I negotiated a lease deal with the intention of buying it out once the money funds (two weeks after signing?). Volvo would not give me the same deal on the sale price ($52,000) if I financed or bought cash. I received the attached lease contract.
My understanding was that if I wanted to move forward with my scenario, my total out of pocket with title in hand would be the agreed upon selling price ($52,000), plus license, taxes and fees, plus the two weeks of rent and tax on the lease.
But the numbers don’t add up (or do they?). And I see scary language I may not understand like #21 (Early Termination) and #42 (Option to Purchase Lease).
Please help before I make a huge mistake (maybe)! volvo.pdf (1.4 MB)
Your buyout price will be around $51500 plus tax. #42 is what describes how the actual value is calculated. #21 is of no consequence since youre not talking about doing an early termination.
Yeah, the numbers do add up. Like @mllcb42 said, you can ignore section 21. What matters are sections 23 & 42.
Here is what I am seeing…
MSRP = 58725
Discount = 7,000 don’t know if that is strictly a dealer discount which is about 11.9%
Residual Factor = 62%
MF = .00331
Actuarial lease amortization rate = 7.9805%
Your 5(f) sales tax = 10.25% x 1979.46 = 202.89
All numbers in the contract are spot on.
So, let’s address your concern… early buyout. Below is a lease amortization schedule that I prepared just for you because you’re special…
If you pay off your lease within 30 days of lease signing, your outstanding lease balance, computed in accordance with section 42, is 51,147.65 (highlighted in dark yellow in the amort schedule above).
Section 42 says… multiply the number of remaining payments (35) by the base payment (710.80), add that product to the residual (36409.50), deduct the sum of the remaining rent charges. This will give you the outstanding lease balance. Next, add the section 23 purchase option fee (450).
There is an easier way to get the outstanding lease balance…
Lease balance = (adj. Cap - 1st. base payment) x (1 + actuarial rate / 12)
= (51520.54 - 710.80) x (1 + .079805/12)
= 51147.65
Now, add the 450 PO fee to get … 51597.65
You’ll need to add tax @10.235% which yields 56,886.41 plus any other applicable fees in accordance with section 42. Not so scary Afterall, huh?
In California you will pay sales tax on the first payment, when you receive the lessor released title you will have to take that to DMV to re-title In your name, and pay the remaining sales tax on the buyout price. The registration will be good until expires in 12 months.
Yeah, forgot about the dealer 695 door edge guard. Agreed upon value should be as you described… 52420 and should be reflected on line 7 instead of 51725. Where are you getting 9250 lease cash? It’s certainly not itemized in the lease contract which is why I always insist on having the dealer lease worksheet. Wouldn’t the 9250-lease cash be taxable in CA? If so, I don’t see any accounting of this tax (948.13) in the lease agreement. Also, I doubt the MSRP = 67290 because 36409.50 / 67290 = .54108 which doesn’t seem like a valid residual factor.
Volvo incentives are direct to dealer, so they get captured in the sales price instead of direct to consumer, that would have them be itemized. That also makes them not be taxed since it is captured in the selling price ihstead of as a cap cost reduction.
As for where the $9250 comes from, i looked up the incentives in ratefindr to see what they area and confirmed elsewhere.
Don’t believe those MSRP’s are valid as they yield a funky residual factor. They don’t matter anyway and won’t change anything. What matters is the residual in your lease contract which is what I used.
Looks like a fair deal to me and would be even better if OP got the buy rate. Residual kind of sucks but dealer has no control over that as you well know.
