How to calculate a lease interest rate?

To calculate the lease interest rate, you need to first gather some information such as the total cost of the asset, the residual value of the asset at the end of the lease term, the lease term in months, and the monthly lease payment. Once you have this information, you can use a formula to calculate the lease interest rate, which is also known as the lease factor. The formula is:

Lease factor = (Net Cap Cost + Residual Value) / (Lease Term x Monthly Payment)

Once you calculate the lease factor, you can convert it to an interest rate by multiplying it by 2400. This will give you the annual percentage rate (APR) of the lease. Keep in mind that the interest rate on a lease can vary based on factors such as the creditworthiness of the lessee, the type of asset being leased, and the length of the lease term.

The effects of interest rates are often not directly felt but play out over a long time as valuations of real-estate and other assets adjust.

At Horizon65, we created a mobile app that enabled you to check the effect of high interest rates on your savings and to simulate potential investments that can defend against it.

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