Lease To Own Payment Calculator

Lease Payment Formulas:

\[ Dep = (CC - RV) / T \] \[ Fin = (CC + RV) \times MF \] \[ MP = Dep + Fin \]

Capitalized Cost (CC):

Residual Value (RV):

Term (T):

months

Money Factor (MF):

decimal

Depreciation (Dep):

Finance Fee (Fin):

Monthly Payment (MP):

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1. What is Lease To Own Payment?

A lease-to-own payment consists of two main components: depreciation (the value the asset loses during the lease term) and finance charges (the cost of borrowing the money to lease the asset). The sum of these two components gives the monthly payment amount.

2. How Does the Calculator Work?

The calculator uses these formulas:

\[ Dep = (CC - RV) / T \] \[ Fin = (CC + RV) \times MF \] \[ MP = Dep + Fin \]

Where:

$ CC $ — Capitalized Cost ($)
$ RV $ — Residual Value ($)
$ T $ — Term (months)
$ MF $ — Money Factor (decimal)
$ Dep $ — Depreciation ($/month)
$ Fin $ — Finance fee ($/month)
$ MP $ — Monthly Payment ($)

Explanation: The depreciation represents the portion of the asset's value you're using up each month, while the finance charge is the cost of financing that depreciation.

3. Importance of Lease Payment Calculation

Details: Understanding how lease payments are calculated helps consumers compare lease offers, negotiate better terms, and make informed financial decisions about whether leasing is the right choice for their situation.

4. Using the Calculator

Tips: Enter the capitalized cost (price of the item), residual value (estimated value at lease end), lease term in months, and money factor (provided by the lessor). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How is money factor different from interest rate?
A: Money factor is a decimal version of the interest rate. To convert money factor to approximate APR, multiply by 2400.

Q2: What's a good money factor?
A: This varies by market conditions, but generally 0.0025 or lower is considered good (equivalent to ~6% APR).

Q3: Why add CC and RV in the finance charge calculation?
A: This accounts for the average amount financed over the lease term, as you're essentially borrowing the difference between the initial cost and residual value.

Q4: How is residual value determined?
A: The lessor estimates the future value based on historical depreciation data for similar assets.

Q5: Are there other fees not included in this calculation?
A: Yes, leases often have acquisition fees, disposition fees, and taxes that aren't reflected in this basic calculation.