Calculating a lease discount rate involves determining the present value of future lease payments. For instance, a company that signs a long-term lease with monthly payments of $1000 over five years has future lease obligations of $60,000.
Knowing how to calculate the lease discount rate, or the rate that discounts the future lease payments to their present value, is critical for businesses that want to make informed decisions about leasing assets. It enables them to compare the cost of leasing with other financing options, such as loans, and make strategic financial decisions.