Need formula to calculate a lease rate factor from a %.

September 24, 2009 6:05 PM

Need formula to calculate a lease rate factor from a %.

I'm not quite sure why I can't get a straight answer on this. So here goes.
Equipment lease have some variables.
Term in months/yrs i.e. 24, 26, 48, 60, 72
Advance payments 0,1,2 (mostly first month or first and last)
end of lease term option $1 Purchase Option, FMV, 10 PUT etc...
Rate factor (usually expressed as a 4-6 digit decimal)

For the purposes of discussion of this specific problem we will be using a 36 month lease, $1 Purchase option, 2 advance payment lease, and 11% rate. Equipment price will be $10,000 as when we get the monthly payment the rate factor can easily be obtained by moving the decimal 4 places to the left. i.e. $300.00 gives a rate factor of .0300.

Using a FinLease calculator from ParanzaSoft we get a monthly payment of $318.91 or rate factor of .0319

Using the FinKit calculator from the same company we get a payment of $321.57 or .0322 factor.

Whatever calculation FinKit is using seems to more closely model the bank's actual rate sheet.

I am wondering why there are such large discrepancies, even within the same software company's different products, and if there is more straightforward method using Excel. (read not with a HP17b - if so is there a HP 17b emulation method in Excel or, more importantly, for OS X)

I would interested in the following formulas
$1 purchase option, FMV @ 10% and 20% residuals.

I have asked several people about this and get wildly differing responses. No wonder we have a financial crisis on our hands.

posted by thinktwice to Work & Money (2 answers total)

Response by poster: Wow, I thought someone would have an answer on this.
posted by thinktwice at 9:00 AM on September 26, 2009

Response by poster: Still no answer. I can't believe no one has anything on this.
posted by thinktwice at 10:19 AM on November 20, 2009