Finance Leasing Manual - FLM10.32

Example 1: allocating the 'capital element'

It is then possible to determine how the rental payments in each of these five years is apportioned between the finance charges (the interest element) and repayments of the 'loan implicit in the lease' (the capital element).

Year Rent less Interest element = Capital element

1 £12,400 less £4,000 = £ 8,400
2 £12,400 less £3,200 = £ 9,200
3 £12,400 less £2,400 = £10,000
4 £12,400 less £1,600 = £10,800
5 £12,400 less £ 800 = £11,600