment lease is something that you can afford right now — talk to a trusted financial broker.

Be Ready to Grow Your Business With Charter Capital On Your Side

Charter Capital has more than 40 years of experience in helping small businesses grow by connecting them with the right financing partners to support them all the way through. We assist in equipment financing and equipment leasing, ensuring that you get the best value for your investment. We bridge connections not just for buying equipment but also for funding any future growth plans you might have.

Contact the financing experts at Charter Capital today.