627B LeaseMaker APRChecker Routine

The 627B LeaseMaker can be used to check the Annual Percentage Rate (APR) and Federal Box Disclosure of retail contracts, and to compute the dealer reserve by three different methods.  A minimum dealer reserve can be specified, and a percentage paid value can be specified.  The routine can also do interest-rate buy-down calculations, even for 0% loans.

The various disclosure items are entered: APR, Finance Charge, Amount Financed, Total of Payments, Payment Schedule, etc.  The routine checks these numbers for mathematical accuracy. If any error or deviation is detected, it is reported. The entered data and results can be printed with the optional LeaseMaker Printer Kit.  See a list of input prompts and calculated output data.

For each dealer reserve method, there are two code numbers. Use the first number to start the routine without a printer, i.e., this code should be used if you are running the calculator without a printer.

A portion of the calculated dealer reserve can be paid to compensate the lender for Early Terminations.

If you want a printed record, and have the optional printer kit, use the second code number to start the routine. To start the APRChecker routine, push the [Setup] key, enter the appropriate code number in response to the "CODE?_" prompt, and push [Enter].

Early Terminations

When the dealer reserve is paid up front, a problem for the lender arises if the borrower pays the loan off early. In this case, the lender has advanced an amount to the dealer that is based on the loan running to maturity. If the loan does not run to maturity, the lender will not realize the interest income that was expected.

Some lenders charge the dealer back for unearned portions of the dealer reserve due to early terminations. The dealer may be required to leave a portion of the accumulated dealer reserve amounts on deposit with the lender as security against future charge-backs.

Another common method is to only advance the dealer a percentage of the calculated reserve amount (typically 65%-80%) and then not bother to charge the dealer back for early terminations. This percentage paid can be entered in the PCT PD % field.

Checker Routine

CODE = 581/681
       584/684
       585/685 		Push the [Setup] Key and enter the code for the desired dealer reserve method in response to the "CODE" prompt. After entering the code to run this routine once, you can push the Star [*] function key to run it again.
APR % xx.xx? Enter the disclosed APR as a percentage.

CHG xxxxx.xx?

Enter the disclosed Finance Charge.
AMTF xxxxx.xx? Enter the disclosed Amount Financed.
TPMTS xxxxx.xx? Enter the disclosed Total of Payments.

 

(If the Amount Financed plus the Finance Charge does not equal the Total of Payments, an error will be reported.)

(For 0% loans, the Finance Charge must be $0.00, and the Amount Financed must equal the Total of Payments.)

 

TERM xx? Enter the term in months.
PMT xxxx.xx? Enter the payment amount.

 

(If the number of payments times the payment amount does not equal the Total of Payments, an error will be reported.)

(For 0% loans, enter the regular monthly payment.  If the last payment needs to be adjusted by a few cents to make the stream of payments exactly equal the Total of Payments, the routine will calculate it.)

 

DAYS TO #1  xx?
DAYS TO 1ST xx? 		If using a Federal or 360-day calendar the DAYS TO #1 prompt will appear. If using an Actual calendar, the DAYS TO 1ST prompt will appear. See Calendar systems.

In either case, enter the total number of days to the first payment, thus if there are 45 days to the first payment, enter "45".

See the Setup Routine to select the calendar method.  See also Which Calendar to Use.
PPD CHG xx.xx? Enter the prepaid charge.

 

APR COMP    xx.xx%
   * APR WARNING *

 APR DIFF   xx.xx%


 LOAN RATE  xx.xx%


 [Reserve Method] 		Computed APR percentage.
If the computed APR deviates by more than 0.05%, this warning message appears.

Difference between disclosed and computed APRs.

If there is a prepaid charge, the loan rate is calculated and disclosed here.

The dealer reserve method appears here.

 

BUY RATE xx.xx%? Enter the lender's buy rate.  The buy rate cannot be 0%, however you can discount a loan with an A.P.R. or loan rate of 0%.
MIN RES xx.xx? Enter the minimum dealer reserve amount the lender will pay.
PCT PD % xx? Enter the percentage of the dealer reserve amount that is paid to the dealer (see Early Terminations).
RESERVE  xxxx.xx
BUY DOWN xxxx.xx 		The computed dealer reserve or interest rate buy down amount will appear.
Endnotes: Computed APR percentage: APR is calculated by Federal Truth-in-Lending Regulation Z, §226.14 and Appendix J method using the calendar method selected to measure the length of the first period.
Loan Rate Calculation with Prepaid Charge:  If there is a prepaid charge, the loan interest rate will be lower than the APR. If there is no prepaid charge, the loan interest rate will be the same (or very nearly the same).
Buy Rate:  If the buy rate is equal to or less than the loan interest rate, the dealer reserve will be calculated. If the buy rate is greater than the loan interest rate, the interest rate buy down will be calculated.  The loan rate can be 0%, but the buy rate must be greater than 0.

Minimum Reserve:  Even if the buy rate is the same as the loan interest rate, the minimum applies. For interest rate buy down calculations, this prompt does not appear and the minimum is not applied.

Percentage Paid:  To compensate the lender for early terminations, only a portion of the computed dealer reserve is actually paid to the dealer. You should enter that percentage here. For interest rate buy down calculations, this prompt does not appear and the percentage is not applied.

11 Feb 2014