How to Calculate a Vehicle Capital Lease in Canada

A vehicle capital lease allows the company to book the interest on the loan as an expense.

A capital lease is an excellent way for a business to acquire assets. A capital lease is a financing arrangement where the lessor company has either the right or the obligation to buy the asset at a predetermined price, according to Bookkeeping-essentials.com. The company gets the dual benefit of having full use of the vehicle and is able to book the interest and depreciation as an expense against profits. An easy way to calculate a capital lease payment schedule is to use one of the available online lease payment calculators.

Instructions

1. Go to the Amortization-calc website (see Resources). This site has an amortization calculator that will provide a month-by-month breakdown of the lease payments by principal and interest.

2. Enter the loan amount, interest rate, loan term and start date. Include the Canadian sales tax in the figure. Determine if you would like to see payments by month or by year. Press calculate. The calculator will provide a breakdown of interest and principal for the loan duration.

3. 

   Spreadsheet software, such as that from Excel or Google, can help keep track of a lease payment schedule.

   Copy and paste the schedule into a spreadsheet program.

Tips & Warnings

• The interest is a tax-deductible expense.

• There are several ways that depreciation can be determined that will comply with Canadian tax law, including using the declining balance rule, the available-for-use rule and the 50 percent rule. Speak with a tax adviser to properly comply with the statutes.

References

• Bookkeeping-essentials.com: Capital Lease versus Operating Lease
• Cars Direct: Commercial Vehicle Leasing: Operating Vs. Capital Lease Options

Resources

• Amortization-calc.com: Amortization Schedule Calculator