How can I set up a lease with advance payments, points, etc.?

Problem

Leases can include advance payments, extra costs, residual payments, etc.

Since leases are ussually tailored to meet the lessee's needs, many different setups are possible.

Solution

FinFlow lets you set up a lease any way you like: all you need to do is enter each of a lease's components as events that can either be outflows, inflows or unknowns.

The lease amount itself would be entered as an outflow, which is also the case for costs such as points, fees, etc.

Normal lease payments are set up as unknowns, with as their amount (or factor) 1.

Advance payments are added as events that occur on lease date. For their amount you would enter the number of advance payments.

Contact payments are just added as inflows with their respective amounts (which by the way can vary).

Step up and step down payments are added as either unknowns or inflows.

For example, if you want to set up a three payment step up series of 25%, 50% and 75% of a normal payment, you would set up an unknown event with a monthly series that starts with a payment value of 0.25 and which changes by 0.25.

Please note that we wrote "by 0.25" and not "by 25 %": the first will result in a series of 0.25, 0.50 and 0.75 times a normal payment, whereas the latter results in a series of 0.25, 0.3125 (0,25 + 25 %) and 0.3900625 (0.3125 + 25 %). times a normal payment.

Residual payments would simply be added as inflows with a fixed amount.

Use the Amortization schedule to check that what's generated is what you have in mind!

Example

Open the "Lease - Setup" example in the Help examples folder, to see how we would set up a lease.