Calculate lease payments or find the effective interest rate on a lease.
This lease calculator is built for equipment, commercial, and general-purpose leasing scenarios. It accepts a capitalized cost (the item's negotiated value), residual value (what the asset is worth at the end of the term), a money factor or annual interest rate, and your lease term in months. The output includes your monthly payment, total payments over the full term, the total interest (finance charge) embedded in the lease, and the effective APR. For commercial real estate leases using NNN (triple net) or gross lease structures, a separate rent-based input mode is available. Results appear instantly — no registration required.
1. Enter the capitalized cost — the negotiated price of the equipment or property, minus any upfront credits or cap cost reductions.
2. Enter the residual value — the expected value at lease end (often expressed as a percentage of MSRP or appraised value; enter as a dollar amount).
3. Input the money factor (if given by the lessor) or the annual interest rate — the calculator converts between the two automatically.
4. Set your lease term in months (common terms: 24, 36, 48, or 60 months for equipment; 36–120 months for commercial property).
5. Enter any upfront fees — documentation fees, first/last month, security deposit — to see true out-of-pocket at signing.
6. Click Calculate to view your monthly payment, total cost, and effective APR.
A lease payment has two components: the depreciation charge and the finance charge.
Depreciation charge = (Cap Cost – Residual Value) ÷ Term
Finance charge = (Cap Cost + Residual Value) × Money Factor
Monthly payment = Depreciation charge + Finance charge
To convert a money factor to an equivalent APR: APR = Money Factor × 2,400. For example, a money factor of 0.00250 equals a 6.0% APR. On a $40,000 piece of equipment with a $12,000 residual over 48 months at a 0.00280 money factor: depreciation = $583.33, finance charge = $145.60, total monthly payment ≈ $729. Total lease cost = $34,992.
Your monthly payment covers the asset's loss of value over the term plus the cost of money. If the residual is set high, your payment is lower — but your buyout price at lease end is higher. A low residual means larger payments but a cheaper buyout. When comparing a lease to an outright purchase loan, always compare the total-cost column, not just monthly payment, and account for the tax treatment difference between the two paths.
Equipment leasing is a multi-hundred-billion-dollar industry in the US, and 2026 rates are being shaped by the same forces moving the broader credit market. For business equipment leases, well-qualified lessees (strong FICO, 2+ years in business, solid revenue) are seeing effective rates in the 6.5–9.5% range for standard 36–60-month terms on Class A collateral (manufacturing equipment, medical devices, technology hardware). Soft collateral — restaurant equipment, specialty vehicles, certain tech — carries rates from 9–15%.
One structural note that often surprises small business owners: most equipment leases are not simple interest loans. The money factor system embeds interest in a way that makes direct comparison difficult. Always ask your lessor for the implicit rate or use this calculator's APR conversion. Under current IRS rules, a true operating lease allows you to deduct 100% of lease payments as a business expense. A finance lease (also called a capital lease or TRAC lease) may require the asset to appear on your balance sheet, affecting ratios that matter to other lenders. Your CPA should confirm the classification before you sign.
Residual value is the single most powerful lever in a lease. It's the estimated worth of the asset at the end of the lease term, and it's set by the lessor — not by the market. When a lessor inflates the residual, your monthly payment looks attractively low, but you're setting up for one of two outcomes at lease end: either you walk away from significant equity the lessor captures, or you exercise the purchase option at an inflated price.
For equipment, industry guides (like those published by the Equipment Leasing and Finance Association) provide residual benchmarks by asset class and age. For commercial real estate, residual value is replaced by the concept of lease-end market rent — worth researching before you sign a long-term NNN lease. As a rule: always run the buyout math in the calculator before signing any lease where you suspect you might want to own the asset at term end.
Small business owners often frame the decision as "lease or buy," but the more precise question is "lease or buy and use Section 179 expensing?" Under the 2026 tax code, Section 179 allows businesses to immediately deduct up to $1,220,000 in qualifying equipment purchases (2026 limit, subject to a phase-out above $3,050,000 in total purchases). Bonus depreciation is also available, though it stepped down to 40% in 2025 and continues to phase out.
If your business has strong taxable income and the cash flow to handle a purchase loan, Section 179 can dramatically reduce the true cost of ownership in year one. If cash flow is the constraint or you upgrade equipment frequently, an operating lease preserves capital and keeps each payment fully deductible — no depreciation schedule required. The lease calculator helps you see the total-payment side of this equation; pair it with a conversation with your accountant to determine which path minimizes your actual after-tax cost.
The lower you negotiate the cap cost, the lower your monthly payment — this matters just as much in a lease as in a purchase.
Higher residual = lower monthly payment, higher buyout. Match your residual expectation to your actual end-of-term intent.
Even small differences matter. A money factor increase from 0.00250 to 0.00350 on a $60,000 lease adds roughly $120/month.
Longer terms spread depreciation over more months (lower payment) but increase total interest paid.
Upfront payments or trade-in credits reduce the cap cost and lower payments — similar to a down payment.
Typically $300–$900 upfront; factor these into your total cost at signing.
A restaurant owner in Nashville leases a commercial refrigeration system with a negotiated cap cost of $28,000 and a $5,600 residual (20%) over 48 months. The lessor quotes a money factor of 0.00265 (equivalent to 6.36% APR). Depreciation charge: ($28,000 – $5,600) ÷ 48 = $466.67. Finance charge: ($28,000 + $5,600) × 0.00265 = $89.04. Monthly payment: $555.71. Total lease cost: $26,674 plus a $299 acquisition fee. The restaurant owner deducts all 48 payments as a business operating expense — no depreciation schedule required.
A Denver-based SaaS startup signs a 60-month gross lease on 3,200 sq ft at $28/sq ft/year. Monthly rent: $7,467. Over 60 months, total base rent: $448,000. The landlord includes a tenant improvement allowance of $45,000, effectively reducing the economic cap cost. The startup's CFO uses the lease calculator to model total occupancy cost, then compares it to purchasing a comparable condo office — finding the lease's lower capital commitment preserves runway for product development.
1. Negotiate the cap cost, not just the monthly payment. Lowering the cap cost by $2,000 saves you money every single month and reduces total interest.
2. Ask for the money factor explicitly. Lessors are not always required to disclose it, but a reputable lessor will provide it. Convert to APR to compare against bank financing.
3. Match the term to your actual use horizon. A 60-month lease on technology equipment that will be obsolete in 36 months creates a painful mismatch.
4. Understand your end-of-term options before signing. Know the buyout price, return conditions, and any excess usage or wear-and-tear penalties.
5. Budget for the total cost at signing. First payment, last payment, security deposit, and acquisition fee can add $2,000–$5,000 out of pocket on day one.
A money factor is the interest component of a lease payment expressed as a small decimal. Multiply it by 2,400 to convert it to an approximate APR. For example, a money factor of 0.00300 equals a 7.2% APR.
A lease payment equals the depreciation charge (cap cost minus residual, divided by term) plus the finance charge (cap cost plus residual, multiplied by the money factor). The lease calculator handles this formula automatically.
Residual value is the estimated worth of the leased asset at the end of the lease term. It's set by the lessor. A higher residual value means lower monthly payments but a higher purchase price if you want to buy the asset at lease end.
Leasing preserves capital, may offer full payment deductibility as an operating expense, and lets you upgrade equipment at term end. Buying (especially with Section 179 expensing) can be cheaper in total cost if cash flow allows. The right answer depends on your tax situation, cash position, and how long you expect to use the asset.
Most leases allow early termination, but it typically involves an early termination fee — often equal to a portion of the remaining payments. Calculate the penalty before assuming early payoff saves you money.
A cap cost reduction is any upfront payment, trade-in credit, or rebate that reduces the capitalized cost before monthly payments are calculated. It functions like a down payment and reduces both your monthly payment and total interest.
An operating lease keeps the asset off your balance sheet and lets you expense payments fully. A finance lease (capital lease) treats the lease more like a purchase, putting the asset and liability on your balance sheet. The distinction affects financial ratios and tax treatment.
Your buyout cost at lease end is the residual value stated in the contract, plus any applicable buyout fee and state sales tax. Use the lease calculator to model this figure from the start so end-of-term decisions aren't a surprise.
Brief disclaimer: This calculator provides estimates for educational and planning purposes only. Actual lease terms, money factors, residual values, and tax treatment depend on your lessor, asset type, credit profile, and applicable regulations. Consult a qualified tax professional before making lease-versus-buy decisions. Results should be treated as planning guidance rather than financial, tax, or legal advice.