Lease a car with TVM in hand

You can use the Time Value of Money application in HPCALC to calculate the interest rate of a lease. In CALC press [MENU] Application TVM and enter the following information:

Number of periods: (Number of months in the lease)

Annual interest rate: -LEAVE BLANK-

Present value: (Sales price of car)

Payment (Lease payment)

Future value: (residual value on lease.)

After entering this information, press F7 to calculate the effective interest rate.

Don't let a salesperson fool you. They often claim that you should take the total of the down payment plus the total of the lease payments and the residual and compare that to a conventional loan. However, that does not compare financing the total price (since it assumes you have the cash to pay the big balance at the end of the lease.)

You can use the TVM to calculate the total payments on a loan with an early payoff. To do this, make the term of the loan 5 years, for example, and enter the percentage rate and a future value of 0. Then change the number of payments to equal the loan term and press the future value key to see the early loan payoff amount.

The method I found to work best is to calculate everything in advance, then make your offer based on: "I can put this amount of money down, and can pay this amount per month for X number of years." Then forget about the percentage rates, price of the car, etc. If the dealer can match your figures you're set. The details don't matter anymore.

-David Shier [SS&S] 74777,2477