Discussion on calculator use for monthly payment targets - split topic

Thanks. A suggestion for tweaking the calculator? With other variables known, and entry for desired monthly payment. And the results will reflect different combinations of down payment, msd’s, capitalizing all costs, or capitalizing just tax.

It’s a bit like portfolio optimization theory:

For example, the actual vehicle is a relevant for this, but a customer house $4000 cash, and one for $350 monthly payment. For personal monthly cash flow purposes… They are more focused on their personal monthly cash flow, rather than the actual total cost of the lease.

For example, customer can throw 4000 towards the MSDs, and nothing towards the down payment, and the monthly payment of course would be higher… Although it would be a better value all around to do the MSDs, and still have that cash available to roll over into the next lease. However for this example, consider that the customer is focused only on the short term, the monthly payment that fits their budget specifically, for a variety of financial and emotional (personal preference, lower pmnt versus a friend “bragging rights”) purposes as well.

Personally, I am all about the best financial deal, and would be focused on the MSDs and Lowest total cost, then let msd’s rollover. Caveat for lease 1: yes, of course the monthly payment would be higher for the first lease, versus using same $ to reduce cap cost, or taxes/fees. I get that.

The idea is about optimizing the cash out-of-pocket upfront: 4000 “to spend”, 350 target pmnt. Objective: best combination of capitalizing costs, down pmnt, MSDs. We know that $500 of down payment provides for lower monthly payment as compared to $500 toward msd’s, even though that’s a poor financial decision in absolute. However, the customer is making a “relative“ decision based on personal preference of monthly cash flow. Yes, it’s a short term decision… And the customer would be for going the benefits of having the MSD available for NEXT lease. However, the customer is focused on THIS lease, and a target monthly pmnt.

Please note: The above is an example only… 4000 being used to just for the example regarding optimal allocation of the 4000, or any out-of-pocket amount, that would result in the targeted monthly payment. Heck, The customer might get to the 350 target with only $3000 out of pocket.

So, in essence, if anyone still following, if a customer has chosen a vehicle, and has an ideal targeted monthly payment, they could plug that into a modified calculator, and the result would show A) how much total is out-of-pocket, and B) how is the out-of-pocket $ allocated c) what costs, if any, being capitalized or not.

I think The idea would eliminate the “what if” need for calculator users to say “ how does my monthly payment change if I put more out of pocket $ into bucket A (down pmnt) or bucket B (msd) or c) dealer costs or D) taxes.

I completely agree that customers shouldn’t be focused on the monthly payment, and should focus on the total cost of the lease and the total value. I completely get that, but I also realize that some customers may be more concerned with their shorts from cash flow, and also as a “defense“ against a friend with a similar car saying they’re paying $375/mo, so this customer would have and emotional confidence, and a sort of “bragging rights“, that they got a great deal because her pain “only 350mo”. Human nature, people compare their monthly payment… Rather than the total cost of the lease. I believe the people in this forum and on this page are more sophisticated, and focus more on the absolute financial value, but the question is more for people that are more focused on the monthly payment, the typical customer that walks into a dealer and says “My budget allows $350 per month and I can afford $3000 out of pocket“. At that point, the dealer looks for a car…that fits that monthly payment, And a less sophisticated customer would be happy with the 350 per month… And the dealer, “optimized” the deal for themselves, rather than for the customer,

My thought is that a calculator modification could allow for a customer to do their own optimization, with a calculator suggesting an optimal allocation of the out of pocket cash towards the various costs that may be involved.

My apologies for the long post… I’ve got a financial background, and I found myself plugging various numbers into the calculator to try to optimize the deal toward a monthly payment That fits a friends personal preferences and their budget, rather than the absolute best financial deal which would be “lowest total cost of new lease””

I hope the above makes sense… I’ve had fun playing with the calculator, but I’ve spent several hours doing “what if“… So I kind of like the idea of the calculator offering “suggestions“ regarding best allocation of with a customer is willing to pay upfront out-of-pocket

For example again, the customer could say I’m willing to put out $3000 out-of-pocket upfront.… Depending on the outcomes, they could then change it to 4000, or 2000, with their primary goal to get to a targeted monthly payment… And if they’re willing to spend 4000 upfront… It’s up to them if they want to go lower… Say 3000 upfront, allocated accordingly, and still achieve the 350 per month target.

If this post is too long, feel free to delete it, and moderator can email me directly perhaps. I hope The idea may be helpful.

Ideally, 350 per month and zero out-of-pocket would be great… But based on the vehicle chosen, that’s a fixed item… So looking for the ideal combination of how to allocate the upfront cash in order to achieve the targeted monthly payment or lower. I think a modification of the calculator might be helpful in that regard. Or maybe not? I don’t know that’s why I’m asking.

Have a good Saturday afternoon, and thank you for indulging in allowing me to post this question

I think anyone here will tell you that it’s best to come out of pocket with somewhere between $0 and Upfront Fees/First Payment/Taxes.

Then, if you have the extra cash, MSDs as well.

Generally, you’re assuming risk in the event of a total loss if you apply a down payment or cap cost reduction.

If you can hit your optimal monthly budget with applying $ at signing to cover the fees / Msds mentioned above, you’re golden.

If not, it’s better to take a higher payment as opposed to adding extra money as CCR only to lower your payment. That’s basically just prepaying rent which no one should be comfortable with.

@OffStickerPrice.com sorry for replying on your thread. Happy to remove if you like man!

Holy wall of text. !!


My apologies if I posted in the wrong thread. No offense intended, and didn’t mean to hijack anyone’s conversation.

Thank you for your reply comment, which also serves to illustrate my comment… You mentioned “if” a few times. I completely agree with your comments regarding the best “financial“ solution… 100%. However sometimes the best longer-term financial decision, the best deal, takes a backseat to A short term preference regarding monthly cash flow budget.

I am against pre-paying rent, not a good financial move. That’s why I suggested the idea of modifying the lease calculator to include how upfront cash could be allocated to achieve the desired target monthly payment, rather than the ideal targeted total lease cost. If it were me, I would out everything into the MSD. For lowest total cost, plus benefit for the next lease. BUT, That MSD use of the upfront cash does not provide the lowest monthly payment which is often the primary goal of less informed consumers. I’m not saying that’s my objective, I’m saying it is often the objective of lesson form to consumers that go into a dealer saying “I can afford $350 per month“. And they wind up signing any deal that meets that monthly budget them out, without scrutinizing the out-of-pocket costs etc. To those consumers, the “lowest total lease cost” it’s not their goal, unfortunately their goal is “lowest monthly payment“. For people on this forum, a calculator enhancement could provide results that would also show the ideal/best allocation of upfront cash in order to achieve a target monthly payment. $500 of “prepaid rent“ lowers the monthly payment significantly more than $500 of MSD. I know that’s not a good financial decision… But if “lower monthly payment” is their immediate short-term goal… That would be the answer… And that’s why I was suggesting a possible enhancement to the calculator to account for those types of situations.

I’m a simpleton so bear with me.

Why is an enhancement necessary?

Wouldn’t it be straightforward enough to allocate available funds towards MSDs before all else, then attack the first/fees/taxes if one chooses?

Hi. Comments/feedback about the calculator would prob be best directed to LH. Pros/cons about lease structure could/should be an entirely different thread.

Feedback on how the sheet is setup is appreciated, but it’s tough to accommodate all scenarios. I’ve thought about juicing up my sheet to let people choose dropdowns and pass on variables to adjust the LH calculator automatically, but I haven’t had the bandwidth to do it. Also, not sure if I’d be creating something that competing brokers would then rip off. I have some of it setup for my own use, but it’s not designed to be customer facing.


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