Irregular Loans  Example 2 (Lease)


Irregular Example  EXAMPLE 2 (Lease) 
Mr. Larson, has decided to lease his next car and take advantage of the tax advantages that leases offer. He has seen an automobile that costs $36,000 and after showing the dealer an interest in leasing it, he was given the following lease contract. He can lease the $36,000 automobile for $850.00 per month. He has to make an initial down payment of $2,500 and has to pay some processing charges and Predelivery costs that add up to $235.00. The contract will be in effect for 48 months. At the end of this term, Mr. Larson can return the automobile or he can purchase it for $6,000. The terms and conditions all make sense, but what Mr. Larson needs to know is what is the interest rate the leasing company is charging him by leasing the car. In other words what is the Implicit interest rate in the lease contract? 
Solve The Implicit Interest Rate.
You can use current dates as they are not specified and not required for this calculation.
Use all the known information and your knowledge of the Irregular Loan form and fill
in the fields. Then compute the answer.
If you are continuing with this example after the last one, you will want to clear
all of the entries made last time. To clear all the transactions, right click on any
transaction entry and a menu will pop up, select the "DELETE ALL TRANSACTIONS" Item.
Once you clear all the transaction, you can enter in all the known data.
Start by entering in the Loan amount and date on the first line. Then compute the Interest Rate.
Check your form with the illustrated one below.
Click
Press

The Int. Rate field so that the cursor is flashing.
Unknown button at the top of the Window.
The Implicit Interest Rate is : 15.7956% 
Therefore the interest rate charged for the lease is 15.80%.
From these two examples, you can see how powerful and flexible this Irregular
Loans Form can be. Regardless of the irregularity of the loan or lease scenario,
if you need to compute and keep track of various odd payments and interest
changes, this form is the one to use.