To All Brokers:
I have never seen anyone ask brokers on this or other forums, if they design their own leases and calculate all the components of a lease (e.g., monthly base payments, monthly lease payment, sales tax, etc.) or whether they review lease agreements to ensure that all the numbers align as agreed before the client signs.
If you don’t review lease agreements and allow dealers to perform all the lease calculations without doing them yourself, then you’re not doing your job as a broker IMO. Brokers must control the deal; not the dealer. That means that brokers should be able to design leases which requires them to (not necessarily in the order given)…
- assess MSRP
negotiate selling price taking into account all incentives, both customer and dealer, as well as MSRP discounts based on supply / demand- determine the appropriate residual factor
- determine the base rate (i.e., buy rate)
- determine the sales tax rate and know the four different methods used to calculate sales tax and,
apply the method used by the state where the vehicle will be garaged - separate taxable fees from non-taxable fees
- determine the gross cap
- appropriately apply any cap reductions
- determine the adjusted cap
- calculate a zero drive off lease which includes capping the first payment and, where appropriate,
capping taxes as well as all other fees - calculate the monthly base payment if appropriate… you should know when to do this and what capped
fees a base payment should include - calculate sale tax
- calculate the monthly lease payment
- create a comprehensive professionally-looking lease proposal
- review the completed lease agreement to ensure that all numbers align with the final negotiated lease
proposal before the client signs - create a lease amortization schedule so the client knows the exact lease payoff balance at any point in
the lease determined in accordance with the lease agreement
This is only being responsible and having high standards. It’s also doing your job IMO. It’s NOT arrogance on my part… not by a long shot! If you have the attitude “who cares”, then you just don’t get it. But, luckily for you, you’re probably right. In America, it seems that many people don’t care, hate to be judged and, hate to be held accountable and, is why business is often done sloppily and are able to get away with it.
When I negotiate leases for myself and others, you can be certain that I do all things I’ve listed above and hold dealerships accountable. If they screw up, lie to me, or refuse to give me basic information (e.g., doc fee, base money factor, residual factor, adjusted MSRP (iff applicable), etc.), I won’t do business with them.
So, brokers, feel free to challenge yourselves by structuring a complex lease. Formulate a hypothetical lease originating in, say NY. Create a hypothetical lease proposal and know what the lease agreement should look like and why. Are you going to say “who cares” and assume that all the dealer calculations are performed correctly? I’ve seen some that weren’t.
Finally, I would challenge anyone to find an on-line lease calculator designed to accurately calculate zero drive-off leases. Zero drive-off leases are sometimes advantageous especially if the implicit interest rate is very low (e.g., < 0.5%).
Just my thoughts