Find the monthly payment on a lease, or the interest rate hidden in a quoted payment, from the asset value, the residual value and the term.
In a lease you pay for the part of an asset you use rather than the whole thing. The asset value is what it is worth at the start, and the residual value is what it is expected to be worth when the lease ends. Your payments have to cover the drop in value between the two, plus the interest on the money tied up in the asset. That is why a higher residual value gives a lower monthly payment, even though you give the asset back at the end.
Dealers and lessors often quote a monthly payment without saying what interest rate it contains. Use the second option to work it out. Enter the asset value, the residual value, the term and the payment, and the calculator finds the interest rate that makes the payments and the residual value exactly worth the asset value today. Comparing that rate with loan rates shows whether a lease is a good deal.
The calculation treats the lease like a loan that ends with a balloon payment equal to the residual value. It does not include fees, taxes, mileage charges or the cost of buying the asset at the end. Auto leases often add a money factor, a down payment and other charges, so use the Auto Lease Calculator for a car lease.
The residual value is the estimated worth of the asset at the end of the lease. The lessor sets it at the start, and it is the part of the asset you do not pay off through your monthly payments.
Your payments only need to cover the fall in value from the start to the end of the lease, plus interest. A higher residual value means the asset loses less value, so there is less to pay off each month.
The calculator searches for the monthly rate at which the present value of all the payments, plus the present value of the residual value, equals the asset value. That rate, multiplied by twelve, is the yearly rate shown.
You can get a rough figure, but car leases usually add a money factor, fees, sales tax and a down payment. The Auto Lease Calculator handles those details.
If the residual value is equal to or greater than the asset value, the asset is not losing value, so there is nothing to pay off through the lease payments and the calculation does not make sense.
Pick another tool to jump straight to it.