Help me understand how lease cash can be used/taxed

Ask the Hackrs
1

I was talking to a dealership today and there is $2500 lease cash available. I’m overanalyzing this but they said I have two options:

option 1: use the lease cash as part of the “discounted price”, as in I think they are using this before the other incentives

option 2: use the lease cash after the discount (with the discount not being as high) and then it has to be capitalized/taxed.

Thanks for any help!

2

In more talks had today, now I’m hearing a lot of the $2500 lease cash being used in part of the discounted price, whereas I was under the impression using the LH calculator that it was part of the $14000 that would be taxed as incentives: ($2000 costco/$2000 ABA/$7500 EV Credit/$2500 VCFS Lease Cash)

Is this consistent with what others have seen? as in it’s being “used as part of of the discount”

3

For just the purposes of the calculator, put it under untaxed incentives.

The main question is what is your target deal? Post your best attempt at the calculator showing what your target is.

4

I will do that soon, but if I do take the lease cash and put it in the untaxed incentive do I still use the discount off of MSRP that I’m looking for? Every time I think I seem to get it, I end up getting confused by a part of this process

5

The discount off MSRP you’re looking at is before any incentives are applied.

With volvo, on a contract, you’ll often see the incentive rolled into the selling price rather than itemized. So you may agree to a 10% discount with a $2000 incentive and instead see a 14% discount with no incentive.

6

OK, that makes more sense. Does it matter which of the two To aim for? Or is the difference negligible?

7

Rolled into the selling price is better generally since it’s untaxed.

8

You guys are great on here and I apologize again for all the questions but just to confirm I should ask for a particular percentage for a discount off of the MSRP and whatever that amount is just assume that the $2500 lease cash is in that discount

Or

Ask for even a greater discount off of the MSRP using that lease cash to get the maximum discount I can

It seems more likely that the first scenario is more doable?

9

I would structure your offer as “10% off MSRP + $2500 lease cash” and then let them put it in the contract in whatever way makes sense

10

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