1. What is Lease To Purchase?

A lease to purchase agreement allows a tenant to lease a property with the option to buy it at the end of the lease term. This calculator computes the monthly payments for a 24-month lease-to-own agreement.

2. How Does the Calculator Work?

The calculator uses these equations:

Where:

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

Explanation: The depreciation is the amount the property value decreases over the lease term, while the finance fee is the cost of borrowing.

3. Importance of Lease To Purchase Calculation

Details: Understanding these calculations helps tenants evaluate whether a lease-to-own agreement makes financial sense compared to traditional renting or buying.

4. Using the Calculator

Tips: Enter the capitalized cost (total property value), residual value (expected value at lease end), and money factor (provided by lessor). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What is a typical money factor value?
A: Money factors typically range from 0.001 to 0.004, which equates to roughly 2.4% to 9.6% APR when multiplied by 2400.

Q2: How is residual value determined?
A: The lessor estimates the property's value at lease end based on depreciation rates and market conditions.

Q3: Are there additional fees in lease to purchase?
A: Yes, there may be acquisition fees, disposition fees, and option fees that aren't included in this calculation.

Q4: What happens at the end of the lease term?
A: The tenant typically has the option to purchase the property at the residual value or walk away.

Q5: Is lease to purchase better than traditional buying?
A: It depends on individual circumstances. Lease-to-own can be beneficial for those who need time to improve credit or save for a down payment.