1. What is Lease With Option To Own?

A lease with option to own (also called rent-to-own) is a contractual agreement where a lessee can lease an asset with the option to purchase it at the end of the lease term. This calculator helps determine the monthly payments for such arrangements.

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 ($)
• \( T \) — Term (months)
• \( MF \) — Money factor (decimal)

Explanation: The depreciation represents the portion of the asset's value you're paying down each month, while the finance fee is the cost of borrowing.

3. Importance of Lease Calculations

Details: Understanding these calculations helps you evaluate whether a lease-to-own agreement is financially advantageous compared to other financing options.

4. Using the Calculator

Tips: Enter all values in the specified units. Capitalized cost and residual value should be in dollars, term in months, and money factor as a decimal (e.g., 0.0025 instead of 0.25%).

5. Frequently Asked Questions (FAQ)

Q1: What's a typical money factor value?
A: Money factors typically range from 0.0010 to 0.0040, which equates to 2.4% to 9.6% APR when multiplied by 2400.

Q2: How is residual value determined?
A: The residual is typically set by the lessor based on expected depreciation and market conditions at lease end.

Q3: What's better - higher or lower money factor?
A: Lower is better - it means you're paying less in finance charges each month.

Q4: Should I negotiate capitalized cost?
A: Yes, just like negotiating a purchase price, you can often negotiate the capitalized cost in a lease.

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