# Lease Payment

Leasing is financing that is granted to a company or an individual to purchase a property. In return, the signatory of the contract undertakes to pay rent for the duration of the leasing, the costs of setting up the file and an option to buy back the property at the end of the period.

The redemption value is expressed either as a % of the property financed or as a lump sum, contractually fixed at the time of signing the contract.

During the life of the leasing, the financing company remains the owner of the asset until the signatory of the leasing contract has exercised its purchase option.

Unlike loans, it is very common for the bank to refuse to give you the interest rate and only show the amount of the rent in its proposal. It therefore becomes difficult to compare leasing proposals, especially if they have different scopes (duration, redemption value, etc.).

## The Formula for Lease Payment

The formula for Lease Payment is derived by adding the depreciation fee, finance fee and sales tax which is mathematically represented as:

Lease Payment = Depreciation Fee + Finance Fee + Sales Tax

#### Example

 EXAMPLE OF PURCHASING A LEASE VEHICLE in K USD Proposal ABC Bank Proposal DEF Bank Amount of the purchase including VAT: 56 400 56 400 Monthly rents including VAT: 1 656 1 225 Nombre de loyers (en mois) 36 48 Number of rents (in months) 59 616 61 620 File preparation costs: 522 24 Residual value including VAT: 564 2 820 Total cost of leasing: 60 702 64 464 Rents – Purchase – redemption value – fees 2 130 2 376 Interest rate 3,63% 2,06% Interest rate by linearizing fees and residual value (rough estimate) 4,83% 4,43% % of cash value 0,01 0,05

Time is Money and Time is valuable and should not be wasted

Sources: PinterPandai, TokoPinter, WikiHow, WallStreetMojo

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