Rate Premium
Users who do not have access to specify the yield/rate explicitly (such as
external dealers, for instance) can only use the Recommended Yield function calculating the rate
automatically based on the Cost of Funds and Margin
tables. However, they can specify an additional rate premium (up to 5%) added
to the lessee rate.
If the rate premium is specified, the quote summary will show an increased
drawdown fee (brokerage) taking into account the lessor's share of the premium
(0–100%) set up for the branch. The higher is the lessor's share of the
premium the lower is the drawdown fee (the Dealer's share).
For example, suppose the customer rate applicable to the transaction is 7%,
the rate premium specified by the user is 1% and the lessor's share of the rate
premium is 30%. The program will solve for the rentals and the brokerage amount
so that:
- The customer rate becomes 8% (7% + 1%).
- The lessor's yield is x%, where x% is the yield that will give the customer
rate of 7.3% (7.0% + 0.3%) when there is no brokerage.
In this way, the lessor gets the benefit of the customer rate going up to
7.3% (as reflected in a higher yield). The dealer has the remainder of the
benefit with the customer rate going up to 8.0% (in brokerage).
See also:
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