1. What is Lease With Option To Own?

A lease with option to own (rent-to-own) agreement allows tenants to rent a property with the option to purchase it later. The monthly payments typically include both rental and purchase option components.

2. How Does the Calculator Work?

The calculator uses these formulas:

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 calculation separates the monthly payment into depreciation (principal) and finance (interest) components.

3. Importance of Lease Calculations

Details: Understanding these calculations helps compare lease offers, evaluate total costs, and make informed decisions about rent-to-own agreements.

4. Using the Calculator

Tips: Enter all required values in dollars (except term in months and money factor as decimal). Capitalized cost should be the agreed purchase price, residual value is the buyout amount at lease end.

5. Frequently Asked Questions (FAQ)

Q1: What is a good money factor?
A: Lower is better. To convert to approximate APR, multiply money factor by 2400 (e.g., 0.0025 MF ≈ 6% APR).

Q2: How is residual value determined?
A: Typically set by the lessor based on expected depreciation and market conditions.

Q3: What's included in capitalized cost?
A: Negotiated purchase price plus any fees rolled into the lease.

Q4: Are there tax implications?
A: Consult a tax professional as lease payments may be treated differently than mortgage payments.

Q5: How does this compare to traditional renting?
A: Rent-to-own typically costs more monthly but builds toward ownership equity.