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Micro-Leasing Calculator

Compare leasing vs. buying equipment for small businesses. Calculate monthly payments, total cost of ownership, and tax implications with residual value logic.

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Category Business & Trade

Lease Parameters

Approx APR: 6.0%

Loan / Buy Parameters

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About

Equipment leasing offers small businesses flexibility and preserved cash flow but often comes at a higher long-term cost. Decision makers must evaluate the trade-off between immediate liquidity and total expense. This tool compares the financial outcome of leasing an asset versus purchasing it outright with cash or a loan. It accounts for the Money Factor (a common leasing interest metric) and the Residual Value (the balloon payment required to keep the asset).

Tax implications play a crucial role. Lease payments are often fully deductible as operating expenses while purchases rely on depreciation schedules. This calculator isolates these variables. It helps freelancers and gig economy workers determine if the convenience of a lease justifies the premium. Accuracy in the Money Factor conversion is essential as this number is frequently misunderstood as an APR.

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Formulas

Leasing math combines depreciation with a rent charge. Unlike a standard loan the interest (rent charge) is calculated on the sum of the adjusted capitalized cost and the residual value.

Monthly Lease Payment:

P = C − RN + (C + R) × MF

Where C is Capitalized Cost, R is Residual Value, N is months, and MF is Money Factor. To convert APR to Money Factor divide the APR by 2400.

Reference Data

TermSymbolDescription
Capitalized CostCNegotiated price of the equipment
Residual ValueRValue at end of lease (% of MSRP)
Money FactorMFLease rate factor (APR ÷ 2400)
Depreciation FeeDmo(C − R) ÷ Term
Finance FeeFmo(C + R) × MF
Lease PaymentPleaseDmo + Fmo
Tax ShieldTsaveExpense × TaxRate
Break-evenBEPoint where Lease Cost = Buy Cost

Frequently Asked Questions

The Money Factor (or Lease Factor) determines the finance charge portion of your lease payment. It is not an interest rate in the traditional sense. To get the approximate APR multiply the Money Factor by 2400.
It depends on your business structure. Leases are typically 100% tax-deductible as operating expenses. Purchases are capital expenses and are deducted over time via depreciation. Consult a CPA for your specific situation.
You typically have three options: return the equipment, purchase it for the Residual Value (balloon payment), or extend the lease. The Residual Value is set at the start of the contract.
Leases are harder to terminate than loans. Early termination often requires paying all remaining payments immediately plus a penalty making it financially unwise to break the contract.