1. What is Lease To Own Interest?

The Lease To Own Interest represents the total interest paid over the term of a lease-to-own agreement. It's calculated based on the capitalized cost, residual value, money factor, and lease term.

2. How Does the Calculator Work?

The calculator uses the lease interest formula:

Where:

• \( CC \) — Capitalized cost ($)
• \( RV \) — Residual value ($)
• \( MF \) — Money factor (decimal)
• \( T \) — Lease term (months)

Explanation: The formula calculates total interest by multiplying the sum of the capitalized cost and residual value by the money factor and lease term.

3. Importance of Interest Calculation

Details: Calculating lease interest helps consumers understand the true cost of a lease-to-own agreement and compare different financing options.

4. Using the Calculator

Tips: Enter all values as positive numbers. Money factor is typically provided by the lessor (divide APR by 2400 to convert to money factor).

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between money factor and APR?
A: Money factor is a decimal version of interest rate (APR ÷ 2400 = money factor). It's commonly used in lease calculations.

Q2: How does residual value affect interest?
A: Higher residual values typically result in lower monthly payments but may increase total interest paid over the lease term.

Q3: Can I negotiate the money factor?
A: Yes, money factors are often negotiable, especially if you have good credit. Compare rates from multiple lessors.

Q4: What's a good money factor?
A: Lower is better. As a rule of thumb, multiply money factor by 2400 to compare with APR rates (e.g., 0.0025 MF ≈ 6% APR).

Q5: Are there other fees in lease-to-own agreements?
A: Yes, watch for acquisition fees, disposition fees, and excess mileage charges which aren't included in this calculation.