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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 12 of 18

#104 of 173 2012 lacrosse touring by dwsindy

Jul 06, 2012 (6:37 pm)

MSRP. $41735
Sell. $40564.25
Cap cost reduction $5250.00
Money Factor. $.000583. (1.4%)
Residual. $22954.25
Payment. $446.78
Out of pocket
First month & ?? $814.28
 
The numbers don't seem to work for me. I come up with a payment of $404 which includes the 7% sales tax. What am I missing? Doesn't the cap cost reduction come off of the sale price so the net cap is $35314.25
 
Thanks

#105 of 173 Re: 2012 lacrosse touring [dwsindy] by jwilliams2

Jul 06, 2012 (7:25 pm)

Replying to: dwsindy (Jul 06, 2012 6:37 pm)
Yes, the cap cost reduction does come off the actual selling price to arrive at the net cap cost. I would ask what else is going into the payment number. Looks like there is somewhere around $1500 or so that needs explaining. Probably the acquisition fee plus??

#106 of 173 Re: 2012 lacrosse touring [dwsindy] by kyfdx HOST

Jul 07, 2012 (6:37 am)

Replying to: dwsindy (Jul 06, 2012 6:37 pm)
What your example doesn't show is the actual capitalized cost... That could include other amounts not shown. The acquisition fee comes to mind, at first glance...

#107 of 173 Re: Reconciling advertised lease payment with my own calculation [ksrp] by kyfdx HOST

Jul 07, 2012 (6:49 am)

Replying to: ksrp (Jul 06, 2012 5:00 pm)
Firstly, I want to understand how the capitalized cost was arrived at. Shouldn't the capitalized cost be 19550+795-1999 = 18346?. They are claiming it is 18440.
 
If $1999 is the due at signing, then it includes the first payment and you should only subtract $1800. BUT... what isn't disclosed is the actual selling price of the vehicle. In your assumption, you would be paying MSRP, which isn't good... Also, other additions to the CAP cost may not be disclosed, including the acquisition fee.. My guess? There is an acquisition fee of around $700, and the vehicle is discounted about $800 to arrive at that CAP cost
  
Also, I want to find the MF they are using. Here's my calculation from the $199 monthly payment. The depreciation payment is (18440 - 12004)/36 = 179. That leaves $20 for the interest, so (18440+12004)*MF = 20. That makes MF = 0.000657, so interest rate = 0.000657*2400 = 1.57%
  
Is this calculation correct?
 
Your math looks to be correct... Is the purchase option price the same as the residual? Usually it is, but not always... that could change the calculation... Most likely, you have it right.
  
Since total payments required is 7160 and each payment is 199, they are expecting 36 payments. Then why do they claim $1999 includes the first month's payment?
 
It's still 36 payments of $199..... paying other amounts at signing in addition to that ($1800) doesn't change what is actually being paid.. Just a legal disclaimer.
  
Lastly, what should I expect to pay for 'taxes, title and fees" in California?
 
Title/registration/document fees in California are roughly 2-3% of the purchase price, as a general rule of thumb... California taxes the monthly payment on leases.... So, if your local rate is 9%, then tax will be about $18/mo..
  
regards,
kyfdx

#108 of 173 Re: 2012 lacrosse touring [jwilliams2] by dwsindy

Jul 07, 2012 (7:02 am)

Replying to: jwilliams2 (Jul 06, 2012 7:25 pm)
Thanks for the reply. Yes the destination charge or acquisition fee is not there so that is probably it. I wish they would of just told me that up front but they seem to always be about the payment and that is it. And in such a big hurry to get me down in front of the business manager.

#109 of 173 Re: Reconciling advertised lease payment with my own calculation [ksrp] by delta737h

Jul 07, 2012 (8:10 am)

Replying to: ksrp (Jul 06, 2012 5:00 pm)
ksrp,
 
Some fund providers use an interest rate instead of a money factor. When I saw the $795 acquisition fee, I immediately thought of GMAC/Ally Bank who charges a $795 acq. fee. They also use an interest rate. So, here's my question: Who is the manufacturer? GMAC? I know that there are other providers that charge a $795 acq. fee, but I want to make sure whether this is a money factor lease or an interest rate before answering your question.
 
I assume thast the numbers and all terminology that you provided are correct.
For instance, you stated
 
"Payment based on capitalized cost of $18,440"
 
I have no idea what that means. Is that the selling price? Is that the gross cap cost? Is that the net cap cost? Frequently, dealers will erroneously use the term "purchase price" when they really mean "gross capitalized cost". So, there are a lot of questionable things here. For instance, I've assumed that the $18,440 is the net capitalized cost because that's the way most Ads disclose it.
 
Also,
 
"MSRP $19,550 plus destination charge of $795."
 
Just doen't make a bit of sense. Another thing that makes no sense is that the Ad states...
 
"Total payments of $7,160."
 
Makes no sense because 35 x $199 + $1,999 = $8,964
 
The $1,999 includes the first payment of $199. Obviously, there is a cap reduction of $1,800 and the 795 acq fee appears to be financed in the lease.
 
This Ad does not make one bit of sense. I think you need to double check it and ask some questions.
 
Can you provide a link to the manufacturer's website please?
 
Let me comment on your calculations...
 
The average monthly depreciation is actually $178.77... and the average monthly finance charge is $20.22... and so, the money factor works out to be 0.00066424372...
 
This is a rather strange-looking money factor because the money factor syntax takes the form 0.00XXX and, if rounded, amounts to 0.00066 which yields as payment of $198.87. Usually, the rounding of the money factor is not that extreme. And, although very close, I still get the feeling that this might be an interest rate lease. Another issue is that the residual factor amounts to 61.4% ($12,004/$19550) which is really strange. It should come out to a nice whole number. Something just isn't right.
 
John
TheAutoLeaseGeek

#110 of 173 Re: Reconciling advertised lease payment with my own calculation [kyfdx] by ksrp

Jul 07, 2012 (5:31 pm)

Replying to: kyfdx (Jul 07, 2012 6:49 am)
kyfdx,
 
Thanks for your response.
 
Regarding your point about paying MSRP, I was only walking through the calculation with the data in the ad. Just trying it on for size, if you will. We are not yet sure which vehicle we want to get and if it is this one, I will definitely negotiate to bring down the purchase price first.

#111 of 173 Re: Reconciling advertised lease payment with my own calculation [delta737h] by ksrp

Jul 07, 2012 (6:24 pm)

Replying to: delta737h (Jul 07, 2012 8:10 am)
Thanks for your response, John.
 
The numbers are terminology are correct. The manufacturer is Mazda and here's the link to the ad. It's the offer at the bottom of this page.
link title
 
Now your points/questions --
> "MSRP $19,550 plus destination charge of $795."
>
> Just doen't make a bit of sense.
 
I don't know why it doesn't make sense. Is it the numbers themselves or the terminology?
 
> "Total payments of $7,160."
>
> Makes no sense because 35 x $199 + $1,999 = $8,964
 
I assumed that 'total payments' refers to payments during the lease duration and does not include the $1,999 payment made at signing. As kyfdx explained, one reasonable interpretation is $1800 + $199 at signing and then 36 payments of $199 subsequently. In which case, 36*199 = 7164, which is close enough to their statement. My original question about the $7160 was why should there be 36 more payments if the initial payment included the first monthly payment. Shouldn't there be 35 more after the first payment? But I will accept kyfdx's explanation.
 
> And, although very close, I still get the feeling that this might be an interest rate lease.
 
I did not know that there are different kinds of leases. Please explain 'interest rate lease'. Are most leases some other kind? Does it change the calculation?
 
Hopefully, you can look at the ad with the link I provided. I appreciate any further comments after you look at the ad.

#112 of 173 Re: Reconciling advertised lease payment with my own calculation [ksrp] by delta737h

Jul 08, 2012 (4:58 am)

Replying to: ksrp (Jul 07, 2012 6:24 pm)
ksrp,
 
Could not find a lease fitting your description at the Mazda website. Knowing the model may have been helpful. Anyway, I was so focucsed on the $795 acquisition fee that when I saw...
 
"MSRP $19,550 plus destination charge of $795."
 
my mind blocked out the word "destination" and all I saw was $795 which I associated with the acq fee. Sorry. Now it makes sense. So, the residual is $12,004 meaning that the residual factor is 59% ($12,004/$20,345) based on a total MSRP of $20,345.
 
Mazda uses a money factor as opposed to an interest rate. Ally Bank uses an interest rate. Interest rate payments are computed based on an annuity formula similar to the way loan payments are calculated except at the end of the term, there is a residual remaining which is analogous to a loan balance. This results in lower monthly payments than they otherwise would be.
 
Because of the complexities associated with computing payments using an interest rate, many years ago the concept of "money factor" was introduced which is defined as the estimated interest rate divided by 24. Here's why...
 
monthly payment ~ (annual int rate/12) x (net cap + residual)/2 + (net cap - residual)/Term
 
So that...
 
monthly payment ~ (annual int rate/24) x (net cap + residual) + (net cap - residual)/Term
 
money factor ~ annual int rate/24
(annual int rate/12) = estimated monthly interest rate
(net cap + residual)/2 = average lease balance
 (net cap - residual)/Term = average monthly depreciation charge
 (annual int rate/12) x (net cap + residual)/2 = average lease finance charge
 
If we assume an imputed money factor of 0.00066, then the monthly payment, assuming the capital cost of $18,440 is the NET capital cost, is
 
0.00066 x ($18,440 + $12,004) + ($18,440 - $12,004)/12 = $198.87
 
which is very close to $199. The bet here is that the NET cap is $18,440 and that the money factor is 0.00066. If so, then the selling price of the vehicle is...
 
$18,440 + $1,800 - $795 = $19,445
 
You need to research the selling price for this model vehicle as the selling price is the most important number in a lease. Use Edmunds, and TrueCar...
 
http://www.truecar.com/
 
Total payments of $7,160 does not make sense because you're paying $1,999 at lease inception which includes your first payment of $199 meaning that 35 payments of $199 remain. It also includes an $1,800 capitalized cost reduction. The $795 acq fee is financed in the lease and, therefore, is embedded in the $199 payment. As such, total payments should be....
 
$1,999 + 35 x $199 = $8,964
 
Federal regulations (Regulation M- Consumer Retail Leasing) manadate that cap reductions be included in the total of payments as well as the first payment due at lease signing.
 
Let me emphasize that your first payment of $199 is due at signing and the remaining 35 are due over each of the next 35 months. You're making payments at the beginning of the term instead of at the end which is how loan payments are constructed. Your periodic payments form what is known as an annuity due because the first is paid up front (i.e., due immediately). A sequence of loan payments are what is known as an ordinary annuity because the first payment isn't due until one month from the date the loan is originated.
 
Regarding your question...
 
"My original question about the $7160 was why should there be 36 more payments if the initial payment included the first monthly payment. Shouldn't there be 35 more after the first payment?"
 
There aren't 36 more payments... there are only 35 because you made the first payment at lease inception. Hence, total payments, including the $1,800 cap reduction, should be...
 
$1,999 + 35 x $199 = $8,964
 
John
TheAutoLeaseGeek

#113 of 173 bonus cash relative to lease. by c45man

Sep 02, 2012 (8:04 pm)

If the monthly lease payment is advertised at X number of dollars a month and the start up fee payment is listed at X dollars of month, what factor does bonus cash mentioned in the incentive have on the payment and down money. If the down payment is $2500 to start the lease and the bonus cash is $1000. does that equate to only $1500 down, or is the bonus cash already factored into the figures already stated?

Messages Page 12 of 18

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