PV of Lease Calculator (Present Value of Lease Payments)

Calculate the present value of lease payments from the payment, discount rate and term, with timing and escalation, or solve for the rate or payment.

Solve for

The total includes any payment due at commencement.

Base payment per period ($)

Annual discount rate (%)

Payment frequency

Lease term

Must give a whole number of payments, at most 1,200. Changing the term unit reinterprets this number.

Term unit

Payment timing

Annual rate convention

Escalation, terminal cash flow and asset illustration

Annual payment escalation (%)

Blank means 0%. Payments step up after each full year.

Included terminal cash flow ($)

Blank means none. An amount you expect to pay at the end of the term, such as a purchase option or residual guarantee.

Other prepayments + qualifying direct costs ($)

Blank means none. Exclude the first payment already modeled at period 0.

Incentives already received ($)

Blank means none. Used only in the illustrative asset adjustment.

Asset fair value ($)

Blank skips it. Shows PV as a percentage of fair value; no lease classification is made.

Related Calculators

PV of Lease Formula

For equal end-of-period payments without escalation or terminal cash flows, the following annuity equation gives total PV. Here r is the discount rate per payment period; at r =0, PV = PMT × n. Advance payments and other entered cash flows are discounted individually by the calculator.

PV = PMT \times (1 - (1 + r)⁽ - n)) / r

Where PV is the present value of the lease ($)
PMT is the periodic payment ($)
r is the discount rate per payment period (decimal)
n is the total number of payments

To calculate the present value of a lease, discount each future payment to its current worth using the formula above.

What is a PV of Lease?

Definition:

PV of a Lease typically refers to the total value in today's dollars of all the future lease payments owed over the course of a lease agreement. It helps illustrate the true cost of the lease when factoring in the time value of money.

How to Calculate PV of Lease?

Example Problem:

The following example outlines the steps and information needed to calculate the PV of a Lease.

First, determine the periodic payment. In this example, the payment amount is $300 per month.

Next, determine the discount rate (annual) and convert if needed. Suppose the monthly discount rate is 0.5% (r = 0.005). Also, determine the number of monthly payments (n). Let’s say there are 36 monthly payments.

Select end-of-period payments, monthly frequency, a6% nominal annual discount rate and36 payment periods for this example. Then calculate using the formula above:

PV = PMT × (1 - (1 + r)^-n) / r

PV = $300 × (1 - (1 + 0.005)^-36) / 0.005

PV ≈ $9,861.30

FAQ

What factors influence the PV of a lease?

The present value of a lease is influenced by the periodic payment amount, the number of payments, and the discount rate. A higher discount rate reduces the present value, while a larger or more frequent payment schedule increases it.

Is the PV of a lease the same as the total lease cost?

The present value of a lease is not exactly the same as the total payments. It represents the sum of those payments adjusted back to today’s dollars, illustrating the true economic cost when accounting for the time value of money.

How can I reduce the PV of my lease?

For fixed positive cash flows, fewer or smaller payments reduce PV, while a higher discount rate reduces PV. A lower discount rate increases PV; changing a discount-rate assumption does not itself reduce the contractual rent paid. Consider actual payment terms, fees and the appropriate discount-rate basis separately.