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Finally! Real Answers on How Lease Pricing Works

Your guide to understanding lease rates

How is Leasing Priced?

Lease and finance agreements at GreatAmerica are based on lease rates. A lease rate factor is represented as a fraction or multiplier, and is used to quickly calculate a monthly payment. 

Unlike an interest rate, a lease rate does not change throughout the term, nor does it amortize. (Meaning there isn’t a separate principal and interest listed that is paid down at different rates.) Instead, the finance charges are fixed over the term, and there is no economic upside to paying off a lease early.

When your customer multiplies the lease payment by the term, the difference between that and the cash price is the finance charge.

For additional information on interest rates, the differences between a lease and loan, and more frequently asked questions, skip down to the FAQ section.

Your Lease Rate Explained

You’ll get a customized lease rate schedule that includes options for term, lease type, and transaction size. Below is a general guide of what influences a lease rate.

Agreement Term

Standard terms on a lease agreement range from 12 - 60 months. As the term increases, the rate will typically decrease.

(+) Shorter terms have higher rates.

(-) Longer terms have lower rates.

Transaction Size

The lease rate goes down as the size of the transaction increases. 

(+) Smaller transactions have higher rates.

(-) Larger transactions have lower rates.

Lease Type

The lease type influences the rate.  FMV agreements have a residual - or amount due at the end - that lowers the lease rate.

(+) $1 Buyout, EFA, and SFA have higher rates.

(-) Fair Market Value have lower rates.

Financing Commitment

Loyal customers get optimal lease rates. Conversely, it can be expensive for our organization to set up a technology company who finances one customer per year.

(+) Fewer transactions per year leads to higher rates.

(-) More transactions per year leads to lower rates.

Calculating a Monthly Payment with a Lease Rate


Do you have a lease rate, and just aren’t sure what to do with it now? Get an estimated monthly payment using your calculator, info-zone.com, our mobile app, or one of our technology integrations.

Check Out Quoting Integrations

What is the Difference Between a Lease and a Loan?

If you have ever bought a house or a car, or started a business, you likely have experience with loans. A question you may be wondering is when  to lease and when to borrow using a loan? 

A loan is ideal for collateral you want to own at the end of the term; something that holds its value past the life of the agreement. A lease is best for something that depreciates quickly - like technology - and will not hold its value past the term.

The most important distinction between a lease and a loan is how the finance charges are paid. In a loan, the interest in amortized throughout the term. In other words, you are paying more interest at the beginning and more principal at the end. Leasing isn't free, but the finance charges are fixed throughout the term and are not paid separately from the borrowed amount.

Features

Lease
Loan

Fixed Monthly Payment

Risk-Based Pricing

Rate Calculation

Lease Rate = Decimal

Interest Rate = Percentage

Amortization Schedule

Benefit of Early Payoff

Use Case

Best for things that won’t have value past the term.

Best for things that will hold their value past the term.

Term Flexibility

Most terms from 12 - 60 months.

Terms may be limited based on asset type.

Collateral

Financed Equipment

Potentially all company assets.

Technology Included

Up to 100% financing including hardware, software, and implementation.

Typically limited to hard assets. Loan may not cover 100% of costs.

Lease

Fixed Monthly Payment

Risk-Based Pricing

Rate Calculation

Lease Rate = Decimal

Amortization Schedule

Benefit of Early Payoff

Use Case

Best for things that won’t have value past the term.

Term Flexibility

Most terms from 12 - 60 months.

Collateral

Financed Equipment

Technology Included

Up to 100% financing including hardware, software, and implementation.

Loan

Fixed Monthly Payment

Risk-Based Pricing

Rate Calculation

Interest Rate = Percentage

Amortization Schedule

Benefit of Early Payoff

Use Case

Best for things that will hold their value past the term.

Term Flexibility

Terms may be limited based on asset type.

Collateral

Potentially all company assets.

Technology Included

Typically limited to hard assets. Loan may not cover 100% of costs.

Let’s Clear a Few Things Up with Frequently Asked Questions

 

What does “lease rate” mean?

How do I calculate a monthly payment using a lease rate?

What is the interest rate on a lease?

What is the interest rate on a $1 Purchase Option ($1 Buyout) lease?

What is the interest rate on a True Lease (Fair Market Value or rental agreement)?

Do your rates change based on my customer’s credit?

What fees should my customers expect on a lease?

How often do you raise or lower rates?

What Should You Look for in a Financing Partner?

You deserve the best! Here are a few critical elements to look for when selecting your financing partner.

Request Custom Pricing

Ready to build a custom finance program and start quoting monthly payments today? Fill out the form below, and we’ll be in touch to start building a custom lease pricing structure today.