Hi all – looking to get my first lease on XC40 T5 Momentum in Illinois, and I have been reviewing initial lease quotes all week (pre-negotiation). For one of the quotes, the lease payment was not aligning with the lease calculator and I attempted to do the math by hand. I think I figured out the difference, and it has to do with taxes.
My question: should taxes be rolled into the Total Capitalization Cost? It appears this worksheet is including them there, along with taxes in addition to the base payment.
Ah classic Chicago. I researched the hell out of these tax laws and doc fees so let me just cut to the chase. Your Cook County monthly tax is called a use tax and you have no choice to pay this as part of your monthly. It is 9.5% of your total depreciation + finance, divided monthly into your lease length.
However, your SALES tax, of the amount 1857, can be paid upfront. I personally paid it upfront because I didn’t want to roll it into cap cost and have it financed.
Also I don’t even see your DMV fees listed at all. These cover plates and 1 year registration. It’s capped at 301 this year.
Tbh, your discount is pretty poor. You should be aiming 10%+ discount pre-incentive. $525 a month is way too high, my XC60 has a lower payment.
To continue, LH calculator does not really have a good way to calculate the monthly use tax. The best way to really get a precise calculation is to make a spreadsheet with the proper calculations. I made one and came down to the cent.
Thank you! I’ve been googling and having a hard time getting a clear answer of all the taxes and this really helps. If you have happen to have your spreadsheet handy, would you be willing to share?
Agreed that it makes sense to pay the sales tax up front and NOT finance that. I’ll be requesting to do the same.
DMV fees are listed on the quote at $301 – I just didn’t include in the screenshot.
And agreed on the discount – this was just an initial quote that I had solicited pre-negotiation. I’ve seen some broker deals for the XC40, but those appear to be limited to the tri-state area.
State sales tax of 9.5% is taxed on your total of depreciation + finance, in addition to taxed incentives, in addition to anything you DIDN’T roll into cap cost (in this case your fees). Use the ST-566-LSE tax document to figure this out. It has a line item called “Selling Price Definition”. Basically this means even if you pay DAS those fees, sales tax will tax them.
Whereas, the use tax doesn’t tax the fees. It only taxes the total depreciation + finance.
Yeah, not really a down payment, but paying it upfront.
But just realize there is a trade off. If you pay taxes upfront in one shot, you stand to lose all of it if you total the car the next day as opposed to if you rolled it into each monthly payment.
That risk is for you to decide and to see if it is worth the cost savings.
I’m confused with what you’re doing on the calculator. You don’t have the $1500 incentives listed anywhere, but have a negative incentive in the untaxed incentive column. Are you using that to try to put the chicago taxes back in?
I don’t see anywhere the right Chicago use tax being calculated.
Where are your DMV fees?
I’ve personally done my XC60 lease with the use tax, and the really only way is to do it by hand. The LH calc was off ~$10-$20 if I remember correctly.
I’d say go and get a detailed lease sheet from the dealer and work the calculations backwards.
Man your payment monthly is more than my 55k XC60 that I’m paying 500 a month. That’ll kinda tell you that you need a larger pre incentive dealer discount.
This is the quote that I got from the dealer, and what I’ve tried to back into on the calculator. Also presumes the tax on items is rolled into the Net Cap, not paid upfront.
DMV fees are 301 and DAS.
I’m at a 12.2% discount pre-incentive and 15.6% with incentive. What am I doing wrong here??
There’s nothing wrong with your discount. That’s fine. This is where I believe evaluating a lease holistically comes in. Because you are rolling your doc fee, acq, and sales tax into net cap cost, you are in theory financing more than you need to. This helps attribute why your lower MSRP car ends up costing the same monthly compared to a car that is over 12k more in MSRP.
I realized I mentioned this before but you still rolled all of them in.
What is the 1500 incentive for? Why are you not doing MSDs?
I think I’ll likely pay the ~$3k upfront (covers the Doc fees/Acquisition Fee/Upfront Taxes). That’l get me down to ~$415/month all in I think.
MSDs, I’m unsure about. Is the only downside risk that the money for doc fees/taxes/MSDs would be gone should the car get totaled or stolen? Or is there something else I’m not considering?