Lease To Purchase Calculator

Lease To Purchase Equations:

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

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 Purchase?

Lease to purchase is a financial arrangement where you lease a vehicle (or other asset) with the option to purchase it at the end of the lease term. The monthly payments consist of depreciation and finance charges.

2. How Does the Calculator Work?

The calculator uses these equations:

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

Where:

$ Dep $ — Depreciation ($/month)
$ Fin $ — Finance fee ($/month)
$ MP $ — Monthly payment ($)
$ CC $ — Capitalized cost ($)
$ RV $ — Residual value ($)
$ T $ — Term (months)
$ MF $ — Money factor (decimal)

Explanation: The depreciation is the amount the asset loses value each month, while the finance charge is based on the money factor (which is similar to an interest rate).

3. Importance of Lease Calculations

Details: Understanding these calculations helps you compare lease offers, negotiate better terms, and make informed decisions about whether leasing or buying is better for your situation.

4. Using the Calculator

Tips: Enter all values in dollars except for term (months) and money factor (decimal). The money factor is typically provided by the leasing company (divide the APR by 2400 to convert to money factor).

5. Frequently Asked Questions (FAQ)

Q1: What is capitalized cost?
A: This is the negotiated price of the vehicle plus any additional fees or items you're rolling into the lease.

Q2: How is residual value determined?
A: The leasing company sets the residual value based on the expected value of the vehicle at lease end.

Q3: What's a good money factor?
A: Lower is better. A money factor of 0.0025 is roughly equivalent to 6% APR.

Q4: Can I negotiate the money factor?
A: Sometimes - it depends on the leasing company. Those with excellent credit may qualify for better rates.

Q5: Is lease-to-purchase right for me?
A: It depends on your driving habits, financial situation, and how long you plan to keep the vehicle. Consult a financial advisor for personalized advice.