A capital-lease payment has two parts: an annuity on the amount actually repaid during the term, and interest on the residual value that stays unbought throughout. A €25,000 car with 10% down, 30% residual, 5% and 5 years gives a payment of roughly €314.32.
Formula and variables
Financed amount F = price − down payment. Payment M = (F − R) × r / (1 − (1+r)^−n) + R × r, where R is the residual value in euros, r = annual rate / 12 / 100 and n is the number of months. At a zero rate M = (F − R) / n. Total interest = M × n + R − F.
Why only interest is paid on the residual
The residual is the part of the asset not repaid during the term — it is bought out at the end in a single payment, or the asset is returned. So only the difference (F − R) is amortised monthly, while interest accrues on the whole outstanding balance, because the money is in use the entire time. This is exactly what makes a lease payment lower than a loan for the same amount.
A low payment does not mean a cheaper deal
A larger residual lowers the payment but raises the total cost, because interest is charged on a larger balance for the whole term. At the end the residual itself must also be paid. Offers should be compared on the total: payments made plus the buyout, not on the monthly figure alone.
Capital and operating leases are different
Under a capital lease the asset ends up owned by the lessee and sits on the balance sheet. Under an operating lease the asset is returned; there, mileage limits and condition requirements matter, and exceeding them costs extra. This calculator computes a capital lease.
VAT and additional costs
The calculator works with net prices and does not add VAT. For a company, VAT treatment depends on how the asset is used and on whether the lease is capital or operating. Contract fees, comprehensive insurance, registration fees and motor vehicle tax are likewise outside the calculation.
Scope and limitations
Suitable for estimating a vehicle or equipment lease payment at a fixed rate. It does not cover Euribor movements, payment holidays, early termination or revaluation of the residual. The lessor's schedule may differ by a few cents due to rounding and day counts.
Examples
Car €25,000, 10% down, 30% residual, 5% per year, 5 years
F = 25,000 − 2500 = €22,500, residual R = €7500, n = 60. The amortised part (22,500 − 7500) contributes €283.07 to the payment, interest on the residual is 7500 × 0.0041667 = €31.25. Payment ≈ €314.32. Over the term €18,859 is paid, plus the €7500 residual at the end — €26,359 in total, of which interest ≈ €3859.
The same deal without a residual
With a zero residual the whole €22,500 is amortised and the payment rises to roughly €425. The payment is higher, but there is no final buyout and total interest is lower.
Interest-free instalments
At 0% the formula reduces to (F − R) / n and no interest arises on the residual. In that case the only extra cost is the contract fee.
Sources
- Eesti Pank — interest environment and Euribor
- Financial Supervision Authority — leasing and consumer credit requirements