Is this a good deal on a 2025 Lexus NX450h+?

[xp4289]

I’m a newbie leaser and need some help. I am seeking to do an out-of-state 36 month, 10K Zero Drive Off lease on a 2025 Lexus NX450h+. My ultimate plan is to buyout this lease a.s.a.p. to take advantage of the negotiated discount and $7,500 incentive.That said, the dealer and I agree on the MF of .000225 and the Residual Value at .56; however, we are not aligning on the Final Capitalized Cost due to some ambiguous fees.

The first issue I have is understanding the $500 fee for Capped Taxes. I don’t understand why there is a separate tax fee when they are already included in the lease payment.

The next issue is knowing whether this offer is considered fair in light of the market. In this case, the car is resides in Indiana (see attached offer and my lease calculation).

Additionally, I want to make sure that the Lease Agreement allows for early buyout without significant penalties and whether it would require me to travel back to the dealership to complete the buyout. All that said, I want to make sure the deal is all tied up, before I travel 1,000 only to find out that the deal terms have change. I would want to make any deal contingent on inspection, and a test drive.

Given my objectives, what documentation should I be asking to sign before making a 1,000 mile trip.

• Should I be asking for both a Buyer’s Agreement, and Lease Agreement?
• Is there anything else I should be asking the dealer to provide?
• Will the dealer provide these documents in advance with my contingencies of final inspection and test drive?
• How do I confirm that buying out the vehicle will not cost me an arm and a leg in fees or travel back to the dealership?

[delta737h]

@xp4289

The first issue I have is understanding the $500 fee for Capped Taxes.

This has nothing to do with the monthly payment. It is the tax levied on the cap reduction shown in the tax info section…

6% x 7500 = 450
1% x 5000 = 50 (not sure where the 5000 is coming from unless there is some sort of cap reduc ceiling (the 5000 appears to be a portion of the 7500))

@xp4289

The next issue is knowing whether this offer is considered fair in light of the market.

You need to determine this yourself. However, IMO the dealer discount of 4.7% off the 66078 MSRP is crappy. Did you do the research beforehand? Check LH marketplace and LH signed deals and tips for your local market. You can also check other sources like TrueCar.

@xp4289

Additionally, I want to make sure that the Lease Agreement allows for early buyout without significant penalties and whether it would require me to travel back to the dealership to complete the buyout.

You need to read the early termination purchase option criteria in your lease contract. Every finance captive that I’m aware of allow for an early buyout without penalty. If you’re doing an immediate buyout within 30 days or so of signing, it’s cheaper to do a one-pay lease instead of a monthly. Speaking of monthly payments, the first payment is capped in the lease so that you have a zero drive-off.

The retention rate is the money factor rate which appears to be marked up. Check Edmunds for the buy rate (MF with no markup).

56% is the residual factor but check with Edmunds given your term and mileage. 56% x 65679 = 36780.24. The 399 paint protection is not residualized.

You may need to get some clarity on the 246.25 admin/tire fee. I don’t see a dealer doc fee disclosed nor do I see title/reg/license fees disclosed. However, it is classified as a dealer fee.

Your payment calculations are off on the second page because you did not capture the 500-cap reduction tax and you used an MSRP = 66078 to determine the residual. This MSRP includes the paint protection which, apparently, is not residualized by Lexus Financial. Therefore, the MSRP used to compute the RV is 65679. Another reason your payment is off is that you show a capped 1st payment of 854.80 which does not match your calculated 832.63. All payments must match. Calculating the monthly payment when the first one is capped, does require some algebra.

??? Let me know.

[delta737h]

FYI-

Below is the LH Calc for a one-pay lease…

LH Calc

Caveat: Note that the lease payment is 24448. This includes tax on the one-pay. The sales tax rate used by the dealer is 7.00%. So, your one-pay lease payment = 24448/1.07 = 22848.60. Actually, the one-pay, including tax, is 24447.87 (the LH Calc rounds).

So, here is what you owe at lease signing…

one-pay 22848.48
one-pay tax 1599.39
CCR Tax 500.00
*Acq + Dealer Fees 1041.25
Fee Tax 72.89
TOTAL DUE 26062.01

*Still need clarity on the 246.25 dealer fees. Some of it may not be taxable.

I confirmed all calculations in the dealer worksheet and in the LH Calc manually.

Hope this helps.

[BHay]

I would imagine Lexus Financial Services is as easy to do an immediate buyout as Toyota Financial is. I just did this a few months ago to capture $4500 in lease cash on a Prius Prime. The buyout process was simple and was started through my online account with Toyota. Signed some paperwork and sent it in with the payoff amount and I had the title in 5 weeks.

Here is a copy of my lease agreement with TFS so you can compare when you get yours

Smart move to lease then immediately buy it out! The savings is well worth it. I don’t see why you are doing this with a dealer 1,000 miles away for a minimal discount though.

[Contralien]

Could they could also ask for a bump up in mF for a increase in preincentive discount since they are buying out in less then 30?

[delta737h]

Excellent post! You raised some very good points; especially working with a FL dealer so far away. OP’s discount sucks.

I looked at a Texas Lexus lease agreement and it’s somewhat similar to TFS with regard to exercising the purchase option. TFS uses the constant yield method (I’ve explained this in several other threads) while Lexus simply deducts the number of months remaining x the average monthly rental charge from the residual value to determine the lease balance. Toyota’s method is mathematically correct and is common practice among lenders.

[delta737h]

@Contralien

Could they could also ask for a bump up in mF for a increase in preincentive discount since they are buying out in less then 30?

Absolutely! That’s great advice and should be doable. I completely overlooked it. It’s always advantageous to have others chiming in. Given an immediate buyout, a one-pay is a no-brainer.

Using my one-pay scenario posted above, the Lexus adjusted lease balance is 32744.04. Using TFS, the adjusted lease balance is 32736.42… a difference of only 7.62. These balances hold as long as the lease is paid off within 30 days of signing. The balance increases with time and converge to the RV of 36780.24 at lease end. Of course, OP will have to pay tax on the balance plus misc. fees/other taxes.

[xp4289]

Thank you for your response. I am looking for a specific color combination 2025 Lexus NX450h+ specifically equipped, with among other things, a Mark Levinson sound system. Unfortunately, I cannot locate the car in FL. It appears most similarly equipped models are in the NE with the exception of this one in IN.

[Contralien]

I guess the only other question to op would be is the lease to buy funds coming as a straight out of pocket/cash or would they be borrowing off the market, which would require further calculations considering LFS might be doing a captive subvented rates these days of 2.9%/48.

[xp4289]

Thank you for your response. My goal is to own the vehicle outright, pay cash, and not pay any interest on the vehicle; hence, the immediate buyout. The purpose of the initial lease is to leverage the manufacture rebate and hopefully combine it with an additional vehicle price discount to reduce the overall vehicle price in excess of what I would get if purchasing the car outright. In this case, I would be looking at vehicle discount of $3,101 + $7,500 for a total of $10,601 off of MSRP. From what I understand these savings would be further reduce by the buyout fees; however, a while a one-pay may reduce my payment from a traditional lease; it would not achieve my goal of vehicle ownership. That said, discussing a vehicle buyout in advance with a dealer is unlikely to achieve a significant discount. My challenge is negotiating a good sales price, when I do not have a sound understanding of the dealers fees. If the dealer fees eat up my vehicle discount then I haven’t accomplished my goal of maximizing my savings. So far, dealers have not been transparent to share their fees as that want to leave themselves a profit margin; consequently, I negotiating in the dark.

In terms of homework, I researched Kelly Blue Book, Edmunds, and NADA to determine the MF of .002250, Residual of .56, Lexus Dealer Holdback of 2% and national estimate for Dealer Gross Profit 3.9%. I am assuming, conservatively, the Dealer is making profit on his fees in addition to a 1 percentage point mark-up on MF and a 2% Dealer Holdback on the MSRP. The result shows $1,335.36 dealer profit based off of vehicle pricing (based off of invoice pricing) (see attached). There are additional profits made on dealer fees of $189.61, likely understated, profit on MF of $1,419.00 (not relevant on a immediate buyout) and $1,321.56 for a total of $4,266.32. Lexus Financial would make an estimated $6,247.12 Again, with an immediate buy-out, I do not intend to incur any of the interest expense. Please feel free to correct my assumptions accordingly.

1. That said, how do I get a Dealer to divulge all their out-the-door fees / taxes before making a vehicle purchase price offer?

2. In light of my goal of vehicle ownership, would you say Final Capitalized Cost is a fair number keeping in mind that buyout fees will further eat into these savings?
   

   

[paranoidgarliclover]

@xp4289

would you say Final Capitalized Cost is a fair number keeping in mind that buyout fees will further eat into these savings?

Can’t answer your first question (and not sure why that would actually change your negotiations), but the answer to your 2nd question is yes.

[xp4289]

Thank you. My first question has to do with limiting my out of pocket expense. If I knew all of the out the door fee/expenses, then I would lower my offer to offset those added costs. In this deal, despite specifically asking, the dealer did not divulge $2,100 in taxes and fees until after I made my offer on the vehicle price. With the exception of the tax, the dealer is likely going to make money off all those fees. Had I known the true OTD costs, up front, I would have offered a much lower number. Now, I’m asking for more which is putting the deal in jeopardy. On lease deals, it seems dealers are less than transparent on their fees because it there final cushion for profit.

[paranoidgarliclover]

@xp4289

On lease deals, it seems dealers are less than transparent on their fees because it there final cushion for profit.

Yes… But, unless there are add ons, the taxes and fees aren’t really negotiable, no?

[xp4289]

The fees are typically non-negotiable; however, the vehicle price is completely negotiatable. For example, I don’t care if the dealer charges $1,500 acquisition if I can offset that expense by paying $1,500 less on the vehicle price. If I don’t know all the fees, I don’t know how much less to offer. In this case, I missed the mark by $2,100. I may not be able to negotiate $1 for $1 but hopefully I can reduce it some.

[delta737h]

@xp4289

The purpose of the initial lease is to leverage the manufacture rebate and hopefully combine it with an additional vehicle price discount to reduce the overall vehicle price in excess of what I would get if purchasing the car outright.

You should be doing a one-pay lease to save money. First, negotiate the sell price based on your own research. Next, ask the dealer to increase the MF as much as possible in exchange for a lower sell price. Deduct .00100 from this money factor to get the one-pay discounted money factor. Finally, compute the reduction in the negotiated sell price so that the one-pay amount remains the same.

Here’s an example. Assume the following…

Step 1 negotiated sell price = S = 59111
initial MF = Fo = .00225 → discounted MF = .00125
New MF= F1 = .00290 → MF = .00190
Term = N = 36

Compute the change in sell price as follows…

Note the sell price must be reduced by 1935.94 So, the new sell price is 57175.06. Your Adj. Cap = 57175.06 - 7500 = 49675.06. So that…

Base Pay = .00190 x (49675.06 + 36780.24) + (49675.06 - 36780.24)/36
= 522.45
One Pay = 36 x 522.45
= 18808.20

Before proceeding, you should determine how Indiana taxes motor vehicle leases and the tax treatment given EV credits (7500). Here’s the link…

Indiana Dept. of Revenue

Continuing, here is an example of what you would owe at lease signing…

one-pay 18808.20
one-pay tax 1316.57 = 7.00% x 18808.20
CCR Tax 500.00 needs to be confirmed
*Acq + Dealer Fees 1041.25 needs to be vetted
Fee Tax 72.89
TOTAL DUE 21738.91

Finally, compute an estimate of your buyout within 30 days of signing the lease…

Ave. Monthly Rental Charge = .00190 x (49675.06 + 36780.24)
= 164.27

I believe LFS computes adj. lease balances as follows…

RV - remaining number of payments x Ave. Monthly Rental Charge

36780.24 - 35 x 164.27 = 31030.79 This should be confirmed by reading the LFS early term purchase option in the lease contract.

Buyout = 31030.79 x 1.07 + misc. fees/other taxes

NOTE: Buyout with MF = .00125 is 32913.09 x 1.07… a difference of 2014.06. In either scenario (.00125 v. .00190), you’ll pay the same amount at signing (21738.91). However, the buyouts are different!

So now you have the methodology for making all pertinent lease calculations for a one pay lease as well as the buyout calculation (assuming LFS buyout calculations are the same in TX and in IN).

You stated…

@xp4289

I would be looking at vehicle discount of $3,101 + $7,500 for a total of $10,601 off of MSRP.

Where did the 7500 come from? Is that the rebate? If so, that doesn’t count as a dealer discount. The dealer discount is still only 3101.

You also stated…

@xp4289

while a one-pay may reduce my payment from a traditional lease; it would not achieve my goal of vehicle ownership.

Why? Most people that immediately buyout their leased vehicle, do so by wisely constructing a one-pay lease. Compare a one pay buyout with a traditional lease buyout within 30 days and see which of the two is more expensive. I assume your goal is to minimize the cost of the lease and buyout transaction thus achieving ownership at a substantial discount (7500). The 7500 would not be available if you bought the car instead of leasing it.

@xp4289

My challenge is negotiating a good sales price, when I do not have a sound understanding of the dealers fees.

You need to get a sound understanding of dealer fees. Look around this website.

@xp4289

with an immediate buy-out, I do not intend to incur any of the interest expense.

Ah, you will. Lease payments are always made one month in advance. So, if you do an immediate buyout within 30 days, the interest for those 30 days is considered earned. That’s why the above ave. monthly rental charge was multiplied by 35 and not 36.

Here’s what I suggest moving forward…

Forget about dealer profit, holdback, invoice sheets (they don’t mean squat as they don’t reflect dealer cost). Don’t waste time trying to decipher a dealer’s worksheet or chasing after them. Otherwise, you’re allowing them to control the deal. They often omit a lot of relevant detail such as money factor, monthly base payment, monthly contractual payment, fees not itemized and even make mistakes. You need to rely on credible outside sources (e.g., LH marketplace and signed deals, Edmunds, etc.). Do your own research and establish a reasonable selling price in your market. Be sure to get a copy of the factory window sticker. Check for non-factory add-ons or dealer-installed options. And, if possible, eliminate those you don’t need or want. Get a list of all customer and dealer rebates/incentives including VIN#-specific discounts/incentives, if any. And, yes, the dealer has such a list.

The only thing useful about dealer lease worksheets is the input data. All data should be vetted such as acquisition fee, doc fee (regulated by some states), cost of money (e.g., money factor), gov fees, residual, rebates/incentives, sales tax rate, etc. Make sure the residual matches the term and annual mileage requirement. Check available tax credits/incentives via the fund provider who may cover taxes or, at minimum, may assess a lower sales tax rate to energize sales for some models (e.g., Texas).

Organize all relevant data in tabular format with the goal of creating a lease proposal that reflects your target deal. The idea is to create your own target deal (proposal), not replicate the dealer’s deal.

Craft a lease proposal (example below- the round peg, round hole won’t work) and email it to the sales manager (SM), not a floor salesperson as they’re often Mickey D order takers and lack knowledge.

All numbers should be accurate otherwise, you’ll lose credibility. Negotiate via phone/email. Once an agreement is reached, ask the dealer for a review copy of the lease agreement and all contract addenda BEFORE you go to the dealer and sign. Moreover, it’s helpful to know the terms and conditions of the lease contract such as early termination liability criteria and purchase option criteria as well as lease amortization methodology and excess wear/tear criteria. If all is as agreed, tell the SM that you’ll come in to sign asap. You don’t want any surprises or dealer excuses like …. Oh, we made a mistake. That’s unacceptable and shouldn’t be tolerated.

If the dealer isn’t transparent or is uncooperative or showing signs of incompetence, WALK AWAY AND MOVE ON!

Leasing is time-consuming and requires a good deal of study and attention to detail. If you don’t have the time to commit, perhaps your best alternative is a good broker. There are some outstanding brokers on this website. However, if you’re willing to commit your time and resources, always control the deal. That can only be achieved with education which breeds confidence and increases the likelihood of success.

??? Let me know.

[paranoidgarliclover]

@xp4289

I don’t care if the dealer charges $1,500 acquisition if I can offset that expense by paying $1,500 less on the vehicle price

Isn’t the acquisition fee set by the bank? I don’t think it is realistic to expect a dealer to lower the selling price by the acquisition fee (or other such fees).

[LAK1ngs]

No advice on the deal, you’re already in very capable hands. Curious if you’re a fellow accountant… getting that vibe here.

[xp4289]

This great information. I need some time to digest and play with the formulas. That said, as soon as the dealer starts to sniff out a lease buyout, wouldn’t they hold firm on the vehicle price and claim up about their fees to keep the vehicle price inflated? Now that I have this great info, I’m struggling on my approach to apply it.

My other challenge is leverage and time. Unfortunately, there are only 3 cars similarly equipped all about 1,000 miles of me. That is not much leverage in negotiating between dealers. Additionally, with the new administration, the EV manufacture rebate may be in jeopardy. As it stands, the $7,500 manufacturer rebate runs until March 3rd. It is unclear if it will be extended. I hope I can learn everything I need to in time to take advantage of the manufacture rebate. It sure would have been a lot easier if the government simply allowed the EV manufacturer rebate to apply to outright purchases as I would have only needed to negotiate the vehicle sales price. Ugh!

[xp4289]

My background is healthcare finance.

[LeaserOC]

@xp4289

as I would have only needed to negotiate the vehicle sales price. Ugh!

You’re overthinking this. That is all you need to be doing. Push for the lowest selling price, add back true dealer add ons and ignore the mf (if they want to mark it up to get to your desired selling price then let them).