You’re not paying interest on the sum of the adj cap and the residual. Think of a lease as a balloon loan. Say you borrow $50,000 with a final balloon payment of $20,000. If it were a lease, the $20,000 is analogous to the residual value and the $50,000 is analogous to the adjusted cap. The difference is you don’t have to pay the $20,000 residual. You’re only paying the depreciation (adj cap - residual) plus interest levied on the declining lease balance starting with the adjust cap cost. At lease end, your lease balance is the residual value.
A loan has two component: principle and interest. Likewise, a lease has two components: depreciation and lease charge. Principle is similar to depreciation while interest is similar to the lease charge.
Here’s what a lease amortization schedule looks like…
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