Product value
Down payment
Down payment
Lease amount
Residual value
Residual value
Interest rate
Lease term
Monthly payment

Lease calculator helps you determine the monthly and total payments for a lease. In order to that, you will need to know the initial and residual value of the good that you'd like to lease, the interest rate and the lease term. Our lease payment calculator could help you when you are trying to decide lease vs. buy. Read on this article to find answers for the following questions:

  • What is a lease?
  • What does the lease agreement contain?
  • What is the residual value?
  • How to calculate the costs of the lease?
  • What is more profitable leasing or buying?
  • What is more profitable leasing or renting?
  • What is ecoleasing? And last but not least, in the text below you will find out how to use our incredible lease calculator to make your financial decisions faster and smarter.

What is a lease?

The commonly agreed definition of lease says that it is a contractual agreement between two parties - the lessee and the lessor - where one party pays the other for the use of a particular good or asset.

The lessee is the one who uses the good (or more formally: the one who obtains the right to use the asset in return for regular payments).

The lessor is the legal owner of the good in question. Usually, the lessee agrees to follow some additional rules regarding the use of the leased property. For example, in a car leasing agreement, it may be stated that the lessee can use the car only for personal purposes.

Generally all kinds of personal property or real property can be leased. Common assets to be leased are:

  • cars,
  • buildings, (apartments, family homes etc.),
  • raw lands,
  • furniture,
  • different type of special equipment (eg. machinery),
  • other types of property.

Under a lease agreement, the lessee is entitled to use an asset in exchange for regular payments (the "leasing rate" in case of leasing a car or the "rent" in case of leasing an apartment). The payments are stipulated in the contract and usually equate to the difference between the initial value of the leased good (called transaction value or capitalized cost) and its residual value. There can be additional conditions regulating the proper use of an asset by the lessee, which they need to abide by. For example, the contract can specify that a car can only be used for business purposes or that one cannot have pets in a leased apartment, etc. Other costs one needs to consider are down payments, deposits and other charges imposed by the lessor.

A lease is usually fixed in time, after which the lessee is obliged to return the property to the lessor. Sometimes a lessee has an option to buy the asset from the lessor for its residual value (a percentage of what a new item would cost). This is a popular option with cars and business equipment.

The residual value in leasing

One of the basic term used in leasing agreement is the above mentioned residual value (sometimes it is also referred as a salvage value). Although this term is quite simple to get familiar with, it is often the cause of misunderstanding and mistakes made by lessees. In the simplest terms, the residual value is an estimated amount of money that an asset will be worth at the end of the leasing period. In other words, the residual value is an estimated price the leased asset can be sold once again after the end of the leasing period.

This amount is contained in the leasing contract and has a direct impact on the costs of leasing (see section Example – the leasing calculations). The rule of a thumb says that the longer the lease period, the lower the residual value. An exception to this rule may be real estates, which – due to the general increase of property prices - sometimes may have higher residual values after the lease period.

The lease agreement

Formally a lease is a legal contract signed by two parties under the contract law of the particular (i.e., state or country) jurisdiction. There is no single and universal form or content of the lease agreement. You can, however, point out the following common elements of each lease agreement:

  • Names of the parties of the agreement (the lessee and the lessor),
  • Information necessary to identify the object of a lease (e.g., in a car lease it may be the VIN),
  • The starting date and duration of the agreement,
  • A specific provisions for granting the right to use of this object,
  • Provisions for a security deposit and terms for its return,
  • A list of additional conditions (so-called Default Conditions),
  • Provisions regarding the need to provide insurance (the most common coverage areas are: fire, lightning, theft, vandalism, windstorm),
  • Provisions regarding the restrictive use,
  • Provisions regarding which party is responsible for maintenance,
  • Conditions for renewal the contract (if applicable),
  • Contract termination clauses. In addition, some specific kinds of lease contracts may have specific clauses required by the state or country law.

How to use the leasing calculator?

The use of our leasing calculator is very simple indeed.

  1. First of all you, need to determine the product value (the value of the transaction) of an asset you want to lease. In addition you can provide the value of your down payment in the form of a fixed amount or as a percentage of the product value.
  2. Secondly, try to estimate the residual value (an appraisal of how much the good will be worth at the end of the lease period) of an asset you want to lease. You can do it either in the form of a fixed value or as the percentage of the initial product value.
  3. Then you need to provide the interest rate.
  4. And finally, you should put in the lease term in years and months. The lease payment calculator will estimate your monthly payment. In the advanced mode it will also calculate the total paymentson the lease, the total interest to be paid and total costs to own the leased property. In conclusion, our smart least calculator helps you make a smart financial decision. With the mobile version of our application, you are also able to use our lease calculator whenever and wherever you want.

Example – the leasing calculations

Are you wondering how the lease works? What are the costs of leasing? Or maybe you wonder whether you should lease or buy some asset?

We have prepared an easy to understand example to help you find answers to these questions. After studying this example carefully, you shouldn’t have any troubles with understanding the mechanism of leasing. We also believe that thanks to this example you will be able to make smart financial decisions in your personal finance.

Knowing the basic rules of leasing, let’s try to calculate the monthly payments in the example leasing contract.

First of all let’s assume that you want to lease an asset that is worth $30,000 (it is the retail price of an asset you want to buy, in our calculator it is the product value). The cost of leasing is set by the lessor at a fixed rate of 4% (it is the interest rate), the agreed down payment is $5,000, the length of the lease is four years (48 months) and the residual value of a leased asset after this period is set as $14,000.

To calculate the monthly leasing payments in this example you need to do as follows:

  • First of all, calculate the lease amount. It is a difference between the retail price and the down payment. In our example it is:

$30,000 - $5,000 = $25,000

  • Calculate the monthly_payment using the following formula:

monthly_payment = (lease_amount * Interest_rate * (1 + Interest_rate) ^ Lease_term - residual_value * Interest_rate) / ((1 + Interest_rate) ^ Lease_term - 1)


monthly_payment = ($25,000 * 0,04 * (1 + 0,04) ^ 48 – $14,000 * 0,04) / ((1 + 0,04) ^ 48 – 1) = 295,04

  • Now you can compute the total sum of payments in the considered leasing agreement (a sum of all monthly payments). The formula here is as follows:

Lease_term x Monthly_payment = Total_payments

So in our example:

48 months x $295,04 = $14,161.64

  • You can also calculate the total interest to be paid (in fact it is the actual cost of leasing). To do so you need to use the following formula:

Down_payment + Total_Payments + Residual_Value - Product_Value = Total_interest


$5,000 + $14,161,64 + $14,000 - $30,000 = $3161.74

  • And last but not least, you can also calculate the total cost to own a car after lease ends. It is the product value plus total interest. So:

$30,000 + $3161.74 = $33,161.74

This amount shows you the total cost you need to cover in order to have the considered asset after the leasing period. If you want to know whether it is more profitable to buy or to lease this asset you should compare this amount with the costs of buying this asset for credit (to do so you can use our personal loan calculator.

Lease vs. rental

Although the philosophy behind a lease and a rental is basically the same: you pay a certain amount of money for the right to use an asset, there is a difference. A lease agreement is much stricter than a rental contract. Let's look at a simple example: when you rent an apartment you can always move out earlier or maybe pay rent a little later than agreed with your landlord. Also the landlord may change the terms of this agreement with proper notice. One cannot do it under a lease agreement.

If you'd lease an apartment for three years, you will have to pay your monthly rate irrespective of whether you use it or not. Once the lease contract is signed neither party can deviate from it or they will face penalties. Therefore, it is unlikely that a landlord will lease an apartment to an individual.

Lease vs. buy

The difference between leasing an asset and buying it is essentially the ownership title. When you lease an asset the ownership stays with the lessor, you only have the right to use their asset for a fixed period. However, most of us do not have enough cash to buy such assets like cars for example. We usually need to take a loan.

Wonder which option you should choose? Take a look at the most common differences:

  1. Costs. One might think that leasing a car is a better option in terms of finances, but it is not. Even if your monthly lease rate would be lower than the rate of a loan you are paying a higher interest rate on the lease (if you need to calculate simple interest, you can use our interest calculator). Furthermore, the lessee is often charged with various fees and other extra costs (like lease initiation and disposal fees), which can only add to the total cost.
  2. Termination. When taking a loan to buy a car, you can sell it whenever you want. You can also use the money from the sale to pay the loan balance. If you'd like to terminate the lease contract earlier, you will have to face penalties which could be as costly as sticking to the agreement.
  3. Equity. At the end of the loan, you own a car and can use it to pay for a next one. When leasing, you have to return the car and have to finance the purchase or lease of another car yourself.
  4. Usage. When buying a ca, you can drive it as much as you like and you don't have to worry so much about your kids spilling drinks or ice cream on the upholstering (it can, however, lower the resale value of your car). Under a lease agreement, you'll typically have a mileage limit and will have to pay for any damage that is not standard wear and tear.

You can determine the cost of your lease using our lease - calculator. To see an example tool for loans, please see our mortgage calculator.


Are you familiar with the term “ecoleasing”? It is worth to know what it means as in the recent years its popularity has grown significantly. Generally, ecoleasing is a type of leasing in which a particular good is rented for a certain period of time after which it is returned to the lessor (usually the manufacturer) which then recycle the materials contained in this good.

An example of ecoleasing is a lease of a TV set. In this case, a consumer sign a contract with the TV manufacturer. According to the contract, the consumer has a right to use the TV e.g., 15 000 hours. After this period he returns the TV to the company which then recycles it.

Ecoleasing differs from the “classical” leasing in the following aspects:

  • It does not require to sign the formal leasing contract – ecoleasing is similar to common purchase
  • The ecoleasing is usually done with appliances and other relatively cheap household products. It is hardly ever used for land, real estate, and expensive products. It also doesn’t apply to B2B contracts.
  • Usually the period of ecoleasing is more or less equal to the lifespan of the product. It means that the product can be rented only once before it is returned to the company and recycled.

One of the most significant advantages of ecoleasing is its environmental friendliness – thanks to this solution fewer materials are thrown away and wasted. It is the other way round – materials are recovered and reused. In addition, thanks to the recycling process the manufacturer can make new products at a lower expense, so they are cheaper for the customer.

Other financial calculators

Now that you know how to perform the lease calculations and how to use our lease calculator, it's high time to find other applications which will help you make smart decisions regarding your personal finance.

  • The compound interest calculator is a tool which helps you estimate how much money you will save with your bank deposit.
  • If you want to find out how long it would take for something to increase by n%, you can use our Rule of 72 Calculator.
  • Very helpful in comparing bank offers with different compounding periods, is APY Calculator, which estimates the Annual Percentage Yield from the interest rate and compounding frequency.
  • The car depreciation calculator allows you to find the market value of your car after a few years
  • If you want to find your sale price or, inversely, the cost you bear, you should use markup calculator.
  • You may be interested in the Credit card payoff calculator which allows you to estimate how long it will take until you are completely debt-free.
  • Another interesting calculator is our Cap rate calculator which determines the rate of return on your real estate property purchase.
  • If you want to know how long you have to save to make your dream comes true, use our Dream Come True Calculator .
Tomasz Jedynak, PhD, Mateusz Mucha and Joanna Andrzejwska

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