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Capital Lease Interest Calculator

Work out capital lease interest instantly with clear inputs, formula shown and shareable results.

About Capital Lease Interest Calculator

A finance lease is unwound like a loan: each payment is split between interest on the outstanding liability and repayment of principal. The interest element falls over the term as the liability amortises, which is why finance lease expense is front-loaded compared with a straight-line operating charge.

Formulas

Interest element

Interest = Opening liability x Implicit rate

Principal element

Principal = Payment - Interest

Closing liability

Closing = Opening - Principal

Worked example

With the default values below, Capital Lease Interest Calculator returns Interest in the selected payment of $7,725.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Opening lease liability
120,000
Implicit interest rate
7.5
Annual lease payment
26,000
Payment number to reportaccepts 1–1,200
2

Results

Interest in the selected payment
$7,725.00
Principal reduction
$18,275.00
Liability after the payment
$84,725.00
Interest as % of the payment
29.71%

Step by step

  1. 1Values used
  2. 2Interest element
  3. 3Principal element
  4. 4Closing liability
  5. 5Interest in the selected payment= 7,725.00
  6. 6Principal reduction= 18,275.00
  7. 7Liability after the payment= 84,725.00
  8. 8Interest as % of the payment= 29.71

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation, tax or fees or charges into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Where do I find the implicit rate?

In the lease documentation, or derive it as the rate that discounts the payments plus residual back to the fair value of the asset. If it is not determinable, use your incremental borrowing rate.

Does the asset depreciate separately?

Yes. Under IFRS 16 the right-of-use asset is depreciated and the liability accrues interest — two separate charges.

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