How to Calculate Leases with the TVM Calculator

Using the Time Value of Money Calculator

ABC Company is considering leasing a piece of equipment worth $50,000 for 5 years. The lessor is offering a 6% annual interest rate with monthly payments at the beginning of each month. The equipment is expected to have a residual value of $10,000 at the end of the lease. What will the monthly lease payments be?

Value	Keystrokes	Display	Description
	shift, C TVM		Clears the financial variables.
	shift, B/E	BEG	To toggle the BEG / END mode so the BEG indicator is displayed.
12	STO, P/YR	12.00	Sets the payments per year.
5	shift, xP/YR	60.00	Sets the total number of payments to the value in x (5) times the payments per year.
6	I/YR	6.00	Stores the annual interest rate.
50000	PV	50,000.00	Stores the equipment value as the present value.
10000	+/-, FV	-10,000.00	Stores the residual value as a negative future value.
	PMT	-819.22	Calculate the monthly lease payment.

ABC Company's monthly lease payment will be $819.22.

The History Detail

Calculates the Payment
          60.00 : The number of periods.
           6.00 : The annual rate.
      50,000.00 : The present value.
        -819.22 : The payment.
     -10,000.00 : The future value.
          12.00 : Payments per year.
          12.00 : Compounding periods per year.
           1.00 : Payments due at beginning.

Calculating the Interest Rate on a Car Lease

Sarah is considering leasing a car. The dealership has offered her the following terms:

Car's purchase price: $35,000
Lease term: 3 years (36 months)
Monthly payment: $550 (due at the beginning of each month)
Residual value at end of lease: $20,000

Sarah wants to know what interest rate she's effectively paying on this lease. How can she calculate this?

Value	Keystrokes	Display	Description
	shift, C TVM		Clears the financial variables.
	shift, B/E	BEG	To toggle the BEG / END mode so the BEG indicator is displayed.
12	STO, P/YR	12.00	Sets the payments per year.
3	shift, xP/YR	36.00	Sets the total number of payments to the value in x (3) times the payments per year.
35000	PV	35,000.00	Stores the car's purchase price as the present value.
450	+/-, PMT	-550.00	Stores the monthly payment as a negative value.
20000	+/-, FV	-20,000.00	Stores the residual value as a negative future value.
	I/YR	5.84	Calculate the annual interest rate.

The effective annual interest rate on Sarah's car lease is 5.84%.

The History Detail

Calculates the Annual Percentage Rate
          36.00 : The number of periods.
           5.84 : The annual rate.
      35,000.00 : The present value.
        -550.00 : The payment.
     -20,000.00 : The future value.
          12.00 : Payments per year.
          12.00 : Compounding periods per year.
           1.00 : Payments due at beginning.

This calculation helps Sarah understand the true cost of her lease. She can now compare this rate to other financing options or lease offers to make an informed decision.

Important Considerations for Lease Rate Calculations

The calculated rate doesn't include additional fees or charges that might be part of the lease agreement.
For more accurate comparisons, Sarah should consider the total cost of the lease, including any upfront payments or fees not included in the monthly payment.
The purchase price used in this calculation assumes no down payment or trade-in value. If there is a down payment or trade-in, it should be subtracted from the purchase price before entering the PV.
Always verify that the calculator is in BEG mode for lease calculations, as payments are typically due at the beginning of each period.