Hi all, I’m hoping someone can provide some clarity on how incentives and fees get applied to the leasing of a vehicle and if there’s a minimum price a car has to be sold for in a lease contract.
For example, is it possible for a dealer to lease a car with a sell price of $40000 and $12000 manufacturer incentives if the RV of the vehicle is $29000? Would this mean the car is sold for $28000, $1000 less than its residual value? What if the combines fees of $1500 is rolled in? Will $1500 worth of incentives be applied to the fees leaving $10500 to reduce the cost of the car so it’s $40000 - $10500=$29500? Depending on if fees are rolled in, it would appear that the depreciation can be either -$1000 or $500. But having a negitive depreciation wouldn’t make sense. Is my assumption that the incentives can be applied to the fees incorrect and it’s not possible to sell a car for less than its RV, no matter if fees are rolled in or not?
If some of the incentives are applied to the fees, that portion of the incentives don’t lower the adjusted cap cost, so theyd have no impact on how much depreciation there is.
Perhaps the some part of discounted price and incentives are being double counted? We haven’t seen any car come close to negative depreciation since the expired Audi Etron GT/RS deals.
So this would be a demo 2023 Nissan Ariya Engage. I’m asking because I wanted to know if the dealer lied about having to revised a contract I signed with one that had a higher sell price since the leasing company rejected the first one due to a mistake in using the wrong rv%.
The bottom line is that the sell price + capped fees - cap reduction must equal or exceed the residual value. In other words, the depreciation must equal or exceed zero, otherwise the lease will not fund.
Yup… as long as no more than 11000 of the 12000 rebate is used as a cap reduction The remaining 1000 would be used to offset some of the upfront fees.
Thank you. So I think the incentives comprise of 7500 ev lease cash, 3100 18 month lease cash, and maybe 2000 dealer cash. They probably could have used some of those incentives to offset the fees leaving a positive depreciation amount. I’m positive that they pulled a fast one one me but just wanted to know the extent. To answer @max_g question, the new contract has a payment that a bit lower but used the subvented lease rate that they told me I didn’t qualify for in the first contract. So in the new contract, the sell price was increased thus the depreciation but the rent charge was lowered making the total payment lower than the one in the first contract but still more than my original offer which was based on the subvented lease rate.
So the first contract price was $60/month more than my original offer because they said I didnt qualify for the special lease rate. The second contract used the special lease rate and lowered the payment by $10/month. But if I ended up qualifying for the subvented lease rate, my original offer should have been honored and the payment would reduced by $60 and not $10.
“Offers made and declined” are no longer relevant.
You freely signed the first contract. You did so because you presumably were happy with it. To get an even lower payment after signing sounds like a win
Not sure if I understand your question. The money would be the incentives, just a matter of how they’re allocated/applied that I wasnt sure about and delta737h provided the answer
Either all the fees get capitalized, resulting in a higher gross cap cost, but with a larger cap cost reduction or the fees get paid up front, resulting in a lower gross cap cost, but with a smaller cap cost reduction. In either situation, you end up at the same adjusted cap cost and the same depreciation, with the exception of maybe some minor tax differences.
Even if the reason for the decline was later found to be invalid? If only the part that was a mistake(RV) was fixed, I would have no problem. In fact, if only the RV was corrected, the payment would have been lower than my original offer which was agreed upon.
