Equipment Lease Calculator

Buying equipment can be costly and time-consuming, but leasing a piece of it is one way to spread out the costs. This calculator will help you determine how much money you’ll spend after your lease expires.

The “equipment lease calculator excel” is a spreadsheet that can be used to calculate the monthly payments for leasing equipment. The spreadsheet includes many different variables, such as the term of the lease, interest rate, and down payment.

Our equipment leasing calculator compares three popular lease options: a Lease at Fair Market Value, a Lease Buyout for $1, and a Optional Lease of 10% to evaluate the possible expenses of an equipment lease. Change essential factors like the interest rate, Making a Down Payment, and term length to estimate your monthly payment and total cost.

How Does the Calculator for Equipment Leasing Work?

Our equipment leasing calculator lets you calculate your monthly payments, the amount needed to buy the equipment at the conclusion of the lease, and the equipment’s worth at the end of the lease. To calculate, input the cost of the equipment, the rate, the term, and your Making a Down Payment, then choose the kind of equipment leasing you’re interested in.

Our calculator includes three different forms of equipment leases:

1. Your payments go toward interest and paying down the entire cost of the equipment on a Lease Buyout for $1. This form of leasing is akin to getting a loan to buy the equipment. Your monthly payments will be identical, and you will owe a symbolic $1 to purchase the equipment entirely at the conclusion of your term.
2. A ten percent option lease is similar to a dollar buyout lease in that the purchase price is set at the beginning of the lease. You have the opportunity to buy the equipment for 10% of the equipment’s set purchase price at the conclusion of your term. The monthly payments will be lower than those of a Lease Buyout for $1, but more than those of a Lease at Fair Market Value.
3. Lease at Fair Market Value: A fair market value (FMV) lease works in the same way as a home or automobile lease does. You pay a monthly fee to use the equipment with the intention of returning it at the conclusion of your contract. When your operating lease expires, many operating leases allow you the opportunity to buy the equipment at fair market value.

If the interest rates and term duration are the same, the Lease Payments on a Monthly Basis for an operating lease will never be more than a loan or lease to own scenario.

Typical Equipment Lease Rates, Terms & Costs

Interest rates on equipment leases vary depending on the risk that the financing business faces, which is determined by a number of variables. Your credit score, the equipment being financed, and the amount of money you can put down beforehand are all factors to consider. Leases with a $1 buyout vary from 6% to 15%, Optional Lease of 10%s from 7% to 16%, and FMV leases from 6% to 30%.

A monthly payment on an equipment lease is often cheaper than a monthly payment on an equipment loan. The tables below illustrate the typical expenses of each equipment leasing type as well as an illustration of your costs.

Equipment Lease Rates & Terms

With a Lease Buyout for $1, the lessor recoups the whole cost of the equipment, less the symbolic $1, at the end of the term. This enables borrowers to receive rates ranging from 6% to 15% with Making a Down Payments as little as 5% and maturities ranging from 2 to 5 years, with durations going up to 10 years where the expected life of the equipment permits.

The Optional Lease of 10% is a compromise that provides the borrower with cheaper payments and the ability to walk away from the asset at the end of the term. Typical interest rates range from 7% to 16%, with Making a Down Payments beginning at 5% for well-qualified applicants. The lease period is usually between two and five years, and it may go up to 90 percent of the equipment’s expected life.

Borrowers seeking the lowest monthly payments might choose an FMV lease, which often has shorter durations of one to three years, interest rates ranging from 6 to 30%, and the possibility of no Making a Down Payment for prime borrowers.

“You have a one-of-a-kind credit and company situation. Your real experience may differ significantly from online estimations of possible financing offers. In the realm of equipment finance and leasing, this is especially true. There are over 100 distinct types of equipment financing packages available on the market.

“These systems all assess risk differently based on characteristics such as your personal and business credit, installment loan history, time in business, industry, equipment type, age, and hours or miles, as well as corporate cash flows, such as monthly income and average or ending bank balances.”

President of Smarter Finance USA, Rob Misheloff

Inputs for the Equipment Lease Calculator

You may use our equipment leasing calculator to input the value and kind of equipment you want to buy, as well as the Making a Down Payment and estimated interest rate. We can calculate a projected monthly payment, as well as the total cost of the lease and the anticipated equipment value at the end of the term, by adding the duration of the lease and the estimated equipment life.

Equipment Value in Dollars

This is the equipment’s agreed-upon price. Include any optional features and soft charges, such as delivery and installation, in the overall cost of your equipment. If the equipment finance business is not the equipment seller, an expert assessment may be necessary for secondhand equipment.

Equipment Lease Types

With our calculator, we covered the three most common equipment leasing alternatives. Choose between a $1 option lease, a Optional Lease of 10%, or an operational lease to view the prices (FMV lease). A 10 percent buy upon termination (PUT) lease is a fourth option that basically shares the 10 percent option lease’s inputs and outputs.

Rate of Effective Interest

When you lease equipment, the lessor is effectively putting up a lump sum of money on your behalf, which you will pay off with interest over time. The Rate of Effective Interest on a lease can be anywhere from the low single digits to more than 30%, with the average is around 6% to16%.

Making a Down Payment

How much are you paying upfront before you get your equipment? The more you pay, the lower your monthly payments will be, and the less you may have to pay to own the equipment later. In many cases, the lessor will require a minimum of 5% down, but you may be asked to pay 10% to 20% down. Larger Making a Down Payments should be expected for equipment that loses value quickly or when the borrower has subprime credit.

Length of the Contract

While the period of an equipment lease might vary greatly, it should be less than the equipment’s projected shelf life. Longer leases often offer lower monthly payments but higher interest rates, resulting in a greater total cost.

Equipment Life Expectancy

How long is the equipment anticipated to remain productive under normal conditions? You or your lease provider, whichever ends up with the equipment at the conclusion of the term, will want to make sure it still has worth and/or shelf life.

Outputs of the Equipment Lease Calculator

Our Outputs of the Equipment Lease Calculator several fields, including the amount of Lease Payments on a Monthly Basis, the total cost of the lease, the Purchase Price the equipment at the end of the lease, and an estimate of the asset’s remaining value. These values will help business owners estimate some of the most common costs associated with an equipment lease.

Lease Payments on a Monthly Basis

This provides you a rough estimate of your monthly payments. This figure is derived based on the assumption that all payments are the same amount and paid once a month.

The total cost of the lease

This amount is the total amount you will pay to lease the equipment over the term, including the amount of the equipment financed as well as finance charges, sometimes known as equipment rental charges. This amount will fluctuate based on how long you lease the equipment and the Rate of Effective Interest you are charged.

The total cost of the lease can be a helpful figure to compare to the cost of an equipment loan or other form of financing and can be used to help you understand how the total cost of leasing the equipment would compare to an equipment loan on the same equipment. This can also be used to estimate the cost of using the equipment for a specific period of time versus buying the equipment outright.

Purchase Price

This is the amount you’ll have to spend to buy the equipment at the conclusion of your lease period. A $1 option lease or an equipment loan will leave you with a little sum to pay off when the equipment is purchased. If you wish to acquire the equipment at the conclusion of the lease period, a Optional Lease of 10% or FMV lease will have considerable fees.

End-of-Lease Equipment Value

The equipment’s value is computed using a straight-line depreciation technique based on the equipment’s value at the start of the lease and the equipment’s projected lifespan. This number is particularly relevant in operating leases, where the lessee may choose to purchase the equipment from the lessor at the conclusion of the lease but must pay fair market value.

The Cost of an Equipment Operating Lease Is Underestimated

In contrast to accelerated depreciation and MACRS depreciation, this equipment leasing calculator assumes straight-line depreciation. Essentially, we compute depreciation based on the assumption that the equipment would depreciate at a constant rate during its life.

For instance, if the equipment is predicted to last five years, we estimate it would lose 20% of its value each year. As a result, if you have a 2-year fair market value equipment lease, we predict it will lose 40% of its value over that time.

Depreciation does not happen in a straight line in reality. Depreciation usually accelerates in the early years of a piece of equipment’s life. Even though the equipment has a 5-year life, it may lose 50 percent or 60 percent of its value by year two.

The lessor will want to be compensated for this greater loss of value early in the lease. In some cases, the lessor will require a Making a Down Payment to compensate for the effect. However, other times, they may increase the monthly payment. If the latter is the case, the equipment leasing calculator may underestimate the required payments for operating leases.

There are three different types of equipment leases.

Lease Buyout for $1

In a lease to own arrangement, the lessee―the small business leasing the equipment―has the option to buy the equipment from the lessor―the financing company―at the end of the lease term, for a nominal sum. The sum for a Lease Buyout for $1 is just like it sounds―$1.

So, at least in one sense, a Lease Buyout for $1 operates similarly to an equipment loan. Effectively, you own the equipment when your Lease Buyout for $1 is done. You get all the benefits of owning the equipment, such as the tax advantages, throughout the lease term.

Unlike an equipment loan, though, you can’t usually pay off an equipment lease early to save money on interest. Paying off a lease early implies paying off the whole lease contract, since the lease is an agreement to pay a specified number of predetermined monthly installments, not principle plus interest.

Optional Lease of 10%

A Optional Lease of 10% is a capital lease like the Lease Buyout for $1. This means you also get the benefits of owning the equipment for tax purposes, but your payments are also typically less than they are for the Lease Buyout for $1. This is due to you having the option to purchase the equipment at the end of the term for 10% of the equipment’s value when you sign the lease.

For example, if you use a Optional Lease of 10% to purchase a $100,000 piece of equipment, then you’re financing $90,000. You’ll have the option to purchase the equipment at the end of the term for the additional $10,000 or 10% of the equipment’s value.

A Optional Lease of 10% is a good choice for someone who isn’t sure whether they’ll want to purchase the equipment down the road. You can get lower monthly payments with a 10% option while you wait to see if you will want the equipment long-term.

Lease at Fair Market Value

You may be able to purchase the equipment from the lessor at the conclusion of the lease period if you have an FMV lease, but you will be charged for the equipment’s current fair market value. With an operating lease, your monthly payments will be smaller, but your payment to acquire the equipment, if provided, would be substantially greater.

The lessee is not required to purchase the equipment since it is leased. Rather, the lessee may return the equipment and walk away at the conclusion of an FMV lease. This is a particularly appealing alternative if new technology has rendered the equipment outdated or if the equipment is no longer necessary for your operation.

An operational lease does not provide you with the same tax advantages as conventional leases, but it does not appear on your company’s records as debt. If you’re seeking for further funding, this is a positive thing.

Examples of Equipment Leasing

To help get a better idea of what the different types of equipment leases would cost, let’s look at an example. In the table below, we show what each lease would look like if we were buying a piece of equipment valued at $25,000, with an interest rate of 10%, a $1,250 (5%) Making a Down Payment, and get a 5-year lease.

Examples of Equipment Lease Costs

Qualifications for Leasing Equipment

Qualifying for an equipment lease is much easier than qualifying for traditional financing you may be used to, like a Small Business Administration (SBA) loan or a bank loan. Traditional financing typically requires prime borrowers who have collateral to put down. With equipment leasing, the equipment is used as collateral so that you don’t have to provide any. The only cost you may need to come up with upfront is the Making a Down Payment. The typical requirements are:

• 600+ credit score
• Making a 5% of the purchase price as a down payment Plus
• No open bankruptcies, tax liens, or child support collections are also required.

Smarter Finance USA, on the other hand, may be able to assist you if you have credit issues or are a newer firm. It has a variety of financing choices, can lend up to $250,000, and can generally finance you within one week.

Visit Smarter Finance USA for more information.

What Kinds of Equipment Are Available for Lease?

Major acquisitions and equipment with a longer life cycle and a respectable resale value are often the focus of equipment leasing firms. Restaurant equipment, Heavy equipment, and commercial vehicles, such as Semi-trucks, are among the types of equipment that may be leased.

The following are some examples of equipment that might be suitable for leasing:

• Heavy equipment
• Semi-trucks
• Ovens, stoves, freezers, and other equipment of a similar kind
• Tooling, laser cutters, 3D printers, and more are all available.
• Conveyor equipment, automation equipment, and other comparable devices
• Agriculture and farm equipment
• Food carts and food trucks

Consider unsecured company loans for smaller expenditures like hand tools or microwaves, or equipment with limited shelf life like software, computers, or dishware.

What is the difference between an equipment lease and an equipment loan?

You can’t compare the costs of an equipment lease with an equipment loan with this equipment leasing calculator. However, the “$1 lease” option represents the cost of purchasing the equipment with an equipment loan, so you can get an idea of how much your loan may cost.

Section 179 of the tax law provides some tax savings with equipment acquisitions.

Keep in mind that equipment finance and working capital loans are not the same thing. For example, funding the acquisition of a tractor-trailer necessitates equipment finance, but financing the expansion of a trucking company necessitates a standard trucker’s business loan. Read our in-depth guide on equipment loans and leasing to discover more about financing your next piece of equipment.

Conclusion

Leasing equipment is a popular alternative to taking out a loan or buying it altogether, and it offers advantages such as reduced monthly payments and more flexibility. You may save money by leasing equipment. However, depending on whether you want to maintain the equipment and other variables, it may be more costly in the long term than alternative options.

The “equipment finance calculator” is a free web tool that helps users to calculate the monthly payments for leasing equipment.

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