I am in TX, and trying to lease a BMW 240i. I am trading in a car worth 29,000, that I owe 20,000. I was going to apply 5,000 as cap cost reduction, 20k to the bank to pay it off, and 4,000 to me (check).
MSRP 64120
Sale price (after incentives, etc) 61219
tradein 29000
owe on trade in 20000
cap cost reduction 5000
The dealer has taken the MSRP - TRADEIN get a cap cost of $35k, then is adding back in the $20k to payoff my car AND the 5000 I was using to reduce cap costs for a final cap cost of 60,672. That seems incorrect.
I think the math should be CAP COST = SALE-PRICE + TAXES (SALE PRICE-TRADEIN) + FEES - 5000
That’s 59,579 = 61,219 sale + 2013 tax + 1347 fees - 5,000 down
Sell Price = MSRP - Dealer Discount
Gross Cap = Sell Price + Capitalized Fees
Adjusted Cap = Gross Cap - Cap reduction
Separate dealer discount from incentives. The only time you would deduct an incentive from the MSRP is when it is a manufacturer dealer incentive, not a customer incentive. Capped fees may include acquisition fee, taxes, etc. Or you can choose to pay these fees at lease inception. Cap reduction may include rebates/incentives, trade equity. Or you can use a portion of the rebate to cover some or all of the upfront fees and the balance, if any, as a cap reduction.
You’re allowing the dealer to structure the lease. Bad idea. Learn something about leasing and create a target deal. You may find the following helpful…
Your numbers make sense. $2,013 of sales tax is correct. Incentives/rebates are not taxable in Texas, although some dealers do it wrong, and sometimes the county tax office lets it through.
Sounds like there’s some confusion on what the deal really is (dealer discount amt, cash to buyer).
Agree use the money for MSD to lower money factor and get it back end of the lease, not cap cost reduction that is forfeited if the car is totaled or stolen.
In Texas for certain situations you do get a tax break for trade-in (finance to lease), lease to lease if same captive (this is dependent on the captive however)
