So I’m trying to wrap my head around on how leases are calculated in New York. Can anyone confirm or deny this? Assuming a zero drive off lease:
(((Agreed to Sales Price * (1 - Residual Rate)) * Sales Tax Rate) + Bank Fee + DMV + Inspection - Dealer Incentives/Rebates = Total Amount Before Money Factor.
Total Amount Before Money Factor * (Money Factor *24) = Interest Charge.
(Total Amount Before Money Factor / Number of Payments) + Interest Charge = Monthly Lease Payment
Your formulas are completely wrong. Read the article on how to calculate lease payments. NY does not have a special formula for leases vs other states. Only difference is how they handle taxes (paid upfront).
Fixed that for you. Your interest charge calculation was incorrect.
The top formula is wrong. Sales tax is on the monthly payment, all added up and due upfront.
You’re correct. I was in the middle of editing when you posted.
Jon, what you’re saying doesn’t make sense to me. What if someone had put money towards the monthly payment to reduce it?
Thank you. But I’m trying to wrap my head around the logic on why the residual value is calculated in the monthly interest charge when that value would be for the end of the lease when it’s either turned in or bought out.
CCR is taxed.
Read this.
MF as a number is a simplified value that averages the interest on a loan for the value of the vehicle.
Think of a normal loan; you start your loan paying interest on the whole amount, then you slowly pay down the principal, paying interest on the balance. If you sell the car while it is still financed, your last loan payment is interest on the final value; in this case, the residual value.
If you want to normalize the rent charge so that it isn’t changing every month, you would need to average the interest payment between the starting amount; the adjusted cap cost; and the final amount; the residual value. Mathematically, this is done by (Adjusted Cap Cost + Residual Value) / 2
In the conversion from APR to MF (a factor of 2400), that / 2 is captured as part of the of the coefficient, so it gets wrapped in.
You can see this if you break down what the 2400 really is in the estimation.
MF = APR * (1/2400)
= APR * (1/100 to convert from % to a number) * (1/12 to convert from annual interest to monthly) * (1/2 to capture the 1/2 in the average)
PM me when you’ve read and understood the articles already explaining this.