A restaurant equipment leasing calculator can help you calculate your monthly payments and or interest rates but how exactly does it work?
A lease contract usually specifies payment terms, residual value of the property at the end of the lease term and other details. Using a restaurant equipment leasing calculator to calculate the lease payments you are supposed to make every month is very straightforward. It is even much easier if you are familiar with time annuities and lump sums.
Some restaurant equipment leases call for advance payments at the time the lease agreement is signed. The upfront payment is usually a multiple of the regular monthly payments. This may complicate things a bit, because you have to know how much the regular payments are in order for you to accurately calculate the payment advance amount.
The lease terms may require you to make a number of payments in advance. The number of payments could be 2, 1 or 0. For instance, if you choose a lease that calls for $600 monthly payments with 2 advance payments, then you would have to pay $1200 when you sign the lease and $600 as the first regular payment.
This is an estimation of what your restaurant equipment will be worth at the end of the lease term. As is the case with most leases, you have the option of purchasing the kitchen equipment once the lease term is up. For example, your lease may specify a residual value of $10, 000 when the lease is up in 2 years. At that time, you have the right but you are not obligated to purchase the equipment at $10, 000. If you do not want to purchase the equipment, you can simply return it to your lessor.
This is the presumed value of the restaurant equipment at the time that you sign the lease.
How A Restaurant Equipment Leasing Calculator Works
Calculating Monthly Lease Payments
Calculating monthly lease payments is very easy assuming the lease does not require you to make advance payments. The lease cash flows are the monthly payments (annuity) and the residual value (lump sum) at the end of your lease term. The principle of addivity states that the present value of the residual value (lump sum) plus monthly payments (annuity) is equal to the present value (lease amount).
Calculating Lease Monthly Payments With Advance Payments
A calculation gets much more complex when a lease calls for advance payments and it is not easy to get an accurate answer without using a restaurant equipment leasing calculator installed with a special program. You need to know what your monthly payments are before calculating advance payments. The presence of advance payments changes the amount of money you will pay every month. Is it possible to calculate your advance payment without knowing what your monthly payments are and vice versa? Yes. This is because advance payments are a multiple of your monthly lease payments and this makes it possible to make the calculations.
Advance payments are meant to reduce the number of monthly payments depending on the number of advance payments you make.
Are There Risks Of Using A Restaurant Equipment Leasing Calculator?
Yes, there are certain risks of using a restaurant equipment leasing calculator. Some companies are fond of using lease calculators that dupe prospects with faulty numbers. You have to be aware of how a leasing calculator can disrupt your ability to finance your restaurant.
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More often than not, you will find that most of the leasing calculators on some of the leasing companies’ websites are nothing more than excel spread sheet calculator utilities. You therefore cannot get an accurate estimate that can help you plan for expenses involved in a leasing agreement. This not only prevents you from putting into place a stable financial plan, but it makes you a victim of equipment leasing pitfalls.
Making full lease payments on time can become a very big problem if you are provided with faulty numbers. What this does to most upcoming and even established restaurants is that they end up taking a loan just to be able to make the leasing payments on time. This usually ends up making leasing restaurant equipment seem like a financial disaster.
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