# Lease Calculator – Establishment and Formulas

## What is meant by lease?

A contractual arrangement where the user or the lessee has to pay the owner or the lessor for making use of the asset is known as a lease. The common assets which are leased are buildings or the property or even vehicles apart from the business or the industrial equipment. In addition to this, lease happens to be a contract between the lessor & the lessee. On one hand, lessor turns out to be the owner that too the legal owner of the asset.

## Lease Calculator

 Sales Price(CC): Residual value(RV): Terms of Lease(M): Monthly Depreciation charge:

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While on the other hand, lessee is the one who obtains the right to use this said asset in return for the rental payments being made on regular basis. Besides this, the lessee also agrees to follow the conditions laid down by the lessor when the property is being handed over.

## Residual value

In simple terms, residual value is stated to be the approximate amount of how much will the fixed asset be worth of by the time lease ends or even by the end of its life. Therefore, this residual value in a lease comes to a lessor’s use as it is one of the determining factors as to how much a lessee should pay when the lease payments are in question. Another interesting aspect of this lease is that the longer the lease period or the life of the asset is, residual value happens to be lower.

## How to use a lease calculator?

If you are calculating for the fix rate then firstly you should enter the product or the property value followed by residual value, the lease term & the interest rate before clicking on calculate. But if you wish to calculate lease for fix payment then mention the product or property value besides residual value, lease term, monthly payment & then click on calculate tab.

### Formula used to calculate lease

Before we go ahead & look at the formula to calculate lease, it would be an added advantage if we get to know as to what are the terms that are related to the lease calculator or just the word lease. One has to keep the fact in mind that the lease calculator will make use of the lease formula & in the formula the following terms are used. Here MF means the money factor; generally the interest rate is calculated when this MF or the money factor is multiplied by 2400. The next term is RV or the residual value while CC means capitalized cost or the sale price. There is also the local sales tax or the LST while the letter M denotes term of the lease.

### List of formulae to calculate lease

$$1.\quad \quad Monthly \quad depreciation \quad charge \quad =\frac{(CC \quad – \quad RV)}{M}$$

$$2.\quad \quad Monthly \quad finance \quad charge \quad =\quad (CC \quad + \quad RV)\quad \times \quad MF$$

$$3.\quad \quad Total \quad monthly \quad charge \quad along \quad with \quad tax =\quad (monthly \quad depreciation \quad charge \quad +monthly \quad finance \quad charge ) \times LST$$

Thus, by using the above stated formula for the lease calculator apart from the lease calculator tool, an individual would be able to calculate lease in an easy manner.