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