Residual is off of msrp (except for tesla who does some weird stuff)
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Tesla bases off selling price, making any discount less significant
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To see if I understood anything I took a random contract on the board, and am trying to break it down:
edmunds:
MF: .00091
Elite RV: 61%
36/12k
Dealer math:
MSRP: $45,100
Pre-incentive discount (before dealer fees):10% or 4,629.51 (does not include the mfg rebate)
incentives from mfg: $500
Gross Cap Cost: $40,470.49 (didnt include the rebate)
Adjusted Cap Cost: $37,970.49 (subtracted the cap cost reduction)
Cap Cost Reduction: $2,500 (2k down + $500 rebate)
Dealer taxable Fees/profit: $189+599=$788
Non-tax fees: $237
Tax Burden: $12.83
Negative Equity: $2,000
Total: $5,537.83
DAS to be paid:
Amount in Cash $4,000 ($2k negative equity on current lease + 2k cash down)
Rebates: $500
Now the issue I run into I guess with this contract is calculating their mF by hand?
MF=Rent/(adjusted cap cost+residual)
In this contract I have the base MF, Adjust cap, residual. While I can calculate the rent how would I determine whether the mF is marked up besides asking the dealer? Is their way to calculate this via hand?
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You really need to read the articles on this site such as Leasing 101 and How to Calculate Payments
Check with other buyers, dealers, Carvana, vroom etc in the value of your trade. Make sure you’re getting something very similar to the highest offer (without a purchase just a straight sale), or it’ll just be more worth it to sell to another buyer etc versus your Honda dealer.
Let me know if you need guidance on that, and as others have said, read the leasing 101, how to calculate a lease and lease terminology. You wouldn’t close on a house without learning your interest rate, if it’s fixed or non fixed, closing costs and what not; why do a comparable action when leasing a car.
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A lease contract will have the rent charge amount listed. From that, you can calculate the applied MF to verify against buy rate.
An offer sheet like this may not have mf or rent charge listed. You’d need to ask the dealer what mf is being applied. If they won’t tell you, move on to a dealer that will.
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Preach it
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I appreciate the advice. BTW all contracts listed in my posts thus far are not mine, the BMW is from Leasing 101, while the Honda is another members.
Thanks for clearing up the confusion on that one. I guess I was wondering that while you can read and understand every single detail on the contract sheet, how does one look at an offer sheet and get the complete picture?
You keep asking until the answers make sense… deal sheets aren’t meant to make sense to the buyer - they’re to sell the car 
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The short answer is you don’t. The long answer is you should already have all the pricing details sorted long before getting an offer sheet like that from a dealer, so when you plug in the discounts and see that the price is higher than it should be, you’d know why.
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To add in:
Monthly Depreciation
$290
Monthly Finance Charge
$59
Lease Payment: $290+$59=$349
I didnt include step 4 (upfront fees for signing) from the Lease 101 calculate your payments.
While I understand that the calculator does not account for every dollar, would this be considered ok or inside the normal margin of error?
I am unsure what you’re asking here
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I`m trying to calculate lease payments via hand and then compare it to the calculator. I’m coming up with a discrepancy and wondering if thats normal as mentioned in the 101 guide?
For this exercise I’m using the following parameters:
- base residual
- base mF
- assuming the dealer discount this member obtain was reflective of the current market conditions
- assuming the tax rate for this member was 6.63%
- assuming the members negative equity is paid off at signing and not rolling it into their new lease.
There is no margin of error, it’s simply a formula. If you have all the inputs, it will account for every dollar and cent.
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Just to add on I`m using the following 101 guides in learning:
https://leasehackr.com/blog/2020/10/10/how-to-create-a-target-deal-using-the-calculator
https://leasehackr.com/blog/2016/4/17/how-to-calculate-lease-payments-by-hand
https://leasehackr.com/blog/2019/8/23/leasehacking-101-guide-to-reading-a-lease-contract
Might find this useful.
Ok so I guess I figured out the discrepancy…ACQUISTION FEEE ARGHHH!!! Still off by $36 over the 36 month term but thats not as bad as $648 over the term.
Thanks folks for putting up with me on the learning process. I`ll keep posting deal work ups to hone the skill.
It will, if you know exactly which fees are and aren’t taxable, etc, which rarely one does. Big part of why minor discrepancies vs the calculator are normal.