Help with Gross Cap Cost

Ask the Hackrs
1

Hello. I could use some help with a contract.
Some basic numbers:
MSRP: 61545
Selling Price: 53950
Incentives: 11000
MF: .0016
RV: 55%
No Tax State
Max MSDs (4000)

Fees are 2915.01 and I’d like to pay all fees upfront at signing. My questions is, should the Gross cap cost be 53950 if I pay all fees upfront? It looks like a mistake where the fees are amortized into the total lease.
RV is reduced appx 1.2% due to loaner vehicle.
Additionally the Cap Cost reduction is 2548.06 higher than my incentives which happens to be exactly a monthly payment less than the upfront fees.
Is this correct or is there a mistake on it? My calculator is off by about $14 per month.

Thank you!
Contract Example.pdf (115.4 KB)

2

Theyre just capitalizing fees and then paying them with a cap cost reduction. Doesnt make a huge difference.

Can you post your calculator?

3

Your contract says your bringing in $6915 in cash to the signining out of which $4000 is a security deposit, which makes $2915 available to pay fees.

Think this way. The cash you are bringing in is used to pay SD + Fees. First month’s payment is paid from the incentive.

4

Calculator:

5

This is how the calculator looks in your contract. As you can see this will $15 more over the lease duration than your calculator, but you are bring in $356 less to the table at the signing.

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6

Your monthly payment is off because your due at sale amount is different. If you correct the due at sale amount on the calculator to match the contract, the monthly payment is spot on.

7

So in your opinion the math is fine and I should sign? Msrp discount and incentive stack is solid.
My concern was that I may be double paying the 2900 fees. At signing and amortized into the lease.

8

Youre not paying double fees. Theyre just showing the fees going into the cap cost and then you paying a cap cost reduction rather than you paying the fees directly and no cap cost reduction. You get to the same place either way.

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9

Got it. Will move forward. Thank you for the advice.

10

GOOD CATCH!

Let’s analyze this according to the lease contract…

Gross cap = sell price + fees + 1st payment
= 53,950.00 + 2,548.06 + 366.94
= 56,865.00
Cap reduc = rebates/Credits + fees
= 11,000.00 + 2,548.06
= 13,548.06
Amount paid in cash = MSD + fees + first payment
= 4,000.00 + 2,548.06 + 366.94
= 6,915.00

Both the gross cap and cap reduction include an amount equal to the fees of 2,548.06. So, it’s a wash. As such, you’re paying the 2,548.06 fees plus first payment of 366.94 upfront (column 6). Even so, why would a dealer include fees of 2,548.06 as a cap reduction? Makes no sense and it shouldn’t be done!

The gross cap also includes your first payment of 366.94 which, according to the lease contract, is also being paid upfront as it’s embedded in the amount to be paid in cash (6,915.00). This suggests to me that you’re paying the first payment TWICE (i.e., it’s being amortized in the lease as it’s part of the gross cap AND you’re paying it upfront as part of the 6,915.00. This is pure carelessness and enough for me to move on to another dealer. Was it deliberate? I don’t know. My best guess is that this was done in a half-assed effort to make columns (5) and (6) balance to 17,915.00.

Here’s what it should be…

Gross cap = 53,950.00 assuming you’re paying ALL fees upfront including acq and doc fees
cap reduc = 11,000.00

You should reconcile columns (5) and (6) on your own with the correct numbers. Lastly, you should get an itemization of the 2,548.06 fees.

Anyway, that’s my two cents.

11

One final thing…
Your 366.94 payment is based on a money factor of 0.00110. Better double check that residual value as well.

12

Thank you for this information. I will review and relay it to them. The money factor is a correct 10 MSD reduction from .0016. The residual I am not able to actually verify since it is a loaner residual and I can’t find that information anywhere except from the dealer so unfortunately I need to trust them unless you have advice where to find the graduation for Volvo loaner RVs.
The reality is that this is the greatest discount off MSRP I have found anywhere so I am willing to work through it a little bit to get the deal.
Thank you for your advice.

13

The fees are Acquisition (995)/ Dealer fees (499)/ and Government fees (1421.01) = 2915.01. Gov fees are high but I will be refunded any overage so I am ok with it. Therefore the Gross Cap Cost (GCC){line 7} does not include 1st months payment capitalized AND Cash at signing (line 6) does not include 1st months either. The 1st months is captured by the difference between the gross cap cost adds of 2915.01 and the cap cost reduction adds of 2548.06. The difference is exactly the monthly payment. So I am only paying 1st months once capitalized into GCC. It is a weird way of doing it but I don’t see anything wrong.

14

Gross cap = sell price + fees + 1st payment
= 53,950.00 + 2,548.06 + 366.94
= 53,950.00 + 2,915.00
= 56,865.00

Cash at signing = MSD + fees + first payment
= 4,000.00 + 2,548.06 + 366.94
= 4,000 + 2,915.00
= 6,915.00

You may want to re-read my post above. The gross cap does capture the 1st payment but it is also included in the 6,915 that you’re paying upfront according to the lease contract. So, you’re paying it twice. Your adjusted cap cost should be 42,950 not 43,316.95 and, your payment should be

0.0011 x (42950 + 33134.55) + (42950 - 33134.55)/36 = 356.34

So, if you’re actually paying 6,915 upfront and 366.94 per month, you may want to re-think this. I’m okay with the 6,915 upfront. However, I’m NOT okay with 366.94 per month as that includes the amortization of the 1st payment. So, your payment of 366.94 is inflated. It should be 356.34 as calculated above.

Finally, you said…

“The 1st months is captured by the difference between the gross cap cost adds of 2915.01 and the cap cost reduction adds of 2548.06. The difference is exactly the monthly payment.”

This implies that the 1st payment IS included in the gross cap and, therefore, capitalized! Can you see that you contradicted yourself when you also said…

"Therefore the Gross Cap Cost (GCC){line 7} does not include 1st months payment capitalized"

Does this make sense to you now? Just trying to help you. I’m a former university math professor and an actuary and so, I know what I’m talking about unless there is something weird going on. Can’t imagine what that would be as I can only go by what I see in the lease contract.

15

I hear you but the fees are only: Acquisition (995)/ Dealer fees (499)/ and Government fees (1421.01) = 2915.01. So the 1st months is not included in that. So 1st months isn’t being paid out of the cash at signing. It is only paid in the capitalization. Right?

16

Okay, I’m seeing this now. What still concerns me is the 499-dealer fee and the 1,421.01-government fee. I’d like to see those itemized. I should have looked at your calculator results which curiously shows a payment of 356 which is what I got after deducting the 366.94 payment from the gross cap in the lease contract. So, yes, you are correct. Apparently, the 1st payment is capped in the lease and not paid upfront which means the 366.94 payment is accurate.

17

The dealer fee is just straight profit for them. I doubt I can get rid of that. The government fees don’t bother me because they are required and have agreed to refund me the difference between them and the actuals. Typical for my state since you never know what a registration costs until you do it since it is dependent on how far from your birthday you are.

18

Fair enough. Enjoy your new ride!

19

Will do. Hopefully it all goes through. Thank you for the advice.

20

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