Lease Payoff - Know Your Lease Balance and Create a Lease Amortization Schedule

Off-Ramp
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Below is a snapshot of a partial Excel lease amortization schedule for a Volvo V90 XC T5 …

Lease%20Amortization
Lease%20Amortization588×852 287 KB

Every retail lease agreement that I’ve seen has a paragraph describing how the lease balance is determined. You may want to read it if you’re going to payoff your lease early or trade your vehicle. In many cases, it is the present value of the residual plus the present value of the remaining lease payments (base payment for those States that tax the payment streams) discounted at the interest rate implicit in the lease.

Referencing the above amortization schedule, the last two columns labeled Future Book Value reflects the beginning and ending balances for a particular month. For instance, payment #19, due on December 26, 2019 reflects a beginning balance of $$41,082.81. This is the balance on December 26 immediately after making the $632.00 payment. The ending balance is the balance immediately before making the 20th payment due on January 26, 2020. The lease payoff that is used in any billing cycle is the end of period balance (last column). So, if you wish to payoff your lease sometime during the Dec 2019-Jan 2020 billing cycle, your payoff is the $41,108.46 lease balance plus the $350 purchase option fee plus tax…

($41,108.46 + $350.00) x 1.08875 = $45,137.90

Keep in mind that if you’re trading your vehicle because you have equity, the dealer does not pay tax. Some finance captives will not assess dealers the purchase option fee. Not sure what Volvo does but it’s important to find out what your fund provider does if you’re going to be trading your vehicle at some point during the lease. Hopefully, the dealer will be truthful so it’s probably best to speak with the sales manager or someone knowledgeable. Contacting a few dealers doesn’t hurt.

Hope this is helpful.
John
PS: It’s a long shot but it can’t hurt to ask your fund provider to waive the purchase option fee if you have one in your agreement.

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Or you can go to your VCFS online account at any time and see it with one click, right?

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A Yeah… ya could BUT… how do you know if it’s accurate??? I caught a large mortgage loan lender in Ohio miscalculating loan balances because of an accounting error in 1983. This impacted about 16,000 loans. There was a lawsuit filed. Years later it was certified as a class action lawsuit. The plaintiffs eventually prevailed!

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There’s a huge difference between a 30 year mortgage and a 3 year lease in regard to a calculation error.

Have you found VCFSs number to be incorrect yet?

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Well, you still usually confirm with them when you are ready to pay it off or trade it to a dealer. Dealer trade can be different from customer payoff.

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Yes, I confirm the lease balance and the fund providers balance and they should match. After 5 years, my mortgage lender had inflated my mortgage balance by $786! Had I paid off my loan, I would have paid $786 more than I should have… It’s always best to have a mortgage/lease amortization schedule for these big ticket items. And, yes, calculation errors on lease balances can be significant and especially for high end name plates.

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Haven’t found VCFS’s lease balances to be inaccurate. However, I did find one (who shall remain nameless). It was inflated by $71 which may not be a big deal for some. But, if it’s habitual, it could reflect a tidy windfall for the fund provider and that’s what concerns me.

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Yup, dealer trade value can be different from the lease payoff. As you know, you have equity if the trade value exceeds the payoff.I trade my leased vehicles when I have equity. Relieves me of having to pay the disposition fee and pay for any minor excess wear/tear.

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That’s not what I meant. Dealer may have to pay tax on top of payoff amount, while I won’t. Also, some banks may increase payoffs for other brand dealers or just not allow them to buy.

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Never heard of a dealer having to pay tax on the payoff amount. Unless I’m missing something, it doesn’t make sense. Aren’t they tax exempt? These “other banks” can’t change the amortized lease balance as it’s contractual. Doing otherwise could violate the Federal Reserve Board’s Consumer Retail Leasing Regulation M mandates. It’s important to understand exactly what these “other banks” are doing if paying off a lease. And, yes, in most States consumers (lessees) will have to pay tax on the lease balance if they exercise their buyout option.

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I’ve been told a few times that dealers needed to contact finance company to get their payoff amount which was different from mine, don’t know if it’s tax related or not. VA and some other states charge sales tax on the full selling price, so you don’t pay it again during buyout. Never done it myself, but would think that’s the case.

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Need some help here 2017 Chevy Volt:
I leased 3 years 45,000 miles on my Chevy Volt
I have increased my commute so I will be purchasing a leaf or bolt or Tesla. Rather than go and negotiate at a dealer again, I figured I could just buy out my lease. I owe 19 more payments of 387.00. and I have a residual of 18842. 00
Essentially my buyout price is 25k - no purchase option fee.
Should I buy out my lease and look to sell the car privately? I currently have 22,000 miles on it. Car is fully loaded with all packages
Agreed Value of vehicle during purchase was $35,600 + $595 leasing fee.
DO I finance through GM or anyone else?

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Posting your same question in multiple threads isn’t going to get you an answer quicker.

https://forum.leasehackr.com/t/is-there-a-way-to-make-money-on-a-lease/2338/13?u=mp11477

You would’ve been better off starting your own thread, rather than hijacking 2 others, TBH, as neither of the 2 threads have anything to do with your question.

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Oh yes you do! They are considered mutually exclusive transactions in the eyes of the State. One has nothing to do with the other. The first is a lease, the second is a buy. I know that Ohio, PA, NY, NJ, Ill and many other States charge tax on the buyout amount in addition to levying tax at lease inception whether its tax levied on the entire SP, depreciation, total payments or the individual lease payment streams.That has been a huge gripe by many consumers in some of these States as I understand it.

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if you go to carmax to sell your lease, the payoff amount carmax pays is different than the amount the leasee pays

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@adamcar - is this true for VA? I don’t think our payoffs shown online include sales tax.

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Not the amortized lease balance. That’s virgin territory… it’s fixed… can’t adjust or manipulate it. So, they could be adding something to it other than the purchase option fee and tax.

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Although I could be mistaken, I believe VA does levy tax on the buyout (lease bal. + PO fee). It could be that what you’re seeing online is the lease balance or, the lease balance plus the purchase option fee excluding tax.

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image

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hmmmm… interesting.