When leasing any piece of capital equipment, it is good to understand what you are actually paying for. Many people enter into long term copier lease having no idea what their interest rate is on the loan they are taking out. When looking deeper into this, we realized even we as a copier company struggled explaining HOW this was computed. We knew what the rates came out to be, but when a client pushed up to show the math… we couldn’t find agreement on how this worked.
When we went back and forth with the leasing companies to come up with a formula to show us, they all kept saying things like “you’d need a financial calculator to do the math” – Having a heavy Chemisty focus in college, I wasn’t afraid of formulas. So I kept pushing – I found this was the formula – suddenly the financial calculator answer made much more sense…
For given C, P and N, one can only solve the following equation for r by numerical means.
Given the rather smooth behavior of this equation, this calculator employs the Newton-Raphson method with an educated initial guess:
Not exactly the easiest thing in the world to work out that math. Instead, I was able to find an online calculator that did this math for us. You will need to ask what the residual us on the contract at the end for this to work. If you plan to give it back, you can enter 0.