The short answer
On $50,000 equipment with a $5,000 (10%) residual value at 8% over 36 months, you finance $45,000 and pay $1,410.14 a month — $50,764.91 total, of which $5,764.91 is interest. Switch to a $1 buyout structure on the same equipment and the payment rises to $1,566.79/month, because you're financing nearly the full $50,000 instead of $45,000.
Key takeaways
- $50,000 equipment, $5,000 residual, 8%, 36 months: $1,410.14/month, financing $45,000 of the $50,000 cost.
- Total interest over the lease is $5,764.91 — 11.4% of the $50,764.91 in total payments.
- A $1 buyout on the same equipment costs $156.65/month more ($1,566.79 vs $1,410.14) because almost the full cost is financed instead of just the depreciation.
- With one advance payment and no security deposit, $1,410.14 is due at signing — equal to one month's payment.
The lease payment formula
Amount financed = Equipment cost − Residual value = $50,000 − $5,000 = $45,000
Monthly payment (8%, 36 months): $1,410.14
A lease payment is really an amortized loan on just the portion of the asset's value you're expected to use up — the residual is the part the lessor expects to recover by selling or re-leasing the equipment afterward, so you never finance it.
FMV vs $1 buyout: why the payment jumps
A $1 buyout lease sets the residual to essentially nothing, since you're contractually going to own the equipment for a token fee at the end. On the same $50,000 equipment at 8% over 36 months:
| FMV Lease | $1 Buyout | |
|---|---|---|
| Residual value | $5,000 | $1 |
| Amount financed | $45,000 | $49,999 |
| Monthly payment | $1,410.14 | $1,566.79 |
| Total interest | $5,764.91 | $6,405.33 |
The $156.65 higher monthly payment on the $1 buyout isn't a worse deal — it's the cost of guaranteed ownership. With an FMV lease, that $5,000 residual has to be paid separately (or the equipment returned) at lease end; with a $1 buyout, ownership is already priced into the monthly payment.
Related calculators
- Auto Lease Calculator — apply the same residual-and-financing logic to a vehicle lease.
- Business Loan Calculator — compare leasing against financing the full purchase with a term loan.
- Depreciation Calculator — estimate how equipment value declines if you buy instead of lease.