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How to Calculate Monthly Lease Payments

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  • qbrozenqbrozen Posts: 17,204
    edited February 2013
    however, is it true that interest is not charged on the tax? So, in effect, it is the same as paying tax on the payment (even if calculated differently, if the end result is the same, it doesn't matter). As long as interest isn't charged on the tax, there is no benefit paying it up front, which was the poster's question. Correct?

    '13 Stang GT; '86 Benz 300E; '98 Volvo S70; '12 Leaf; '14 Town&Country

  • delta737hdelta737h Posts: 603
    edited February 2013
    If the tax is capitalized, then it will be subject to interest charges as it is included in the gross cap. Below is a lease I constructed almost two years ago in Ohio...

    April 11, 2010

    2010 Honda Accord LX

    Retail Pricing Information

    Base MSRP 2010Honda Accord LX AutomaticModel CP2F3AEW………..….…………… 21,855.00
    Polished Metallic ……………………………………..….………………………………… 0.00
    Destination Charge…………………………………………………………….…………….….. 710.00
    MSRP……………………………………………………………………..…………….…...…… 22,565.00

    Selling Price
    Agreed Upon Value……………………………………………………………………….……… 18,884.05

    Amounts Financed (Capitalized)
    AHFC Acquisition Fee…………………………………………………………………………… 595.00
    Medina Sales Tax @ 6.50%  36  206.93………………………………..…………………….. 484.22

    Capitalized Costs
    Gross Capitalized Cost………………………………………………………………….……… 19,963.27
    Capitalized Cost Reduction……………………………………………………………………. 0.00
    Adjusted Capitalized Cost……………………………………………………………………… 19,963.27

    Residual Data
    Residual Factor………………………………………………..…………………….…………. 0.60
    Residual Value (Residual Factor × MSRP)………………………..……………….…….….… 13,539.00

    Cost of Money/Term
    Money Factor…………………………………………….……………………….……….…… 0.00127
    Term (months)……………………………………………………………………….………… 36

    Lease Payment Itemization
    Monthly Lease Payment…………………….…………………..……….…………….…….… 221.00
    Taxable Monthly Lease Payment……………………………………………………..……….. 206.93

    Estimated Charges Payable at Lease Origination
    License, Title, Registration Fees (estimated)……………….……….…………………...…….. 125.00
    Amount Due at Lease Signing…………………………………………………………..…..… 125.00

    Fund Provider: AHFC
    GAP Coverage: Included
    Annual Mileage Allowance: 12k
    Disposition Fee: None
    Excess Mileage Charge: $0.15 per mile
  • delta737hdelta737h Posts: 603
    edited February 2013
    This goofy line...

    Medina Sales Tax 6.50%  36  206.93………………………………..…………………….. 484.22

    from the above post should read...

    Medina Sales Tax 6.50% x 36 x 206.93..... 484.22

    John

    PS: Anything that is capitalized in a lease, taxes or otherwise, is going to be charged interest.
  • thngpg3388thngpg3388 Posts: 4
    edited February 2013
    Thanks for all the info. A little over my head.

    So paying upfront and paying monthly is essentially the same?

    Only asking because I have 2 lease offers: 1 w/ all fees/taxes rolled into monthly payments and the other with much higher upfront costs including tax w/ lower monthly.

    the higher upfront cost sounds cheaper in the long run but maybe i'm missing some additional fees.
  • Given that a car is a depreciating asset and the cost of money is relatively cheap, I wouldn't part with any money upfront. Just roll it in with the lease.

    John
  • Thanks for the advice!
  • qbrozenqbrozen Posts: 17,204
    I don't believe the tax is capitalized in NJ. At least, I can't find any evidence that supports that.

    So that OH lease you pasted, I can see that, if interest wasn't charged on the tax, the payment would be about 60 cents less. AFAIK, if you did that same lease in NJ, the payment would be $220.38.

    Maybe I'll see if my sister can bring over her lease contracts we did a few weeks ago so I can take a look.

    '13 Stang GT; '86 Benz 300E; '98 Volvo S70; '12 Leaf; '14 Town&Country

  • Tax can be capitalized at the lessee's request. I have constructed several lease proposals for individuals in the State of NJ over the past three (3) years and have never had a problem with any of the NJ dealerships doing this. They really don't care and neither does the State of NJ. Either way, NJ will receive the tax payment upfront. The fund provider simply advances the dealer the cash to pay the taxes and the lessee re-pays the tax, included in their lease payment, over the term of the lease.

    If you have any questions about the lease contract, please let me know.
    I'll be glad to address them.

    John
  • I received an offer from a Volkswagen dealer on a 2013 CC

    MSRP 32890

    Sell price 29576

    Money factor.00010

    Payment of $479/month with $1000 down + fees.

    Is this a good deal?? :confuse:
  • qbrozenqbrozen Posts: 17,204
    I'm having a tough time following your posts. I thought you used the term "capitalized" to mean the total the interest is charged on. The simple question is, "does NJ charge interest on the tax if you don't pay it up front?"

    I'm saying no, because that's what I've read. Are you saying yes or no?

    '13 Stang GT; '86 Benz 300E; '98 Volvo S70; '12 Leaf; '14 Town&Country

  • kyfdxkyfdx Posts: 27,905
    NJ collects the tax upfront...

    If you wish your bank to pay the tax and then add the amount to your capitalized cost, then you will certainly pay finance charges on that amount...

    NJ doesn't care.... they always get it upfront...

    MODERATOR
    Prices Paid, Lease Questions, SUVs

  • bwaabwaa Posts: 13
    ARRRGH I WISH I HAD READ THIS POST BEFORE I LEASED MY SUBARU FORRESTER AHHHH :'(
  • NJ does not charge interest on the tax if it's not paid upfront because they're not the entity that funds the lease. It's the fund provider that charges interest on the tax if it's not paid upfront because the tax is financed (capitalized) in the lease. NJ does not finance leases. Banks and manufacturer finance subsidiaries (e.g., American Honda Finance, etc.) finance leases.

    John
    TheAutoLeaseGeek
  • qbrozenqbrozen Posts: 17,204
    edited February 2013
    I didn't actually mean the state of NJ. I meant in NJ. I am well aware NJ isn't charging interest like a lender.

    '13 Stang GT; '86 Benz 300E; '98 Volvo S70; '12 Leaf; '14 Town&Country

  • sepi60sepi60 Posts: 13
    edited March 2013
    Hello everyone:

    So, I'm trying to practice my calculations before going to the dealer today, but something doesn't add up. For the lease special offered at:

    http://www.bmwusa.com/standard/content/Vehicles/2013/X1/xDrive28i/

    with MSRP of $38,345, $725 Acquisition fee, $750 loyalty rebate, and $3,624 first month (including $2500 down, $725 acq. fee and $399 first month payment), I get monthly payments of $412 (pretax and excluding license and reg), when I use 0.0013 for money factor and 0.6 residual factor for 10,000 miles per year. (these are the values currently offered by BMW financials).

    Here is my calculations:
    Net Cap Cost = 38345 (MSRP) + 725 (acq. fee) - 2500 (down payment) - 725 (acq. fee paid upfront) - 750 (loyalty rebate) = 35095

    Month depreciation = (35095-23007)/36 = 336
    Interest = (35095+23007)*.0013 = 76

    Total = 336+76 = 412

    The only way that I can $399 seems to be if I include first month payment in "cap cost reductions", to bring the net cap cost down to $34696, which reduces the monthly depreciation to
    $325 and the finance charge to $75 (total ~$400). But including first month payment in the "cap cost reduction" doesn't make sense to me. If I do that, should I then divide the total depreciation by 35 instead of 36 (since one month is already paid)?

    Am I missing something?

    Thanks much
  • kyfdxkyfdx Posts: 27,905
    What you are missing is the selling price of the vehicle... You aren't going to pay MSRP, are you?

    There is an unspecified dealer discount in the advertisement...

    MODERATOR
    Prices Paid, Lease Questions, SUVs

  • sepi60sepi60 Posts: 13
    Thanks kyfdx.

    No, in reality I will negotiate and get (hopefully) a much better price than MSRP. I was just trying to practice to get the numbers posted on their website right.

    So, there's a hidden discount somewhere. That makes much more sense.
  • melech37melech37 Posts: 18
    I was planning on leasing a Volkswagen CC probably next month, But when I look at the very substantial incentives ($3500) available in April I'm feeling some pressure to do it now. I'm concerned that VW may not extend the incentive into May.
    Does anyone know what rationale the car makers use in keeping or pulling incentives from month to month? Is there any public source that can accurately estimate the next months deals?

    Melech
  • Kirstie_HKirstie_H Posts: 10,837
    Here's our VW CC Lease Questions discussion:
    http://townhall-talk.edmunds.com/WebX/.f1ba668/565

    However, there is NO source that can tell you what next month's incentives will be. These aren't published anywhere because they would influence buying patterns, and also, because sometimes incentives are based on previous months' sales.

    MODERATOR
    Need help navigating? kirstie_h@edmunds.com - or send a private message by clicking on my name.
    Share your vehicle reviews

  • jsas1981jsas1981 Posts: 7
    Delta737h,

    Have a few questions on the sales tax on a lease quote I received for a 2013 Pathfinder Platinum Premium - 3 year/36K . I will list my details below but the total sales tax the dealer calculated on their lease worksheet came out higher then my calc. I am leasing in NJ.

    MSRP: 44,645
    Cap Cost : 41,000
    Acq Cost : 595
    Rebate: 675
    Adj Cap Cost 40,920
    Residual: 54%
    Money Factor: .00056

    The total sales tax that the lease worksheet I have is $1,351.20. I am coming in a little less then that if I base my tax calculation off of the total amount that I am technically "borrowing" which would be 16,811.70. Let me know if you have any insight on this topic.

    Thanks!
  • delta737hdelta737h Posts: 603
    Greetings isas1981!

    Yes, I do have some insight on the way taxes are computed in NJ as it is done the same way in Ohio. What I need to know is your NJ sales tax rate.

    John
    TheAutoLeaseGeek
  • jsas1981jsas1981 Posts: 7
    Hi delta737h,

    The tax rate in NJ is 7%
  • delta737hdelta737h Posts: 603
    isas1981,

    Something is missing. Did you capitalize the first payment and/or tax into the lease? If you email me the dealer worksheet, I'll be able to see exactly what's going on with this lease.

    John
  • jsas1981jsas1981 Posts: 7
    John - Send me your email address and ill scan it over to you.

    Jeff
  • delta737hdelta737h Posts: 603
    Here's my email...

    autoleasegeek@zoominternet.net

    John
  • drt222drt222 Posts: 9
    Hi everybody,

    Thanks for sharing the knowledge.

    Here's the offer I have:

    Cap cost:28872
    MSRP: 33160
    Purchase option: 16266.80
    Residula: 48%

    They didn't give me the MF but they came up with a monthly lease payment of 399 with $0 down and 1st month free for a 39 month lease period.

    Is that a good deal?
  • Kirstie_HKirstie_H Posts: 10,837
    Hi - this discussion is for more general questions about leasing, and calculating the lease payment itself. For info on what specifically constitutes a good deal on a particular vehicle, you're better off posting in a discussion about that vehicle: VW CC Lease Questions

    MODERATOR
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    Share your vehicle reviews

  • donuts3donuts3 Posts: 3
    Hi. Am looking at leasing for the first time ever. I have some interesting (good?) money factors , ranging from .0013 and .0016 for various crossovers (i haven't decided which one I like - OUtback, Santa Fe, CX5, Sorento), and residual values from about 59 - 63%. I am looking for 36 - 42 mo, 10K - 12K mi, and $0 down. Some of the monthly payments are around $350. I really would like to get this down closer to $300. is the only number I can push on the Sale price of the car, without having to put money down? I thought that money factor was unable to budge, but a friend just suggested it may be.

    Also - is it common/uncommon/advisable or not to ask for service contract to be thrown in?

    Thanks!
  • steverstever YooperlandPosts: 40,147
    A reporter is looking for new car lessees. If you leased a new car in the past few months, and would like to share your story, please email your daytime contact information to pr@edmunds.com.

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  • I would like to trade in my car in and lease a new car. New job, less money, better benefits. I do still owe money on the car but have about 13-14k equity in the car. Would like to use a little of the money towards a new car lease and pocket rest of the money so I can supplement my income. I know that you get less for trading in vs. selling privately, but to add the tax to the trade-in amount to see if it is worth it just to sell privately.

    Question is, for the amount of money I will receive for my trade-in, the tax on the amount will far surpass the amount of taxes on the lease. What happens with the excess taxes? Applied to the lease? Or will I loose it? Thanx!
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