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  • Question

    Is there a sample/template for creating this formula?


    Answer

    No sample.  It would be done on a case by case basis during negotiations.  Let's take an example and show you how it might look.  A contractor takes out a $10,000 loan to buy a machine that she leases to the DOD.  She has a $100 origination fee and 300 dollar early repayment fee.  So loan fees are $400.  She pays $100 a month in interest and $50 a month to maintain the machine.  It is leased for $500 a month.  So reasonably if we bought out the contract on day 1 of the contract we should pay all the costs.  But if we buy it out in 6 months it would be less as the contractor hasd covered 6 months of payments.  So the formula would might look something like this if we agree on a 60% factor.

    Buyout cost = Purchase price - factor*monthly lease*number of months paid + loan fees.  

    or with numbers BC= 10,000 - 0.6*500*6 +400

    = 10,000 - 1800 + 400

    = 8600

    so you would expect to pay the full purchase and loan fee costs on day 1 and only 82.69% of the day 1 cost after 6 months of operation.

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