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A vehicle's residual value is its total value at the end of the lease or the amount you'll pay to purchase it at the conclusion of its lease term. Leasing a car differs from renting one in that your monthly payments go toward the cost of vehicle depreciation and the lease term is typically longer than a rental.

Multiplying depreciation by the interest rate gets you the total lease payment before sales tax. If you're paying monthly sales tax, you'll multiply that amount by the applicable sales tax rate to get your total lease payment.

How is that number calculated? Add the future cash flows due to the lessor. Add the period the cash flows are in relation to in this case 0 to 9. Decide on a discount rate to present value the future payments in this example 6%

Under ASC 842, IFRS 16, and GASB 87, the finance lease liability is calculated as the present value of the lease payments remaining over the lease term. The preferred discount rate to use is the discount rate implicit in the lease under each of the three major lease standards.

Get the free Present Value Calculator to follow along: Step 1: Create your table with headers. ... Step 2: Enter amounts in the Period and Cash columns. ... Step 3: Insert the PV function. ... Step 4: Enter the Rate, Nper Pmt, and Fv. ... Step 5: Sum the Present Value column.

Get the free Present Value Calculator to follow along: Step 1: Create your table with headers. ... Step 2: Enter amounts in the Period and Cash columns. ... Step 3: Insert the PV function. ... Step 4: Enter the Rate, Nper Pmt, and Fv. ... Step 5: Sum the Present Value column.

The lease liability is the present value of the lease payments not yet paid, discounted using the discount rate for the lease at lease commencement. As per the above, the standards provide no more detail then the lessee must present value the lease payments.