LH Calculator and how to use it

I would love to see one, so I can follow through

For another example, let’s take a look at this offering from a dealer on a 2020 Volvo XC40. This time, there’s a particularly interesting tax complication as the deal at hand is in Chicago. The city of Chicago charges an additional use tax on top of the Illinois sales tax, so this deal doesn’t fit in under the normal state tax options in the calculator.

Here’s the information provided by the dealer:
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First section is fairly self explanatory
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Vehicle is volvo, MSRP is as listed, and there is nothing extra being added in to the selling price as listed.


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The lease terms are also fairly cut and dry.

We can, however, use this as a good example of how the miles per year button works. Notice how the dealer quote lists the residual value as a base rate of 54% and then adjusted 4% for the 7500 miles?

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The same could be done in the calculator by inputting the base rate at 15000 miles
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and changing the mileage selection to 7500.
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Again we start with the downpayment set to $0.

Incentives added as listed in the deal sheet.

If you independently verified the incentives and found that the dealer had rolled some of the incentives into the dealer discount, you’d want to separate them out here and make sure the sales price was adjusted accordingly.


Taxes and fees are the interesting one on this deal, particularly the government fees
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Acquisition fee is as listed.
Dealer fees consist of the dealer doc fee.
Government fees are the sum of the extra fees:

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as well as the Chicago tax
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9% sales tax is ALSO applied to the monthly payment
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(Don’t live in Chicago if you ever want to lease a vehicle)


As a result, the calculator outputs
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This is a good bit off of the $507.87/mo with $808.87 drive-off that the quote offered.

Never fear… when the drive-off amount differs, we can adjust the down payment figure to shift money from the drive-off to the monthly. In this case, with a little trial and error, changing the down payment amount to:
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changes the output to just about perfect
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@mllcb42 Thank you for the incredibly helpful resource! Posting them on the Calculator page as Calculator 101!

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Hi thank you for your informative post. However I am getting a very large difference in my monthly payments when I calculate it manually vs when I use the calculator. Can you let me know if the formula I am using is correct? Or if I just have a misunderstanding on how to calculate leasing price.

Monthly Payment (excluding tax and interest) = [ (The Agreed Sell price of the car) - (MSRP * RV ) ] / Months of Car being lease. Then once you get the Monthly Payment multiply it by the (MF * 2400)/100 to calculate what monthly payment would be including interest.
This example is excluding down payment and Taxes.

Example is A car with MSRP 100,000, dealer agreed to lease at 90,000 ( 10% cap reduction), 36 months 10,000 miles/yr with MF 0.00200 and RV 60%. When I used the lease hacker calculator plugging those values I get a Pre-Tax Monthly Payment of 1,157.

However when I do it manually I get: 100,000 * .60 = 60,000 RV. 90,000-60,000 = 30,000 of deprecation 30,000/36 = 833.33 a month * (0.00200 * 2400)/100 = 39.99 of interest per month
Total Pre-Tax Monthly Payment is 833.33 + 39.99 = 873.32.

Am I doing something wrong? That is a huge difference from 1,157 to 873.32. Total of 10,212 dollars over 36 months. Sorry for the long post. If anyone can help I would greatly appreciate it. Thanks

You’re missing a couple critical parts in your calculations here:

  • The depreciation amount is the delta between your adjusted cap cost and the residual value. That generally means agreed on price - incentives + upfront taxes and fees. Those taxes and fees are often not an insignificant amount.

  • Your rent charge amount is way off.

Monthly rent charge = MF * (adjusted cap cost + residual value)

I’m the case of your .002 MF example, your monthly rent charge would be .002*(90000+60000)=300

There is an article on the LH website explaining this.

“How to calculate payments by hand”

Question for LH Calculator - do we modify the sales tax or is that set at 9%? Texas sales tax is 6.25%.

Set it to your tax rate

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When people start asking how to work the calculator and what the numbers mean, I think you should just start linking this.

For electric and hybrid cars that are eligible for federal and state tax incentives, where do we enter this in the calculator? Just part of the reduction from MSRP to selling price? I leased a Tesla last year and when they did their paperwork they used the federal rebate as a reduction of MSRP and the state (NY) acted as cash down. In the end, I don’t see what the functional difference is there, but they were adamant that it was done like that. They passed the federal savings on to me, so I don’t care, but maybe the difference was in how it’s handled for taxes, if the state rebate is a taxed incentive. Anyway, if these two are handled this way it seems like they wouldn’t both get lumped in together at the top of the calculator. Thanks!

If the rebate is being applied up front, it’d qualify as either a taxed or untaxed incentive (depending on if it’s taxed or not in your state). If it’s a post-sale rebate, where you get a check or tax credit after the fact, it applies as a “post-sale rebate”, and only effects the total lease cost, rather than the monthly.

The functional difference here would be that generally a direct MSRP reduction is untaxed where as a cash down rebate is taxed. Varies by state, but my guess is that was the difference.

Hello, new to leasing but have a background in finance and had a question. I’m curious why the money factor (and thus APR) is applied to the sum of Residual Value and Adjusted Capitalized Cost. In theory, isn’t the present value the Adjusted Capitalized Cost and the Future Value is the Residual Value and thus your “financed” piece of the equation is just the Depreciation Amount?

You are not borrowing the depreciation. You are borrowing the average of cap cost and RV. It’s discussed here.

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Residual value and adjusted cap cost are added together as the equivalent apr is being applied to the average value between them. The /2 in the average equation is part of the 2400 factor in the conversion from apr to MF.

This can be seen easier if we do a bit of unit analysis and ask what a rent charge is.

Rent charge is essentially the interest on the loan, as then vehicle depreciates from the adjusted cap cost to the residual value. Now, in a normal loan, there is a higher interest cost early in the loan and it decreases as the lease balance reduces. To simplify, a lease makes this an equal charge to each payment. To do that, it applies the interest cost at the average value between adjusted cap cost and RV.

Let’s call that (adj cap cost + RV)/2

So we know that MF is used monthly and it’s expressed in decimal format rather than a percentage, so we need to convert our APR to a monthly amount and a decimal.

So let’s take our APR and divide by 12 for months per year and divide by 100 to convert from % to decimal.

That gives us APR/1200.

So monthly interest charge = (APR/1200) * ((adjusted cap cost + RV)/2

We can simplify that to monthly interest charge = (APR/2400)*(adj cap cost + RV)

We also know that MF = APR/2400, so we can substitute that in and get

Monthly interest charge = MF * (adj cap cost + RV)

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Got it, that makes a lot of sense. Thank you both.

Thanks for this.

I have a vehicle I’m looking at, it is new, but the issue is, it is a Land Rover with 3000+ miles on it. I figure consumable items like tires and brake pads will be an expensive hit on the vehicle in my lease. I called a service department and I estimate that the cost to change 2 of the 4 tires is $616. The cost to change just the font brakes pads and resurface rotors is $1236. Who knows if I need to change it all.

What is the right way to put this into the calculator? If I adjust the Selling Price, then it doesn’t include the fact that I am taking the full brunt of the repair cost in my lease period. Ideally, I’d like this subtracted from just my total lease cost somehow…

Thanks for this tool and thanks for the help…

The calculator is not really built to accommodate service/maintenance costs.

I’d take the total lease cost from the calculator, then add in those expenses and divide by the number of periods.

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At dealers, is it the case that for a certain lease length, and for a certain miles per year, dealers use a set residual? What I’m trying to figure out is if the residual percentage is set by the manufacturer and a static variable when negotiating. Thus the primary factors that affect the lease that the dealer can fool around with would be selling price and money factor, am I correct in the way I’m looking at this?