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By Deal Pack - October 24, 2012
We all know that a retail installment contract for a purchase has a principal balance, and finance charges calculated based on the annual percentage rate or APR. There is a significant difference, however, between retail deals and lease deals. There is no traditional ‘APR’ when it comes to leases. But there are finance charges. So, how are these finance charges calculated? Money factor.
Money factor is sometimes called ‘lease factor,’ and while comparable to an interest rate, it is really the finance fee collected by the leasing company on a per payment basis, compensating them for the asset they are allowing the lessee to drive around.
This factor is typically expressed as very small number, such as: .00375, and a simple rule of thumb to get the comparable interest rate is to multiply it by 2400 (in this example: .00375 * 2400 = 9% APR). For additional information, including the full calculation, visit the following site: http://www.leaseguide.com/mf2400.htm
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Advanced Business Computers of America (ABCoA) develops and supports end-to-end software solutions for the subprime finance industry. Since 1983,
we have helped automotive dealerships and finance companies eliminate duplication, remain compliant, and achieve success with dependable, all-in-one software and white glove service and support.
Deal Pack is a complete, all-in-one software ecosystem customizable to your exact needs and scalable to your exact size - helping improve your operations, grow your business,
and solve the challenges you face. Whether you are a finance or sales company, multi-entity or publicly traded company handling BHPH or LHPH, operating or capital leases,
internal or external floor-planning, retail, rentals, consumer loans, origination, or seasoned paper, Deal Pack is the dependable software for mission critical operations.
Deal Pack handles all of your business needs transparently – providing you measurable improvements and complete financial control, saving you time,
increasing your bottom line, and allowing you the freedom to focus on your daily operations. Deal Pack is relied upon by thousands of customers across
all 50 states in the United States and six countries around the world. Customers properly using Deal Pack have never lost an IRS audit.
To learn more about ABCoA, visit www.abcoa.com.