When you see aggressive one payments like 6K on the ZDX, does it include the upfront inception charges of registration, disposition, etc, or those are in addition?
Everything except dispo should be included.
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Base Single-Pay = Term x Monthly Base Payment. The base single payment is virgin territory and should never include unamortized taxes and fees. The reason is that, in the event you elect to terminate early such as exercising your purchase option at some point during the lease, it is the base single-pay amount that determines the adjusted lease balance as defined in the lease agreement.
Below are excerpts from a single-pay lease contract…
In the contract, the base single pay is 8582.76. All other fees should be itemized separately as follows…
Base Single Pay … 8582.76
Base Single Pay Tax… 536.40 … 6.25% x 8582.76
Acq Fee… 650.00
Acq Fee Tax… 40.63
Doc Fee… 495.00
Doc Fee Tax… 30.94
Title/Reg. Fee… 165.00
DAS… 10500.73
NOTE: Using 9119.16 as the single pay would result in an inaccurate adjusted lease balance as it includes 536.40 of unamortized tax. Also, never ever capitalize fees in a single-pay lease as you would be subjecting them to a finance charge.
??? Let me know.
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Just to not confuse the OP, zero people that post up their single pay prices here are talking about the base single pay amount isolated from the other costs. They’re all referring to the one payment they made to drive off in the vehicle which is inclusive of everything but the dispo fee.
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There are a couple different ways to structure leases that depend on personal risk tolerance. For example I typically don’t capitalize non-taxable fees because I don’t want to pay tax on them. But some people want to capitalize everything so they can feel “nothing will be lost” if the car is totaled.
Similarly I’d look into the one-pay contract to see what’s prorated and returned if the car is totaled. Is it the $8,5xx number or the $10,5xx number or something else?
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That may be but most people don’t understand how the single-pay option is constructed. The single pay is a stand-alone payment and **excludes ALL unamortized fees for reasons I’ve explained. ** It’s not rocket science.
It is based on the 8582 number, not the 10500 number which includes unamortized amounts. And it’s not prorated in most lease contracts which assumes linearity. The 8582 is used to compute the adjusted lease balance which is strictly a non-linear procedure. Below are excerpts from the early termination provisions of a Hyundai lease agreement…
And here are the mathematical interpretations…
Calculating the Adjusted Lease Balance…
Method 1: Present value of the Residual-
Where RV = Residual value
CYR = Annual constant yield rate
N = Number of months remaining
Method 2: Future value of the initial lease balance- Using the language in paragraph G of the lease agreement, the initial balance is as follows…
Initial balance = Adj. Cap – Single Pay (= 8582 number)
The adjusted lease balance after N months is just the future value of the initial lease balance N months into the future…
Note that both methods (1&2) give the same Adj. lease balance and so, it doesn’t matter which method is used.
Also, consistent with paragraph G, observe that if the lease goes full term, the adjusted lease balance converges to the residual value (RV)….
T = Lease Term
For those that are risk averse, that’s actually a good strategy and a great catch! If people cap everything, the adjusted cap will be more and, as such, the single pay will be more as well. They don’t offset b/c the single pay captures (1) a finance charge on the capped amounts, (2) tax on the non-taxable amounts, and (3) tax on the finance charge of the capped fees… (3) is often overlooked Therefore, the initial lease balance is actually less (reduced risk) and, hence, the adjusted lease balance will be less than it would otherwise be had they not capped all the fees. So, if I make a general statement to never cap fees in a single pay, the risk averse folks are going to scream bloody murder and, understandably so.
EDIT: Another advantage of capping fees is that, yes, the initial lease balance (ILB) will be less, but the CYR will be higher b/c it has to fight harder (so to speak) to converge on the RV at lease end. This exerts upward pressure on the adj. lease balance (ALB). However, the good news is that the net effect (between the ILB and the TVM factor) lowers the adj lease balance. The lower ILB effect outweighs the higher TVM (time value of money factor) effect. This can be seen by examining method I.
Note that the ILB, RV, and term are used to compute the CYR. Also, the difference between the ALB without capped fees and the ALB with capped fees is maximized at lease inception and is insignificant for capped amounts of less than 5000 (around $200). The difference decreases and collapses to zero at the end of the lease term. For this reason, I would not cap fees in a single pay lease. However, the decision to do so reduces to personal preference where there are no right or wrong answers.
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Some dealers don’t even do one pays. I’d love to see their eyes glaze over when you start asking for this structure. I get it but on a 4k blazer lease does anyone care/want to do the brain damage.
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