Counteroffer based on calculator

I guess this is a silly question but I couldn’t find a practical discussion of how to properly use the calculator with the dealer. Do you offer whatever the calculator spits out? How much legitimate wiggle should you expect (in either direction I guess)?

Easy – you don’t. Learn how to calculate a lease by hand.

MSRP x residual percentage = residual

Selling price (net of incentives) - residual = depreciation

Divide depreciation by months to get base payment.

Add depreciation to residual and multiply that sum by the MF.

Add MF to the base payment.

That’s your payment before taxes, which obviously changes based on how a state calculates tax.

Example with numbers:

MSRP: $20,000
Selling price: $18,000
Residual 50%
MF: 0.0001
Term: 36 months

Residual = $10,000
Depreciation = $18,000 - $10,000 = $8,000
Base payment = $8,000/36 = $222.22
Rent charge = $8,000 + $10,000 = $18,000
$18,000 x 0.0001 = $1.8
Payment before tax = $224.02


Any calculator can only spit out what you spit in.

You have to lay out your inputs

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I used to ballpark this estimate for my past 2 leases but I assumed this calculator was a bit more exacting than my back of the envelope.

My question is more do I have to ‘leave extra meat on the bone’ for the dealer beyond this ? And similarly, are there further discounts that the calculator doesn’t account for?

got a quick question, when you say

shouldnt it 8000+10000 on your example?
sry im just trying to understand the math.

Yes, thanks. I typed and extra number and ran with it! Fixed it now.

Even the calculator isn’t 100% accurate. It’s a guide, not a be-all, end-all.

I’m not sure what you mean by leaving anything for the dealer? Again, you don’t mention LH to the dealer. It’s that simple.

The only discount it “wouldn’t account for,” is if there is further negotiation on selling price.

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I changed my mind…you’re not doing my taxes!

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got it!
also shouldnt depreciation + residual = selling price? or is it not always the case?
reason i ask is b/c that could simplify the math.

I’d say to have a target number in mind based off Calc but have also a number you’d be happy to sign on.

The hardest part of this thing of ours is wondering whether you left money on the table!

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Exactly! My past 2 leases I estimated where I thought I should be and got there, but some variables seem so black box when you’re actually sitting with the dealer. And more recently I’ve gotten to a ballpark of where I think we should be and some dealers claim it’s ‘impossible’. It really is just math. The hardest part is knowing ALL variables.

Fat finger and there’s so much pollen in the air, I can’t see straight! :stuck_out_tongue:

Well what I mean by target number. This can be a known tipping point, but also have a number you’re prepared to stand on no matter what and if they reach it, shake hands and hide your smile.

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Can’t drive yourself crazy about that. Your time is worth something. You want a good deal. If every dealer gave every car away (many survive just on service), there would be no dealers. I want to feel like I got a good deal on the car I wanted, and know the sales and finance people didn’t spend all of happy hour rehashing how much money I left on the table. Someone will get it for $1 less, maybe you could elsewhere, or next month. Work the best deal you can and celebrate your new whip.

With all due respect, your method is very misleading and part of it is wrong. Here’s the correct methodology for money factor leases assuming payment streams are taxed and non-taxable fees are paid upfront…

MSRP x Res. Factor = Residual Value
Sell Price = MSRP - (non-taxable incentives + non-taxable discount)
Gross Cap = Selling price + capped taxable fees (may include acq. fee, doc. fee, negative equity, etc.)
Adjusted Cap = Gross Cap - cap reductions (may include cash cap reductions and trade equity)

Monthly Base Payment = Monthly Lease Charge + Monthly Depreciation
Monthly Base Payment = MF x (Adj. Cap + Res. Value) + (Adj. Cap - Res. Value) / Term
Lease Payment = Base Payment x (1 + tax rate)
MF = Money Factor

Your numerical example assumes that Sell Price = Adj. Cap…excluding non-taxable fees. Also, base payment does not equal depreciation / Term

Base Payment = 0.00010 x (18000 + 10000) + (18000 - 10000) / 36
= 225.02

In their defense, they were within a dollar of your calculation.

The LH calculator works great other than being slightly tripped up by acq fees (take the number for total cost and use regular calculator to come up with true monthly) and frankly any salesperson or sales manager that deals with our type should be used to smartphones being whipped out to cross check numbers.

Doesn’t matter if they were within a dollar. What about an example where there are capped fees and cap reductions. Using the sell price as instead of the adjusted cap will yield a payment that is way off the mark. Poster’s math was clearly wrong. Being within a dollar is no justification as the end does not justify the means. Novices could easily be mislead into using the selling price instead of the adjusted cap to calculate a lease payment or, dividing the depreciation by the term to get the base payment which is flat out wrong.

Fine, I should have defined “selling price” as everything that is rolled in to get the adjusted cap cost. I was typing things up in a general sense to give a basic formula.

Yes, but in the process of doing so, it was misleading. We’re not mind readers. Also, why did you define the base payment as depreciation / Term? Nothing general about that.

Ok, leave her alone. Your point was made. Drop it.