Forget the calculator. Let’s do the calculations manually and learn something about leasing. Before we do, let’s discuss a few other things…
Don’t waste time trying to decipher a dealer’s worksheet or chasing after them. Otherwise, you’re allowing them to control the deal. They often omit a lot of relevant detail such as money factor, monthly base payment, monthly contractual payment, fees not itemized and even make mistakes. You need to rely on credible outside sources (e.g., LH marketplace and signed deals, Edmunds, etc.). Do your own research and establish a reasonable selling price in your market. Be sure to get a copy of the factory window sticker. Check for non-factory add-ons or dealer-installed options (aftermarkets). And, if possible, eliminate those you don’t need or want. Get a list of all customer and dealer rebates/incentives including VIN#-specific discounts/incentives, if any. And, yes, the dealer has such a list.
The only thing useful about dealer lease worksheets is the input data. All data should be vetted such as acquisition fee, doc fee (regulated by some states), cost of money (e.g., money factor), gov fees, residual, rebates/incentives, sales tax rate, etc. Make sure the residual matches the term and annual mileage requirement. Check available tax credits/incentives via the fund provider who may cover taxes or, at minimum, may assess a lower sales tax rate to energize sales for some models.
Organize all relevant data in tabular format with the goal of creating a lease proposal that reflects your target deal. The idea is to create your own target deal (proposal), not replicate the dealer’s deal.
MSRP 72525.00
Sell Price 67960.00 (can do better)
Aftermarkets 995.00 (you may want to get rid of some of these)
Doc Fee 85.00
Cap Fees 852.75 (likely includes 811 license fee)
Gross Cap 69892.75
CCR 206.68 (see blow)
CCR Tax 17.26 (see below)
Net Cap 69703.33
Term 24
MF .00297 (looks marked up)
RV (77%) 55844.25
Sales Tax Rate 8.35%
Rebates are usually treated in one of two ways: (1) Compute how rebates will be allocated. Rebates are often used to cover lease inception fees with any remaining balance used as a CCR, or (2) Use the entire rebate as a CCR. Referencing option (1), I’ll spare you these calculations unless you would like to see how they’re done by sending me a PM.
Next, perform monthly payment calculations like those shown below.
Base Pay = .00297 x (69703.33 + 55844.25) + (69703.33 - 55844.25)/24 = 950.34
Contractual Pay = 1.0835 x 950.34 = 1029.69
Now, table all lease inception fees and how they are to be paid.
Lease Inception Fees
1st payment 1029.69
CCR 206.68
Upfront Charges 812.63 (750 acq + 62.63 tax)
TOTAL 2049.00
Rebate 1750.00
DAS 299.00
Observe that the 1750.00 rebate exactly covers the CCR as well as the remaining lease inception fees including 1st payment with a balance due of 299.00.
Bottom line: DAS = 299.00 followed by 23 monthly payments of 1029.69 each.
Depending upon how the CCR is calculated (there are several different formulas), will determine the amount due at delivery (signing). As a side note, I would not capitalize non-taxable fees such as taxes and gov. fees. In those states the tax the individual payment streams like CA, you’ll pay tax on capped non-taxable fees. As such, I would pay those at lease inception, if possible.
You may want to craft a lease proposal (example below) and email it to the sales manager (SM), not a floor salesperson as they’re often order takers and lack knowledge.
All numbers should be accurate otherwise, you’ll lose credibility. Negotiate via phone/email. Once an agreement is reached, ask the dealer for a review copy of the lease agreement and all contract addenda BEFORE you go to the dealer and sign. Moreover, it’s helpful to know the terms and conditions of the lease contract such as early termination liability criteria and purchase option criteria as well as lease amortization methodology and excess wear/tear criteria. If all is as agreed, tell the SM that you’ll come in to sign right away. You don’t want any surprises or dealer excuses like …. Oh, we made a mistake. That’s unacceptable and shouldn’t be tolerated.
If the dealer isn’t transparent or is uncooperative or showing signs of incompetence, WALK AWAY AND MOVE ON!
Leasing is time-consuming and requires a good deal of study and attention to detail. If you don’t have the time to commit, perhaps your best alternative is a good broker. There are some outstanding brokers on this website. However, if you’re willing to commit your time and resources, always control the deal. That can only be achieved with education which breeds confidence and increases the likelihood of success.
??? Let me know.
