Lexus One Pay Lease early buyout rent charges credited back?

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23

Neglected to mention that they’re not capitalizing any of the fees. So, a portion of the 8500 rebate is used to pay for all the lease inceptions fees totaling 1370 leaving you with 7130 as a cap reduction. So, your adj. cap = 65820-7130 = 58690.

Monthly Base Payment = .00219 x (58690 + 39128.80) + (58690 - 39128.80)/36 = 757.59

Taxable Fees = 250 + 795 + 50 = 1045

Total Tax = 8.00% x (36 x 757.59 + 7130 + 1045) = 2839.86

One-Pay = 36 x 757.59 + 2839.86 = 30113.10
DAS = 30113.10 + 8500 = 38613.10 8500 = your trade

Are you sure that .00219 is the discounted money factor used to compute the one-pay? .00219 seems high. The dealer shows 21532.40 with DAS = 21532.40 + 8500 + 8500 = 38532.40. The 8500 rebate is used as described above.

I think you need to ask the dealer some questions. Also, they’re only giving you a 0.75% discount off MSRP. That’s horrible especially for an EV whose depreciation timeline is steeper than Mount Everest. YIKES!

24

Doesnt adj. cap include trade in (8500?). Should I be asking them to capitalize the fees so the rebates go towards cap cost reduction fully? Or does that not matter?

.00219 is what I got from edmunds (.00319 as regular lease)

25

You’re right. Good catch! No wonder I was getting numbers that made no sense. I must be losing it. I’m so sorry. Adj. cap should be 50190.

It does matter. Capped fees are subject to a rental charge which doesn’t make sense for a one-pay lease.

WHOA! If you qualify for the buy rate, then it should be reduced for a one-pay lease. According to the LH Calc, it should be .00119. So, let’s use that.

Base Payment = .00119 x (50190 + 39128.80) + (50190 - 39128.80)/36 = 413.54

Taxable Fees = 250 + 795 + 50 = 1045

Total Tax = 8.00% x (36 x 413.54 + 7130 + 1045) = 1845.00

One-Pay = 36 x 413.54 + 1845 = 16732.44
DAS = 16732.44 + 8500 = 25232.44
8500 = your trade

Again, the 8500 rebate was used to cover the 7130-cap reduction and the balance use to cover the 1370 upfront fees.

It looks like you have some things to discuss with the dealer. I would move on from this dealer. Weak dealer discount, lack of transparency plus it appears that mistakes were made.

26

I see, so have it non-capitalized makes more sense for the one-pay

Sorry if I wasn’t clear, but the .00219 is the reduced MF for one-pay, normally in a regular lease (not one pay) it is .00319 (according to edmunds). WIth one pay it is reduced by .001(according to edmunds) thus .00219 seems correct, unless you’re saying it should actually be reduced by .002.

27

Here is a copy of the lease contract dealing early buyouts- I actually clearly read in section 30 that it says the adjusted lease balance is the residual less unearned rent charges. So unless I’m hallucinating it is very clear that an early buyout gets me back the unearned rent in the adjusted buyout price.

lease contract
lease contract600×800 229 KB

28

You can capitalize it and see if you end up with a lower payment. It has never worked for me especially with a high MF.

Okay, it sounded like Edmunds was giving you a buy rate of .00219. When I looked at Edmunds, this is what I found…

Lexus NX 450h+ — Car Forums at Edmunds.com

Nothing for a 2025.

29

Yes, it does. You are correct. And my formula above accomplishes the same thing. It’s what I’ve been saying all along. @mllcb42 said the same thing…

30

I see you didn’t even try and argue about an actual discount off the car? It appears they only gave you $500 off MSRP?

There’s easy to find dealers that will give you much better discounts off sticker than that, just FYI. I got close to 12% off my 24 RX450h+ a few months ago I believe. :slight_smile:

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31

Just spoke with the dealership, they said that for Ohio, trade ins only affect the taxes when you purchase a new car (cash/finance), however for lease deals, trade ins will not affect the initial taxes paid (thus they did not use the trade in to reduce to adj cap cost, but just subtracted the trade in from the total one-pay amount). Does this sound correct to you, or just a load of BS?

32

Let’s put this to bed…

Base Payment = .00219 x (50190 + 39128.80) + (50190 - 39128.80)/36 = 502.86

Taxable Fees = 250 + 795 + 50 = 1045

Total Tax = 8.00% x (36 x 502.86 + 7130 + 1045) = 2100.64

One-Pay = 36 x 502.86 + 2100.64 = 20203.60

DAS = 20203.60 + 8500 = 28703.60
8500 = your trade

Again, the 8500 rebate was used to cover the 7130-cap reduction and the balance use to cover the 1370 upfront fees.

33

The first thing is to determine the base monthly payment which captures ALL cap reductions including cash and trade equity. I believe the Ohio Tax guidelines are silent with regard to one-pay leases. So, dealers have some latitude with regard to the treatment of trades for one-pays.

Here is the Ohio Tax Rules (see page 3)

Ohio Tax Rules.pdf (232.6 KB)

The dealer if full of BS. However, doing it their way, I get…

Base Payment = 757.59

One-Pay = 36 x 757.59 – 8500 = 18773.24 BEFORE TAX

Total Tax = 8.00% x (18773.24 + 7130 + 1045) = 2155.86

DAS = 18773.24 + 2155.86 +8500 = 29429.10
8500 = your trade

Again, the 8500 rebate was used to cover the 7130-cap reduction and the balance use to cover the 1370 upfront fees.

34

Yes, but it says nothing about one pay specifically and the calculation provided in contract to determine unearned interest would presumably not apply to a one pay (hopefully).

Per the other thread I linked above, rent charges are still earned monthly, even in a one pay, so you should be fine.

35

You may want to tidy this up a bit and use it to create a lease proposal. If you like it, send it to another dealer. This is the complete package. Some of this is for your eyes only…

Input Data

MSRP 66320.00
Sales Tax Rate 8.00%
RV (59%) 39128.80
MF .00219
Term 36
Total Rebates 8500.00
Trade Equity 8500.00

Calculations

Sell Price 61014.00 (8% dealer discount off MSRP)
Capitalized Fees 0.00
Gross Cap 61014.00
CCR- Rebate 7130.00
CCR- Trade Equity 8500.00
Adj. Cap 45384.00

Base Payment = .00219 x (45384.00 + 39128.80) + (45384.00 - 39128.80)/36
= 358.84

One-Pay = 36 x 358.84
= 12918.24

Lease Inception Fees/Credits

*One-Pay 12918.24
*Doc Fee 250.00
*Acq Fee 795.00
*Convenience Fee 50.00
Total Sales Tax 1691.46 (includes tax on 7130 partial rebate cap reduction)
Reg/Title/Plate Fees 125.00
Alternative Fuel Fee 150.00
Trade 8500.00
TOTAL 24479.70
Rebate Credit 1370.00
DAS 23109.70
Customer Cash Due 14605.70 (included in DAS)
*Taxable Fees

Purchase Option Calculation if Exercised within 30 days of Lease Inception…

Input Data

Constant Yield Rate 6.2386%
RV 39128.80
Term (N) 36

image

NOTE: The above ALB calculation captures unearned rental charges. Deducting unearned rental charges from the RV requires an amortization schedule and will result in an ALB equal to the ALB computed above. For this reason, the above calculation is much simpler and more straight-forward.

An alternative ALB calculation is as follows…

Initial balance = Adj. Cap – Single Pay
= 45384.00 – 12918.24
= 32465.76

Because lease payments and rental charges are fully earned one month in advance, the adjusted lease balance within the first 30 days of lease inception is just the future value of the initial lease balance 1 month into the future…

image

Buyout = (32634.53 + PO Fee) x 1.08 + admin fees/taxes (See lease agreement)

Interesting side note…

Observe that if the lease goes full term, the adjusted lease balance equates to the residual value (RV)….

image

Miscellaneous

You can also use the PV function in Excel to find the Adjusted lease balance (ALB) for the single pay option…

ALB = PV(RATE, # of months remaining, 0,-RV,1)

Using the Excel RATE function with the following syntax:

RATE = RATE(term, -(ACC - Base Single Payment Option), RV, 1)
Annual Constant Yield Rate = 12 x RATE
ACC = Adjusted Capitalized Cost

You can even use the TI-84 calculator

TI-84 Calc…
N = 36
I = 6.2386…
PV = -(45384.00 – 12918.24)
PMT = 0
FV = 39128.80
P/Y = 12
C/Y = 12
PMT: BEGIN

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36

One other thing…

This is pure crap. Trade-ins do impact taxes paid… they reduce the tax base… even for leases! See the Ohio Tax Guidelines, page 3 posted above.

Here is why the dealer is saying (lying) this…

Deducting the trade equity from the one-pay…

Input Data

MSRP 66320.00
Sales Tax Rate 8.00%
RV (59%) 39128.80
MF .00219
Term 36
Total Rebates 8500.00
Trade Equity 8500.00

Calculations

Sell Price 61014.00 (8% dealer discount off MSRP)
Capitalized Fees 0.00
Gross Cap 61014.00
CCR- Rebate 7130.00
Adj. Cap 53884.00

Base Payment = .00219 x (53884.00 + 39128.80) + (53884.00 - 39128.80)/36
= 613.56

One-Pay = 36 x 613.56 – 8500.00
= 22088.16 – 8500.00
= 13588.16

Lease Inception Fees/Credits

*One-Pay 13588.16
*Doc Fee 250.00
*Acq Fee 795.00
*Convenience Fee 50.00
Total Sales Tax 1745.05 (includes tax on 7130 partial rebate cap reduction)
Reg/Title/Plate Fees 125.00
Alternative Fuel Fee 150.00
Trade Equity 8500.00
TOTAL 25203.21
Rebate Credit 1370.00
DAS 23833.21
Customer Cash Due 15333.21 (included in DAS)
*Taxable Fees

Deducting the Trade Equity from the one-pay will cost the customer an additional 723.51 in this example. Bad idea! Why? Of the 723.51, 669.92 flows to the dealer and 53.59 is allocated to taxes. Dealer makes an additional 669.92 using this misleading and grossly unfair tactic. I would call out this dealer and move on.

37

Thank you for the detailed reply! I’m still looking through it but just wanted to address one thing.

However, under Ohio law, the credit afforded a lessee for a trade-in of a used motor
vehicle on the lease of a new motor vehicle is not included in the taxable price of the transaction.

^That’s from the tax document. To me, it reads that in leases trade ins will NOT affect the taxes, so regardless of a trade the taxes remain the same, consistent with what the dealer said. Maybe I am reading it wrong?

38

That means that the trade is not taxed. I’ve used trade equity many times in Ohio as a cap reduction. Trades used as a CCR are not taxable. So, it does impact taxes. That’s what “not included in the taxable price of the transaction”. Deducting the trade form the one-pay will definitely increase the tax b/c the Adj. Cap is increased.

Look at the flow in my post above.

You said…

Here is what Ohio says…

image
image956×449 54.8 KB

Under a purchase, the trade gets taxed. Under a lease, the trade does not get taxed as it is treated as a credit (like kind for like kind) (i.e., trade is not included in the taxable price). The dealer is very unclear. How do trades affect taxes in the case of a purchase? They get taxed! How do trades affect taxes in a lease? They’re NOT taxed!

39

That’s exactly what the dealer wants you to think. If that is so, then why do they insist that the trade credit be deducted from the one-pay instead of from the gross cap? Because they make more money and send you down the road whistling dixie while they laugh all the way to the bank. Not only do taxes increase, but dealer profit increases as well!

Do the math! The beauty of math is that it doesn’t lie, dealers do! Again, look at the math in my posts where it proves that deducting the trade from the one-pay is clearly more expensive for the customer. It’s what I do.

40

Using the entire 8500 rebates as a CCR will save you some money…

Input Data

MSRP 66320.00
Sales Tax Rate 8.00%
RV (59%) 39128.80
MF .00219
Term 36
Total Rebates 8500.00
Trade Equity 8500.00

Calculations

Sell Price 61014.00 (8% dealer discount off MSRP)
Capitalized Fees 0.00
Gross Cap 61014.00
CCR- Rebate 8500.00
CCR- Trade Equity 8500.00
Adj. Cap 44014.00

Base Payment = .00219 x (44014.00 + 39128.80) + (44014.00 - 39128.80)/36
= 317.78

One-Pay = 36 x 317.78
= 11440.08

Lease Inception Fees/Credits

*One-Pay 11440.08
*Doc Fee 250.00
*Acq Fee 795.00
*Convenience Fee 50.00
*CCR- Rebate 8500.00
Total Sales Tax 1682.81
Reg/Title/Plate Fees 125.00
Alternative Fuel Fee 150.00
Trade 8500.00 (flag: some dealers may deduct this from the one-pay)
TOTAL 31492.89
Rebate Credit 8500.00
DAS 22992.89
Customer Cash Due 14492.89 (included in DAS)
*Taxable Fees

I think this is the best strategy and the path of least resistance.

41

@OhioTaxes were you able to execute a one-pay lease + early buyout and get the unearned rent deducted from the buyout?

42

Yes @OhioTaxes please give us a follow-up on this. Did you end up getting a payoff below the RV and indirectly got paid for the unearned interest?

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