Cannot understand reason for Lease Calculator & hand calculation discrepancy

Ask the Hackrs
1

Eg. from Leasehackr guide:

https://leasehackr.com/blog/2016/4/17/how-to-calculate-lease-payments-by-hand :

"
(Capitalized Cost - Residual Value) / Number of Months

Let’s imagine that a particular car has an MSRP of $35,000. The manufacturer has set a residual of 60% (i.e., $21,000) for a 36-month lease. The dealer has agreed to a selling price of $33,000, and there’s a rebate of $3,000 from the manufacturer.

The capitalized cost is the amount financed; it’s the selling price minus any incentives and any down payment. In this case, the capitalized cost is $30,000: a selling price of $33,000 minus that $3,000 rebate.

When we apply these numbers to the formula, we get a depreciation expense of $250 per month:

($30,000 - $21,000) / 36 = $250 "

But when I plug in same numbers into our lease calculator:

  1. Why is the monthly (excl tax) different here?
  2. The monthly depends only on the variables mentioned in formula at top. Then why does the monthly vary by other factors in the lease calculator like Model of car, miles.

I am trying to understand the Lease Calculator here because I noticed it when my Hand Calculation didn’t match lease calculator:

(35050 - (.57)(44435) ) / 36 = $270

But with lease calculator:

Why this discrepancy? What am I missing?

2

Are you including dealer handling, acquisition fees etc in your hand calculations? The online calculator includes those

3

I would like to do it by hand too.
Where can I see the full formula?
Reason I’m doing by hand is to understand how the calculator computes it, and where all the variables fit into the formula.

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4

Gross Capitalized Cost = selling Price + amounts capitalized in the lease
Adjusted (net) capitalized cost = gross cap - capcost reductions (trade credit, rebates, consumer cash, etc.)
Basic money factor formula…

Base Monthly Lease Payment = money factor x (adjusted capcost - residual value) + (adjusted capcost + residual value) / term
Note: this formula excludes capping the first payment as well as capped taxes

Residual Value = Residual Factor x adjusted MSRP.
Note: Some options aren’t fully residualized (e.g., after market add-ons). Hence, the MSRP is adjusted downward.

Also, calculation of the lease payment that includes a capped first payment and taxes can take many different forms and can be very complex depending upon how taxes are computed in your state.

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5

Ok I was wondering, once we have the variables as shown in leasehackr calculator, and agree upon it, will dealer have the same lease quote as shown in Leasehackr calculator?
If not, how is this happening? is dealer also not supposed to use same formula we used?
My dealer quoted to me way different lease numbers from what I got on my leasehackr.
Isn’t this part a fixed formula based math?
Can he just do as he wishes and throw around random numbers?
Then what is the purpose of these fixed formulas we use? Why are we using it?

I thought the negotiation ended at Sales Price. Now I need to negotiate monthly lease quote too, even though we use same MF, Res%, Acquisition fees, miles/year, months, down etc.

6

Not necessarily! See my post in your other topic… “Can dealer lie about car being…”

7

Hi,

My dealer gave me a really good Sales Price (they call it Autonation Price, hope its same).
I got incentives/rebates etc of about $9,000+

The dealer later figured out I knew my lease math and all and that he couldn’t fool me.

He later went to his manager, and he brought in a new Stock # vehicle and told me the old one isn’t available in their lot now.
I checked on their website - it is still shown on their inventory.

The new one has similar spec but a slightly lower MSRP (less than 1k difference)
I understand it probably will get him a better lease number. He will still give me the same sales price on this new car though.

  1. We had agreed on a sales price for the previous vehicle, can he just suddenly tell me it isn’t available, even though it still shows on their website?

  2. Can a dealer refuse to give me a car after we have negotiated price? My dealer gave me a bunch of random lease plans. I told him I don’t want this - there is a straightforward math involved in the calculation, I want the price that comes from the math (I was secretly using the LeaseHackr calculator)
    I thought after negotiation the math would be straightforward. I asked him the MF, res value everything and plugged in the numbers.
    I was getting 340 something with 0 down.
    He was quoting from a paper showing 400+ with 3k or 4k down.
    How are they arriving at such different numbers? Isn’t there a standard calculation? What calculation is everyone else using? Can they just quote whatever numbers they wish to, without adhering to a math formula? Is that legal? I thought the path after negotiation will just adhere to the math; why is there abstract negotiation here too?

8

You haven’t provided much information. Suggest you ask for the dealer’s lease worksheet and post it. I’ll be glad to help you. There is no such thing as a “fixed” formula.Here’s why…
Online lease calculators are very limited in what they’re designed to do. For instance, I know of no online lease calculator that has the ability to compute NY sales tax when the tax in capitalized in the lease. As such, it won’t give you an accurate lease payment. Ditto for those situations when the first payment is capped in the lease. I’m not saying you don’t, but you need to know the mathematics and not just how to push buttons on a calculator. I never use online calculators because I don’t trust them and have created my own proprietary lease software that covers a multitude of different lease scenarios. In fact, I’m betting that mine is more sophisticated than the software packages (ADP, Reynolds & Reynolds, etc.) that dealers use. For instance, I’ve already caught a mistake in one version of ADP’s software program used by dealers like Honda in those instances where the first payment is capped in the lease. They must match my calculated lease payment. But, in order to do so, they must lower their selling price to compensate for the error. It took me an hour or so to explain this error to a Honda dealership GM. At least he listened! Upon realizing the error, he adjusted the selling price downward as I had suggested. I contacted Honda finance and they refused to acknowledge the error. Why wasn’t I surprised? Maybe they think no one else will catch it. That’s why lawsuits get filed as it is often the only remedy available. An online calculator, whether its leasehackrs or someone else’s, is useless in these situations.
The bottom line is that there is no substitute or short cuts for not knowing the mathematics. And so, it’s best to create your own program in Excel. The money factor formula can get extremely complex and unwieldy in a hurry. Another issue is that if your dealer is using a fund provider that uses an interest rate instead of a money factor, then the money factor formula is not applicable although, you can still use it by converting the interest rate to a money factor to arrive at an estimated payment which could be close to the actual payment depending upon the spread between the adjusted capitalized cost and the residual value.
Hope my long “windedness” helps.
John

1 Like
9

Keep all your questions in one thread.

10

I think you need to understand the numbers behind leasing, different conponents behind leasing and how dealers play with those numbers. I remember years ago, this lease calculation was a guarded secret :slight_smile:

11

You aren’t plugging in anywhere near the same numbers. Here it is with all fees, interest, and taxes zeroed out just as you did in your hand calculation:

12

It was never a guarded secret because it is discoverable via mathematical derivation.

2 Likes
13

Yeah, but not every Tom Dick and Harry knew how to calculate a lease as easily as they do today. A car dealer would never explain how to calc a lease by hand, even today. Thank the internet for this revelation.

Not everyone is a math major that would’ve been able to do this without some explanation.

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14

That is largely because most dealers can’t do it themselves. They can only repeat what the computer spits out.

15

There was some truth to what i said. Before the internet, very few people know how to calculate the lease. No one even knows what the rebates, incentives and dealers holdback and so many things that every joe schmoe have access today just by going here or edmunds. Heck, you can even tell how many cars a dealer has on the lot and how long they where there even before stepping foot at the dealership. The lease became popular im the 90s and people dont care back then how lease works because when the sales guy comes out with $525 a month finace at 6% and he pitch that you can get it with a lease for $375 with $600 down saving you a $150 a month and you dont need to worry about it after 3 years. What do you think the response will be?
That $525 a month for 5 years finance translate to a $26k suv. Because we are educated now, will you lease a $26k car for $375 since you know how lease works? And i just describe my first lease that is a 98 Jeep GC Laredo. Now you can lease that same model with an msrp of 36k with less than $300/mo with 0 DaS thanks to the internet. If you do the math, i paid close to msrp and who knows how much was added to mf.

Those that started leasing back in the 90s know what i am talking about.

Geez, feel so old just typing this.

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16

Here’s my numbers (Mercedes Benz C300, RWD, 2018):

Could you plug in these number into your own excel and see is it close to what leasehackr shows as fair? Would be great.

I don’t have the dealer’s lease worksheet yet. Do they give it out to people who ask?

17

Check Mercedes lease offers if you haven’t already done so…

MB’s acquisition fee is $795 and so, it appears that the dealer has a $300 markup. It also appears that the 0.00026 money factor is the base (buy rate) money factor which is the top tier rate.

Based on your calculator inputs, I essentially arrive at the same payment…
base payment = $303.28
base + tax @9% = $330,.58

Yes, the dealer should provide you with their lease worksheet but, you have to be firm. If they refuse, I would go to another dealer. However, the deal you’re getting seems to be very fair except I don’t like the high acq. fee.

18

That seems like too good of a discount for a new car, especially with the base MF. Do you have the lease worksheet from the dealer?

19

All the numbers look good. And the result looks good too from calculators.
But the struggle right now is to get lease numbers from dealers that come close to this.
I havent asked for lease worksheet till now.
I can, but what do i do with it? I havent read on how sheets work. Im at the dealership now.

20

You use it to figure out what is wrong with your calculation. I don’t think what you entered is correct.