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How to Calculate Monthly Lease Payments

173 messages,  Last post on Apr 11, 2013 at 2:36 PM

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Messages Page 17 of 19

#152 of 173 Re: Taxes on lease [qbrozen] by delta737h

Feb 19, 2013 (1:28 pm)

Replying to: qbrozen (Feb 19, 2013 1:07 pm)
Like Ohio, NJ tax is computed on the sum of the taxable payments. The tax can either be paid upfront by the lessee or the tax can be capitalized in the lease wherein interest is levied on the tax as it would be a part of the adjusted capitalized cost. If your cost of money is low compared with savings rates, it's best to capitalize the tax from a financial perspective.
 
J. Clark
TheAutoLeaseGeek

#153 of 173 Re: Taxes on lease [delta737h] by qbrozen

Feb 19, 2013 (1:48 pm)

Replying to: delta737h (Feb 19, 2013 1:28 pm)
Are you certain?
 
Because any lease I've done, I can figure out the base payment and then simply add 7% on top. If total use tax were calculated, then added to the payment prior to adding the interest, wouldn't that give me a very different net payment?
 
EDIT: Found this resource that tells me the tax is not charged interest: http://www.leasetips.com/salestax.htm

#154 of 173 Re: Taxes on lease [qbrozen] by delta737h

Feb 19, 2013 (2:27 pm)

Replying to: qbrozen (Feb 19, 2013 1:48 pm)
I'm positive. Most States compute the tax on the payment streams for which tax is payable as payments are received. However, some States like Ohio and NJ compute tax on the sum of the taxable payments. A taxable payment is computed and that, in turn, is multiplied by the lease term (months). This is the tax base upon which the tax rate is levied. NY does something similar. I've written some articles about this on my website. You may want to look at the following article...
 
https://autoleasegeek.com/457/457
 
Questions? Please let me know.
 
John
 
I'm not sure what you mean by net payment. The sum of the taxable payments is used only for purposes of establishing the tax base and levying the tax. The actual tax can be capped in the lease. Naturally, the taxable payment will be different than the regular lease payment if tax is capped.

#155 of 173 Re: Taxes on lease [delta737h] by qbrozen

Feb 19, 2013 (3:07 pm)

Replying to: delta737h (Feb 19, 2013 2:27 pm)
however, is it true that interest is not charged on the tax? So, in effect, it is the same as paying tax on the payment (even if calculated differently, if the end result is the same, it doesn't matter). As long as interest isn't charged on the tax, there is no benefit paying it up front, which was the poster's question. Correct?

#156 of 173 Re: Taxes on lease [qbrozen] by delta737h

Feb 19, 2013 (3:25 pm)

Replying to: qbrozen (Feb 19, 2013 3:07 pm)
If the tax is capitalized, then it will be subject to interest charges as it is included in the gross cap. Below is a lease I constructed almost two years ago in Ohio...
 
April 11, 2010
 
2010 Honda Accord LX
 
Retail Pricing Information
 
Base MSRP 2010Honda Accord LX AutomaticModel CP2F3AEW………..….…………… 21,855.00
Polished Metallic ……………………………………..….………………………………… 0.00
Destination Charge…………………………………………………………….…………….….. 710.00
MSRP……………………………………………………………………..…………….…...…… 22,565.00
 
Selling Price
Agreed Upon Value……………………………………………………………………….……… 18,884.05
 
Amounts Financed (Capitalized)
AHFC Acquisition Fee…………………………………………………………………………… 595.00
Medina Sales Tax 6.50%  36  206.93………………………………..…………………….. 484.22
 
Capitalized Costs
Gross Capitalized Cost………………………………………………………………….……… 19,963.27
Capitalized Cost Reduction……………………………………………………………………. 0.00
Adjusted Capitalized Cost……………………………………………………………………… 19,963.27
 
Residual Data
Residual Factor………………………………………………..…………………….…………. 0.60
Residual Value (Residual Factor Χ MSRP)………………………..……………….…….….… 13,539.00
 
Cost of Money/Term
Money Factor…………………………………………….……………………….……….…… 0.00127
Term (months)……………………………………………………………………….………… 36
 
Lease Payment Itemization
Monthly Lease Payment…………………….…………………..……….…………….…….… 221.00
Taxable Monthly Lease Payment……………………………………………………..……….. 206.93
 
Estimated Charges Payable at Lease Origination
License, Title, Registration Fees (estimated)……………….……….…………………...…….. 125.00
Amount Due at Lease Signing…………………………………………………………..…..… 125.00
 
Fund Provider: AHFC
GAP Coverage: Included
Annual Mileage Allowance: 12k
Disposition Fee: None
Excess Mileage Charge: $0.15 per mile

#157 of 173 Re: Taxes on lease [delta737h] by delta737h

Feb 19, 2013 (4:01 pm)

Replying to: delta737h (Feb 19, 2013 3:25 pm)
This goofy line...
 
Medina Sales Tax 6.50%  36  206.93………………………………..…………………….. 484.22
 
from the above post should read...
 
Medina Sales Tax 6.50% x 36 x 206.93..... 484.22
 
John
 
PS: Anything that is capitalized in a lease, taxes or otherwise, is going to be charged interest.

#158 of 173 Re: Taxes on lease [delta737h] by thngpg3388

Feb 19, 2013 (5:59 pm)

Replying to: delta737h (Feb 19, 2013 4:01 pm)
Thanks for all the info. A little over my head.
 
So paying upfront and paying monthly is essentially the same?
 
Only asking because I have 2 lease offers: 1 w/ all fees/taxes rolled into monthly payments and the other with much higher upfront costs including tax w/ lower monthly.
 
the higher upfront cost sounds cheaper in the long run but maybe i'm missing some additional fees.

#159 of 173 Re: Taxes on lease [thngpg3388] by delta737h

Feb 19, 2013 (7:32 pm)

Replying to: thngpg3388 (Feb 19, 2013 5:59 pm)
Given that a car is a depreciating asset and the cost of money is relatively cheap, I wouldn't part with any money upfront. Just roll it in with the lease.
 
John

#160 of 173 Re: Taxes on lease [delta737h] by thngpg3388

Feb 19, 2013 (8:26 pm)

Replying to: delta737h (Feb 19, 2013 7:32 pm)
Thanks for the advice!

#161 of 173 Re: Taxes on lease [delta737h] by qbrozen

Feb 20, 2013 (12:09 pm)

Replying to: delta737h (Feb 19, 2013 3:25 pm)
I don't believe the tax is capitalized in NJ. At least, I can't find any evidence that supports that.
 
So that OH lease you pasted, I can see that, if interest wasn't charged on the tax, the payment would be about 60 cents less. AFAIK, if you did that same lease in NJ, the payment would be $220.38.
 
Maybe I'll see if my sister can bring over her lease contracts we did a few weeks ago so I can take a look.

Messages Page 17 of 19

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