Deal Check: 2023 Toyota RAV4 Prime XSE

[bbyf16]

Hi all,

I’ve got a deal here that I feel is off but I can’t put my finger on it. Can someone check the numbers and see if this adds up?

I’m doing a 36/10 lease on a 2023 Toyota RAV4 Prime XSE. I’m leasing the vehicle in CT but live in Illinois. Lease is through TFS.

MSRP: 52,613
Sale Price: 50,113
MF: 0.00174
Residual: 56%
Tax rate 7% (Illinois)
Toyota lease cash: 6500.
Monthly with 0 due at signing: 731
Could someone check the numbers and see if this makes sense?

I plan on doing a lease buyout a month in but I’m throw off by the wording in the lease contract which says all unpaid monthly payments and amounts unpaid under this lease are due. Can I still do a buyout?

Thanks in advance!!!

[paranoidgarliclover]

@bbyf16

all unpaid monthly payments

I don’t think any of the monthly payments have become due yet (aside from the first month?), if you buy out the car immediately.

Which numbers do you think don’t make sense?

[bbyf16]

I mean the sale price of the car is $50,113. If I was to buy the car one month in, I would have to pay 25585 (remaining monthly payments) + 21601 (depreciation amount) = 47186. Where did the 6500 go (I was expecting at least 5k (after disposition, acquisition, and first month rent)?

[delta737h]

@bbyf16

Can someone check the numbers and see if this adds up?

I calculated all the numbers manually and they all check out except the tax on lines 7(j) & (k). Illinois sales tax is levied on the sum of the lease payments. Your tax on line 7(j) should be…

(36 x 731.01) x .07 / (1-.07) = 1980,80. The contract shows 1959.65.

Line 7(k) should show…

(999 + 240) x .07 / (1-.07) = 93.26 instead of 78.68.

You may want to check with the CT dealer for some clarity. Or you may not since my calculated taxes are higher. Below is a link to my post regarding Illinois taxes…

Calculating Illinois Sales Tax Accurately - Off-Ramp - FORUM | LEASEHACKR

@bbyf16

I plan on doing a lease buyout a month in but I’m throw off by the wording in the lease contract which says all unpaid monthly payments and amounts unpaid under this lease are due. Can I still do a buyout?

Yes, you can still do a buyout. Don’t worry about the wording in Section 32(a) as it does not apply to you. It just says that you owe any past due payments. Although you did not post Section 29 of your lease agreement, I am 99.99999% sure that your buyout is calculated as follows…

Adj. Lease Balance = (48434.35 - 731.01) x (1 + 4.2%/12)
= 47870.30

With tax: 47870.30 x 1.07 = 51221.22

Your buyout is 51221.22 plus all applicable fees under Sections 32(b) & (c) as long as you exercise your purchase option within 30 days of your lease inception date of 3/13/2024.

The 4.2% is your lease amortization rate or what Section 29 likely labels it as the actuarial or constant yield rate. All payments, including rent charges, are paid one month in advance. You may want to visit my posts in the links below for a detailed discussion of lease buyouts…

Please help me understand immediate lease buy out - Ask the Hackrs - FORUM | LEASEHACKR

Help Needed: Early Buy-Out Calculation Discrepancy for 2023 Ioniq 5 - Ask the Hackrs - FORUM | LEASEHACKR

Questions? Let me know.

[delta737h]

@bbyf16

I mean the sale price of the car is $50,113. If I was to buy the car one month in, I would have to pay 25585 (remaining monthly payments) + 21601 (depreciation amount) = 47186

Nope. See my post above.

@bbyf16

Where did the 6500 go (I was expecting at least 5k (after disposition, acquisition, and first month rent)?

The 6500 was used to pay all your upfront fees. See Section 7.

[bbyf16]

Thank you so much for the very detailed response. I came to roughly the same conclusion around 2am that IL is similar to NY in terms of how leases are calculated and this case, it would appear that I would be taxed twice (both now since I’m paying for 36 months worth of tax upfront and on the whole amount when I buyout).

Would I be correct in assuming the following:

• The interest rate is 4.2% which isn’t too terrible in this market right now
• Because of the way IL charges tax on the whole term and then on the whole amount, I would be double taxed which somewhat takes away from the benefit of buying out immediately?

Based on my rough math (at 2am):

• Full lease (as in make payments for 36 months) and then do buyout = $55027
• If I bought the vehicle cash (without leasing at all) = 54946
• Buyout within a month = 51181

So basically if I do the lease and buyout immediately, I’m saving roughly $4461. Or, if I ride the full lease term out, it’s basically like getting an interest free loan for 3 years (difference between 55027 and 54946)?

Given that I live in Illinois, would it make more sense to structure the deal in a 24 month term (so that the term is less and therefore less tax is paid (limiting my double taxation (although the amount would be higher initially charged would be higher I imagine making this a moot point)?

[Detroit_Lightning]

Check the marketplace / broker offerings. I believe @Jrouleau426 had some of these listed.

[delta737h]

@bbyf16

Would I be correct in assuming the following:

• The interest rate is 4.2% which isn’t too terrible in this market right now
• Because of the way IL charges tax on the whole term and then on the whole amount, I would be double taxed which somewhat takes away from the benefit of buying out immediately?

Yes, to both. The 4.2% annual interest rate is used to amortize the lease in much the same way that a loan is amortized. The Adjusted lease balance is comparable to its loan balance cousin and is easy to calculate. To find the interest rate, use the Excel RATE function which I’ve detailed in several other posts.

Honestly, I would be very reluctant to lease in Ill and NY because of taxes, especially if I’m going to purchase the vehicle within 30 days.

If you carry the lease to full term, you will owe the residual value which is shown in Section 11 in the amount of 26,833 plus tax and any applicable fees. If you buy the vehicle, you will pay the agreed upon value (sell price) of 50113 plus tax and other fees. However, there may be other discounts available only to purchasers which means your purchase price may be considerably less than 50133. This is something you should address with the dealer. I would also check Edmunds to see if there are other rebates/incentives. Buying within a month will probably cost about 51,300.

@bbyf16

So basically if I do the lease and buyout immediately, I’m saving roughly $4461.

Not sure where you’re getting 4461. You may want to check out my post dealing with the lease v, buy decision…

The Lease v. Purchase Decision - Off-Ramp - FORUM | LEASEHACKR

@bbyf16

Given that I live in Illinois, would it make more sense to structure the deal in a 24 month term (so that the term is less and therefore less tax is paid

Of course, your payments will be higher. You need to look at the 24 v. 36-month lease and analyze the initial cash layout differential, payment differential and lease balances at the end of 24 months. It’s similar to a lease v. purchase analysis. I can’t give you an answer without doing an incremental cost analysis and that does take time to do. Usually, it boils down to one’s own preferences and so, there are intangibles to consider that factor into the decision.

[bbyf16]

[quote=“delta737h, post:8, topic:537560, full:true”]

@bbyf16

Would I be correct in assuming the following:

• The interest rate is 4.2% which isn’t too terrible in this market right now
• Because of the way IL charges tax on the whole term and then on the whole amount, I would be double taxed which somewhat takes away from the benefit of buying out immediately?

Yes, to both. The 4.2% annual interest rate is used to amortize the lease in much the same way that a loan is amortized. The Adjusted lease balance is comparable to its loan balance cousin and is easy to calculate. To find the interest rate, use the Excel RATE function which I’ve detailed in several other posts.

Honestly, I would be very reluctant to lease in Ill and NY because of taxes, especially if I’m going to purchase the vehicle within 30 days.

If you carry the lease to full term, you will owe the residual value which is shown in Section 11 in the amount of 26,833 plus tax and any applicable fees. If you buy the vehicle, you will pay the agreed upon value (sell price) of 50113 plus tax and other fees. However, there may be other discounts available only to purchasers which means your purchase price may be considerably less than 50133. This is something you should address with the dealer. I would also check Edmunds to see if there are other rebates/incentives. Buying within a month will probably cost about 51,300.

-------------------------------------- Response below-----------------------------------

Thanks for the response and that’s why I’m considering not buying it out in a month given the MF for the 2023.

@bbyf16

So basically if I do the lease and buyout immediately, I’m saving roughly $4461.

Not sure where you’re getting 4461. You may want to check out my post dealing with the lease v, buy decision…

The Lease v. Purchase Decision - Off-Ramp - FORUM | LEASEHACKR

-------------------------------------- Response below-----------------------------------

This was my back of the napkin math here (was wrong about the 4461):

• Buyout in 1 month: 26833 (Residual value) + 21000 (Depreciation amount minus the first month payment already made) = 47833 * 1.07 (lake county, IL tax) = 51181. The 0 DAS includes the tax already paid for the full 36 months. Toyota gives 6500 lease cash only for leases, no purchase offers, and of that 6500 (4171 goes towards the 0 DAS (first month, reg, doc fee, tax on reductions, 36 month tax, and dmv tax), the remaining 2300 goes towards CCR.

Cash Purchase price: 51,353 * 1.07 = 54,948

Full 36 month lease + Lease buyout = (26833 * 1.07) + 26316 = 28711 + 26316 = 55027 (Residual * 7% tax + Full lease payments).

If my math above is correct, leasing and buying out immediately saves me $3767 (54948 - 51181). However, given the “low” MF, and the near no difference between leasing the car for 3 years and then buying out vs buying with cash outright, it almost appears that I’m getting a 0% loan on the vehicle for 3 years (and I could keep the future lease amounts and cash buyout amount in a HYSA or similar and gain the interest). I know it’s not a great situation but it’s better than having no deal at all (assuming my math is correct).

[max_g]

Have you considered a one-pay followed by immediate buyout?

[Leases125]

731 a month for a Rav 4? Seems way high. Have you considered financing it instead?

[harrydogyo]

I’ve seen 3-4k off in the northeast, on 24s no less. You can do better.

[SteveB25]

He plans on leasing and then immidiate buyout to capture the $6500 credit which you don’t get on a finance.

[Jrouleau426]

The premiums have been hard to get at that price lately. Word is out on the lease hack on these. I dont see nearly as much inventory as I used to

Not saying it isn’t possible. I had some a couple months ago there. But lately more like 2k off those. And more off the se and base xse

[harrydogyo]

Yeah the premiums are harder to come by. MA has been surprisingly competitive on these though. Other parts of the country are still getting markups.

[Jrouleau426]

The few mass dealers I tried to get them from wouldn’t sell out of region. Maybe bc of their weird tag situation, not sure.

[harrydogyo]

Yeah they won’t beyond the neighboring states. I have one over the border dealer in NH that does go anywhere and has been pretty aggressive on these.

[bbyf16]

I’m still wrapping my head around the fact that this is 52k (yes I get it’s a prime but it’s still a RAV4) and we have a confirmed refresh coming in ‘25. Between that, and the fact that’s it’s 14k more than a regular RAV4 limited, 12k more than a hybrid, I’m just not seeing the value (in Illinois at least). You really would have to drive this till the wheels fell off to recoup the difference (electricity isn’t free unless you have solar even with variable pricing) but then 10-15 years in, you’ll need to replace the battery which puts you right back in the hole anyway. What am I missing? If you’re doing leases, why not get any of the other larger Toyotas that lease for less and if you’re buying, why not get a RAV4 hybrid for a whole lot less or a Highlander for roughly the same?

[Jrouleau426]

Mmr on these is higher or close to what you’re paying. That’s the value in it. You won’t lose much driving this for a couple years most likely.

No need to rationalize the price. It’s about losing as little as possible in depreciation in 2-3 years. Sure you can get an x3 for the same price but you’ll lose 50% of its value.