Enter the beginning lease balance and the amount paid that has been applied to reduce that balance (i.e., principal paid) into the calculator to determine a simplified adjusted lease balance.
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Adjusted Lease Balance Formula (Simplified)
The following formula is used to calculate a simplified adjusted lease balance for a given beginning balance and the amount of payments that have been applied to reduce that balance (principal paid).
ALB = OB - PM
Variables:
- ALB is the adjusted lease balance (simplified remaining balance)
- OB is the original/beginning lease balance (amount financed)
- PM is the amount of payments applied to reduce the balance (principal paid)
To calculate this simplified adjusted balance, subtract the amount of payments applied to reduce the balance (principal paid) from the beginning lease balance.
Important: In most real-world leases, periodic payments usually include finance charges (interest), taxes, and/or fees. Because of this, the contractual payoff (or an accounting “lease liability” balance) typically does not equal beginning balance minus total payments made. For an exact payoff or remaining lease liability, refer to your amortization schedule or your lessor’s payoff quote.
What is an Adjusted Lease Balance?
In general, an “adjusted” or “remaining” lease balance refers to what is still owed under the lease after accounting for payments made and how those payments are allocated (for example, between finance charges and principal) under the lease’s terms. In this calculator, the adjusted lease balance is a simplified estimate that treats the “payments made” input as the amount applied directly to reduce the balance (principal paid), excluding interest, taxes, fees, and any early-termination charges.
How to Calculate Adjusted Lease Balance?
The following steps outline how to calculate the Adjusted Lease Balance.
- First, determine the beginning lease balance (OB).
- Next, determine the total amount applied to reduce the balance (PM), i.e., the principal paid.
- Finally, calculate the simplified adjusted lease balance using the formula ALB = OB – PM.
- After inserting the values and calculating the result, check your answer with the calculator above.
Example Problem :
Use the following variables as an example problem to test your knowledge.
Original Lease Balance (OB) = $10,000
Payments Applied to Balance / Principal Paid (PM) = $3,000
Adjusted Lease Balance (ALB) = $7,000