How Do You Calculate Annual Lease Payments?
Many people sign lease agreements for cars, computers, buildings, and other valuable pieces of property without knowing how their lease payments are calculated. A lease payment is based on the amount of depreciation that the property will experience due to the renter’s use in addition to an interest expense to benefit the party that is leasing out the property. Determine the value of the property that you are looking to lease. For instance, for a car, this value would be the MSRP of the vehicle. Figure out the interest rate that the lease will be based on. The interest rate is determined by the lessor or financier. Then turn the interest rate into what is called a “money factor” by dividing it by 2,400. This is a common factor used by leasing professionals. Decide what will be the lease term for the property. Will it be for one year, three years, five years or longer? Most property leases tend to fall within three to five years. Figure out what will be the estimated residual percentage
