Calculating MF

Nes7s

I have a question regarding calculating the Money Factor (MF) for a deal. The dealer has provided me with the MSRP, adjusted purchase price (MSRP less rebates/discounts), lease payment, and lease term on a contract. I have also obtained the Residual Value (RV) from Edmunds.

Based on my understanding, the Money Factor can be calculated using the formula:

Money Factor = Lease Charge / (Capitalized Cost * Residual Value) * Lease Term.

Now, I'm unsure whether the capitalized cost should be the MSRP or the adjusted purchase price (MSRP less rebates/discounts).

Here are the specific details of the deal:

MSRP: $116,000

Adjusted purchase price (Cost less discounts): $95,000

Quoted lease payment: $1,120 per month with zero down payment for a 24-month term

Residual Value (RV): 65%

I would appreciate any guidance on whether I should use the MSRP or the adjusted purchase price as the capitalized cost in the Money Factor calculation, and what the MF equation would look like.

Michaell

The adjusted cap cost is the selling price less incentives plus any taxes or fees you aren’t paying up front.

Nes7s

Michaell said:

The adjusted cap cost is the selling price less incentives plus any taxes or fees you aren’t paying up front.

Thank you!

A dealer sent me a 2023 vehicle they purchased from another dealer for lease.

The car original MSRP is 157,790
Cash sale price to the dealer was 101,261
Cap cost on dealers books: 101,261
RV = 61%

The dealer then provided me with a lease quote

of $796.22 / month for an 24mo lease for 7.5k miles per year

Based on the lease quote, they are calculating the monthly lease amt with an RV of 61% applied to the original MSRP, NOT the capital cost / price they paid for the vehicle.

Is this how its done, or should they be applying the RV of 61% to the cap cost of 101,261 to arrive at the residual $ value?

Additionally, when i try to calc MF via the formula

Money Factor = Lease Charge / (Capitalized Cost * Residual Value) * Lease Term.

or 796/(101261*61%)*24(mo) i arrive at 30% for MF. That cant be right?

kyfdx

Nes7s said:

Michaell said:

The adjusted cap cost is the selling price less incentives plus any taxes or fees you aren’t paying up front.

Thank you!

A dealer sent me a 2023 vehicle they purchased from another dealer for lease.

The car original MSRP is 157,790
Cash sale price to the dealer was 101,261
Cap cost on dealers books: 101,261
RV = 61%

The dealer then provided me with a lease quote

of $796.22 / month for an 24mo lease for 7.5k miles per year

Based on the lease quote, they are calculating the monthly lease amt with an RV of 61% applied to the original MSRP, NOT the capital cost / price they paid for the vehicle.

Is this how its done, or should they be applying the RV of 61% to the cap cost of 101,261 to arrive at the residual $ value?

Additionally, when i try to calc MF via the formula

Money Factor = Lease Charge / (Capitalized Cost * Residual Value) * Lease Term.

or 796/(101261*61%)*24(mo) i arrive at 30% for MF. That cant be right?

That isn't how you calculate a money factor.

Also, the residual is always a percentage of MSRP.

Nes7s

kyfdx said:

Nes7s said:

Michaell said:

The adjusted cap cost is the selling price less incentives plus any taxes or fees you aren’t paying up front.

Thank you!

A dealer sent me a 2023 vehicle they purchased from another dealer for lease.

The car original MSRP is 157,790
Cash sale price to the dealer was 101,261
Cap cost on dealers books: 101,261
RV = 61%

The dealer then provided me with a lease quote

of $796.22 / month for an 24mo lease for 7.5k miles per year

Based on the lease quote, they are calculating the monthly lease amt with an RV of 61% applied to the original MSRP, NOT the capital cost / price they paid for the vehicle.

Is this how its done, or should they be applying the RV of 61% to the cap cost of 101,261 to arrive at the residual $ value?

Additionally, when i try to calc MF via the formula

Money Factor = Lease Charge / (Capitalized Cost * Residual Value) * Lease Term.

or 796/(101261*61%)*24(mo) i arrive at 30% for MF. That cant be right?

That isn't how you calculate a money factor.

Also, the residual is always a percentage of MSRP.

what would the right way be then?

kyfdx

Nes7s said:

kyfdx said:

Nes7s said:

Michaell said:

The adjusted cap cost is the selling price less incentives plus any taxes or fees you aren’t paying up front.

Thank you!

A dealer sent me a 2023 vehicle they purchased from another dealer for lease.

The car original MSRP is 157,790
Cash sale price to the dealer was 101,261
Cap cost on dealers books: 101,261
RV = 61%

The dealer then provided me with a lease quote

of $796.22 / month for an 24mo lease for 7.5k miles per year

Based on the lease quote, they are calculating the monthly lease amt with an RV of 61% applied to the original MSRP, NOT the capital cost / price they paid for the vehicle.

Is this how its done, or should they be applying the RV of 61% to the cap cost of 101,261 to arrive at the residual $ value?

Additionally, when i try to calc MF via the formula

Money Factor = Lease Charge / (Capitalized Cost * Residual Value) * Lease Term.

or 796/(101261*61%)*24(mo) i arrive at 30% for MF. That cant be right?

That isn't how you calculate a money factor.

Also, the residual is always a percentage of MSRP.

what would the right way be then?

(CAP cost - residual) / term in months = monthly depreciation

monthly payment - monthly deprecation = monthly rent charge
Monthly rent charge / (CAP cost + residual) = money factor

Nes7s

kyfdx said:

Nes7s said:

kyfdx said:

Nes7s said:

Michaell said:

The adjusted cap cost is the selling price less incentives plus any taxes or fees you aren’t paying up front.

Thank you!

A dealer sent me a 2023 vehicle they purchased from another dealer for lease.

The car original MSRP is 157,790
Cash sale price to the dealer was 101,261
Cap cost on dealers books: 101,261
RV = 61%

The dealer then provided me with a lease quote

of $796.22 / month for an 24mo lease for 7.5k miles per year

Based on the lease quote, they are calculating the monthly lease amt with an RV of 61% applied to the original MSRP, NOT the capital cost / price they paid for the vehicle.

Is this how its done, or should they be applying the RV of 61% to the cap cost of 101,261 to arrive at the residual $ value?

Additionally, when i try to calc MF via the formula

Money Factor = Lease Charge / (Capitalized Cost * Residual Value) * Lease Term.

or 796/(101261*61%)*24(mo) i arrive at 30% for MF. That cant be right?

That isn't how you calculate a money factor.

Also, the residual is always a percentage of MSRP.

what would the right way be then?

(CAP cost - residual) / term in months = monthly depreciation

monthly payment - monthly deprecation = monthly rent charge
Monthly rent charge / (CAP cost + residual) = money factor

thank you, appreciate it.

Lastly, would the new MSRP not be the price at which the dealer purchased it from the dealer, or is the MSRP always original factory MSRP?

kyfdx

Nes7s said:

kyfdx said:

Nes7s said:

kyfdx said:

Nes7s said:

Michaell said:

The adjusted cap cost is the selling price less incentives plus any taxes or fees you aren’t paying up front.

Thank you!

A dealer sent me a 2023 vehicle they purchased from another dealer for lease.

The car original MSRP is 157,790
Cash sale price to the dealer was 101,261
Cap cost on dealers books: 101,261
RV = 61%

The dealer then provided me with a lease quote

of $796.22 / month for an 24mo lease for 7.5k miles per year

Based on the lease quote, they are calculating the monthly lease amt with an RV of 61% applied to the original MSRP, NOT the capital cost / price they paid for the vehicle.

Is this how its done, or should they be applying the RV of 61% to the cap cost of 101,261 to arrive at the residual $ value?

Additionally, when i try to calc MF via the formula

Money Factor = Lease Charge / (Capitalized Cost * Residual Value) * Lease Term.

or 796/(101261*61%)*24(mo) i arrive at 30% for MF. That cant be right?

That isn't how you calculate a money factor.

Also, the residual is always a percentage of MSRP.

what would the right way be then?

(CAP cost - residual) / term in months = monthly depreciation

monthly payment - monthly deprecation = monthly rent charge
Monthly rent charge / (CAP cost + residual) = money factor

thank you, appreciate it.

Lastly, would the new MSRP not be the price at which the dealer purchased it from the dealer, or is the MSRP always original factory MSRP?

It's always the original factory MSRP