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How to Calculate Monthly Lease Payments



  • kl07rphkl07rph Posts: 22
    Hi kyfdhx, thanks for helping out w/ the numbers =). The dealer quoted me on the residual and MF (after some pushing), but I know they're a off from what ridewithg and leasecompare have (they have a 2010 X5 3.0 w/ 58% and 0.00175 base). I'm just glad my calculations weren't different from yours...I know this would have been our first time leasing but the dealer's 892/mo did NOT seem right to me at all.
  • kyfdxkyfdx Posts: 27,650
    My guess is he was reading from the wrong sheet... but, his computer program put in the correct numbers..

    I don't know the numbers for the 2010 model, but the ones you have there seem a little too good.. But, each month, the mix of incentives, money factor and residual can be all over the map, and usually work out to about the same payment..

    Another thing to remember... the dealer can quote any number he wants over the phone or e-mail, but the residual is the only one you can verify from the lease paperwork.. BMW dealers are famous for marking up the money factor by the full 0.0004, and the acquisition fee to $925 (from $725). If the numbers don't match up, those are the first two places to look for discrepancies.


    Prices Paid, Lease Questions, SUVs

  • kl07rphkl07rph Posts: 22
    edited May 2010
    Thanks for the insight kydfx,

    Actually, I confused the money factor from the's base rate for the 2010 X5 :blush: . Still, even with the money factor I was quoted (which is on the HIGHER side from what I've read here and on other bimmer forums), that sales guy or general manager goofed up enough (to their advantage) to get the monthly ~$85 more than what you and I calculated. I guess it'll be a mystery as to how they really did it...

    Thanks for your assistance though kydfx! I now have the needed confidence to calculate a monthly in the event I opt to lease in the future :shades:
  • lola225lola225 Posts: 19
    How difficult is it to obtain the dealer's LEASE WORKSHEET ? I assume it's different than the Spec sheet? When I ask for it, I get the spec sheet and separate numbers for tax etc typed into an email. What does the Lease Worksheet contain and why do dealers seem reluctant to provide one?

  • delta737hdelta737h Posts: 603
    edited June 2010
    Hi lola225,

    The dealer's LEASE WORKSHEET is a computer generated docment that contains all pertinent lease data including sell price, doc fees, bank fees, gross cap, cap reduction, adj cap, money factor, residual, term, payment, taxes, etc. Dealers are reluctant to provide them because they assume customers will take it to another dealer and play the game "can you beat this"? If you really want it, then they should give it to you. Otherwise, refuse to do business with them. Once a lease has been consumated, most fund providers require that the dealer submit a similar document together with the lease agreement and other miscellaneous documents. It's different from a SPEC sheet which describes the vehicle attributes... kind of like the window sticker.

    I wouldn't be too concerned about the lease worksheet or place too much credence in what the dealer is offering. Don't let the dealer control the deal. You must be in control. A good start is to create a lease proposal. I've posted several samples on different message boards (Honda Accord, Infiniti G37, etc). Just click on my screen name and feel free to peruse my posts. These are one-page proposals that provide all the details of the lease and are designed to save time, money, and aggravation. Once created, you can FAX/email it to the dealer and do all your negotiating via phone/email in the comfort of your home/office.

    Hope this helps.

  • jerrykenjerryken Posts: 14
    Can you please tell me how to calculate sales tax on a lease in NJ? Is it .07 x the depreciaton or .07 x the selling price and spread over the lease term? Or just .07 thime the monthly lease payment which includes the finance charge? Thanks so much.
  • delta737hdelta737h Posts: 603
    edited June 2010
    Greetings jerryken!

    Thanks for asking. You didn't describe your particular lease situation, if any, so I have to cover all bases. In short, the answer is none of the above. On October 1, 2005, New Jersey joined a 22 state coalition and bought into the Streamlined Sales and Use Tax Law. The key points governing sales tax treatment given to motor vehicle leases in New Jersey, under this law, are briefly summarized in the following document…

    An important provision is described at Item 12 in the above doc…

    "12. The Division has indicated that the tax base will be reduced by the value of a trade-in of property owned by the lessee that is accepted by the lessor as partial payment.

    (a) Does this rule apply under both the original purchase price method and the total lease payments method?

    (b) In determining whether the lessee is the owner of property, what is controlling (i.e. GAAP, UCC, tax treatment)? For example, a lessee trades in property subject to a finance lease. Is the tax base reduced if the lessee is considered the owner for GAAP purposes?

    Since the tax is imposed on the lessee, the trade-in credit is applicable under both calculation methods. However, in both cases, the lessor must disclose the tax base (purchase price or lease payments), as well as the amount of sales tax due, on the paperwork provided to the lessee. As long as the property traded in was originally acquired by the lessee, it does not matter if there is an amount owed to pay off a loan. The trade in credit is based on the amount of value allowed by the dealer/lessor against the lease."

    This document also describes the two methods for computing sales tax in NJ:
    (1) tax rate x manufacturer’s invoice price (Item 7) and;
    (2) tax rate x total taxable lease payments; otherwise, known as the total payment
    method (Item 8)

    Either way, you can roll the tax (finance) into the lease (see below). More than likely, you’ll want to opt for (2- total payment method) as it is usually the cheaper of the two methods.

    The best way to illustrate the sales tax calculation methodology is to use a concrete example. Because the first method is straight forward, I’ll describe the second using a hypothetical example. What follows is somewhat long-winded, so please hang-in. Consider a lease, originating in NJ, with the following data…

    MSRP…………………….…… 30,000
    Sell Price (S)...…………….…... 27,000
    Acq. Fee (A)…………….…….. 600 (Acq Fees are taxable in NJ)
    Trade Equity (Q)...………..…… (1,000) (we’ll assume financed negative equity- taxable in NJ)
    Gross Cap………………..…… 28,600
    Cap reduction (D)…………...… 500 (assume $500 cash down- taxable in NJ)
    Cap reduction- trade-in credit… 4,000 (assumed trade-in allowance- not taxable in NJ)
    Adjusted Cap (C)……………… 24,100
    Money factor (F)………………. 0.00200
    Residual Factor………………. 0.60
    Residual Value (R)…………. 18,000 (Residual Factor x MSRP)
    Term (N months)....…………. 36
    NJ sales Tax Rate (t)………… 7%

    Note that the financed items, A & Q, are taxable items and are assumed to be rolled into the lease (i.e., capitalized). The $500 cash down payment (D) is also taxable (see below). However, the entire trade-in value of $4,000 is non-taxable; regardless of the fact that a $5,000 loan balance remains outstanding producing negative equity in the amount of $1,000.

    Taxable Payment = F x (C + R) + (C – R) / 36
    = 0.00200 x (24,100 + 18,000) + (24,100 – 18,000) / 36
    = 253.64

    Total NJ Sales Tax Liability = Total payment tax + Tax on cash cap reduction
    = (t x N x Taxable Payment) + (t x D)

    = (0.07 x 36 x 253.64) + (0.07 x 500)
    = 674.17

    The taxable payment is NOT the "lease payment". It's only purpose is to compute tax liability and is, therefore, an intermediate calculation.

    Now, if you wish to roll the tax into the lease, then your payment, including taxes, is…

    = 0.00200 x (28,100 + 674.17 + 18,000) + (28,100 + 674.17 – 18,000) / 36
    = 392.83... this is your "lease payment"

    Observe that 24,100 becomes 28,100 in the last calculation. This is due to the fact that the trade-in value ($4,000) is exluded as you owe $5,000 on the trade. The only roll that the trade-in value plays, in this example, is to compute the taxable payment. Beyond that, it's irrelevant and is not used to compute the lease payment (including taxes) or your regular lease payment, with or without taxes, for that matter. And so, the $4,000 was added back in order to compute the "lease payment". Again, this is triggered by the fact that you still owe money (which the dealer pays) on your trade.

    Your intitial costs, payable at lease inception, are assumed to be the the 1st payment of $392.83 plus DMV fees and dealer doc fees plus any applicable taxes on the dealer doc fee or other miscellaneous fees.

    Questions? Please let me know.

  • I just don't get it. I don't understand the whole leasing process or the numbers or the residuals.

    Does this mean I shouldn't lease?

    I've been looking at used RDXes and Lexi and have been worried about their health.

    Today, I saw many cars including a Honda crossover car, that could be leased. I figure if I can pay under $400 for a NEW car that I like, Im ahead of the game. I just don't know how to get eher without my head spinning.

    To wit: Honda Accord Crosstour EX V-6 Automatic 5Speed 2WD
    $309.00 per month for 36 months. $2,299.00 total due at signing.
  • delta737hdelta737h Posts: 603
    edited June 2010

    I suggest that you educate yourself about leasing. Edmunds offers some outstanding easy-to-understand articles on leasing at...

    I'm not sure how you "figure" $400 as a threshold value for a Crossover but the danger of not knowing how a lease is structured or how to compute payments can be very costly. It's not unusual that a vehicle can be leased for much less than their advertised specials.

    Hope this helps.

  • jayriderjayrider Posts: 3,250
    If you drive a lot of miles per year you probably shouldn't lease. Over 15k per.
  • delta737hdelta737h Posts: 603
    I have no idea what I was thinking when I computed the taxable payment in Post #29. I should have excluded the $500 cap reduction. The taxable payment should be...

    0.00200 x (24,600 + 18,000) + (24,600 – 18,000) / 36 = 268.53

    Therefore, the total NJ sales tax liability amounts to...

    0.07 x 36 x 268.53 = 676.70

    The "lease payment" is based on the following data (we'll roll the tax into the lease)...

    MSRP…………………….…… 30,000
    Sell Price (S)...…………….…... 27,000
    Acq. Fee (A)…………….…….. 600.00
    Trade Equity (Q)...………..…… (1,000)
    NJ Sales Tax........................ 676.70
    Gross Cap………………..…… 29,276.70
    Cap reduction (D)…………...… 500.00
    Adjusted Cap (C)……………… 28,776.70
    Money factor (F)………………. 0.00200
    Residual Factor………………. 0.60
    Residual Value (R)…………. 18,000.00
    Term (N months)....…………. 36
    NJ sales Tax Rate (t)………… 7%

    and is computed as follows...

    Lease Payment = 0.00200 x (28,776.70 + 18,000) + (28,776.70 – 18,000) / 36
    = 392.91


  • wtalbotwtalbot Posts: 14
    I think this is true to an extent, however, I am well over my mileage allowance, but as long as I stick with Honda on another lease I don't have to worry about it. I will be turning it in in the next month or two and if I am incorrect about that I would sure like to know. They have told me all I have to do is bring it in and drive out in a new lease, no matter the mileage.
  • kyfdxkyfdx Posts: 27,650
    Well... technically, it's true.... but, you'll still be paying for the over-mileage charges.. If they are turning your car back into Honda Finance, you'll either have to pay the charges, or they'll just roll them into your new lease payment (making it higher than it would be otherwise)...

    If they are buying your car from Honda Finance, then that extra mileage will certainly make your car worth less to them, and that difference will be rolled into your new lease payment..

    So, yeah.... you bring it in, and drive out with a new lease, no matter your mileage.... but, it will be reflected in your new lease payment.

    No free lunch, I'm afraid...

    Now, I don't necessarily agree that high-mileage drivers shouldn't lease... Properly constructed, a high-mileage lease can be the cheapest way to go, especially if you would trade every three years, anyway..


    Prices Paid, Lease Questions, SUVs

  • jayriderjayrider Posts: 3,250
    You can avoid any over mileage charges and damage by purchasing the car instead of turning it in.
  • wtalbotwtalbot Posts: 14
    Oh wow, they mislead me I do believe. Amazing I am going on my 4th lease and did not fully understand this. Out of those leases I have never traded one lease in with the same auto maker for another. I haven't worried about mileage because I was under the impression that if I got another Honda it didn't matter.

    I am pretty sure the dealer will buy it for resale, so now it is a matter of negotiating the trade in value? I don't believe Honda will let me sell the vehicle to a 3rd party either? I guess if they don't give me the payoff amount I can just go turn it in myself, pay the mileage and go lease another vehicle. A little incentive if they really want the car.

    This changes things a bit.
  • dpb67dpb67 Posts: 6
    Does anyone have an idea what the current residual and money factors are for a 2011 Sorento in NJ?

  • delta737hdelta737h Posts: 603
    edited June 2010

    You may want to try the Sorento message board...

    and re-post.

    I'm sure that one of the moderators or, a knowledgeable poster, will be happy to help you. This message board is reserved for questions concerning lease payment calculations for which you're not likely to get a timely response to your question.

  • kyfdxkyfdx Posts: 27,650
    I created a new discussion for Sorento leasing for you (Kia leasing used to be non-existent, but it seems to have revived)..

    You can find it HERE

    Prices Paid, Lease Questions, SUVs

  • artwheelsartwheels Posts: 6
    I’m planning to lease a 2010 Toyota Prius II, & have done a lot of research—all of it on 12k miles a year. However, as I currently drive under 10,000 miles a year, I realize I should get a lease for 10,000 miles a year. duh. (Both my lease & insurance would be cheaper, & it’s highly unlikely I’ll be driving 12k miles a year.) Toyota is currently offering specials, including .00020 money factor. Here’s my dealer’s offer: 0 down, & $200 a month for 36 months re a 12,000 miles a year lease. (This includes taxes, bank fee, destination fee, & DMV fee--& is way lower than what other dealers have been offering.) My question is: If I lower my mileage down to 10k instead of 12k a year, what should my monthly payment be? (How much less should I pay a month?) Thank you so much! I appreciate your response. Best, Artwheels
  • delta737hdelta737h Posts: 603
    edited July 2010
    Greetings artwheels!

    It's rare times like this that I wish that the edmunds website supported mathematical fonts.

    Using differential analysis, the formula for the change in payment, given a percentage change in the residual, with all other variables held constant is...

    %P = (f - 1/N)S(%r) **


    %P = monetary change in payment
    f = money factor
    N = term
    S = Adj MSRP upon which the residual value is calculated
    %r = percentage points change in the residual factor


    Consider the following hypothetical data...

    Adj. MSRP = 25,000 (some options may only be partially residualized or not
    residualized at all which lowers the MSRP hence "Adj"

    Money Factor = 0.00200
    Term = 36 months
    Net Cap = 20,000
    Res. Factor = 60%
    Res. Value = Res. Factor x Adj. MSRP = 0.60 x 25,000 = 15,000 for 12K miles

    Using the money factor formula, the above data yields a payment of...

    P = 0.00200 x (20,000 + 15,000) + (20,000 - 15,000) / 36
    = 208.89

    But, if we lower the mileage to 10K, the residual factor may increase from 60% to 62%... a 2 percentage points increase (+2% or +0.02)... the residual value increases to 15,500 (0.62 x 25,000) and so, the new lower payment is...

    *P = 0.00200 x (20,000 + 15,500) + (20,000 - 15,500) / 36
    = 196.00

    Observe that the payment dropped by 12.89 (i.e., -12.89).

    We can easily calculate this payment change (-12.89) by using one formula instead of two and circumnavigate a lot of work just by using the above forrmula...

    %P = (f - 1/N)S(%r) **

    = (0.00200 - 1/36)(25,000)(+0.02) (the positive sign indicates an increase)

    = -12.89 (the negative sign indicates a decrease)

    This formula has the advantage of quickly determining how your payment will change (up (+) of down (-)) and, by how much.

    ** Toyota is notorious for not residualizing the destination charge and floor
    mats. I'm not sure if they deploy residual factors or not. If not, then they use flat dollar amounts instead. In this case, S(%r) is simply the change (up (+), down (-)) in the residual dollar amounts.

    Questions? Please let me know.

    All the best...

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