Car Leasing Glossary - Time Value of Money

Time Value of Money (car leasing term)

The value derived from the use of money over time as a result of investment and reinvestment. This term may refer to either present value or future value calculations. The present value is the value today of an amount that would exist in the future with a stated investment rate called the discount rate. For example, with a 10% annual discount rate, the present value today of $110 one year from now is $100. Future value is the value in the future of a known amount today with a stated investment rate. For example, with a 10% annual investment rate, the future value in one year of $100 today is $110. In either case, the interest rate used reflects the lost opportunities for return from alternative investments.

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