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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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What is this discussion about? Car Leasing

Dissecting the Deal - How To Spot a Good Lease
 
10 Steps to Leasing a New Car
 
The "Residual Value" of Leasing
 
Calculate Your Own Lease Payment

Messages Page 8 of 18

#63 of 173 Re: NJ Pilot EX 4WD lease [delta737h] by ayalakay

Dec 22, 2010 (1:07 pm)

Replying to: delta737h (Dec 21, 2010 5:20 pm)
Many Thanks, John!

#65 of 173 newbie question by karl_e

Jun 02, 2011 (7:34 am)

Hi. I’m new to Edmunds and the knowledge I am gathering is great! Two quick question; is cap cost the same as selling price (minus incentives, down payment, left over from trade in.). Is base lease rate and money factor the same? If I have a base lease rate of 2.0 what am I calculating that with?
 
Thanks.

#66 of 173 Re: newbie question [karl_e] by delta737h

Jun 02, 2011 (9:45 am)

Replying to: karl_e (Jun 02, 2011 7:34 am)
Welcome to Edmunds, karl!
 
Cap cost and sell price are, conceptually, two different things. Let's look at some terminology...
 
The agreed upon value is the FRBB's Regulation M term for selling price. If amounts are capitalized (i.e., financed) in the lease (e.g., acquisition fee, taxes, etc.), then those amounts are added to the agreed upon value. The sum is called the gross capitalized cost. If there are cap reductions (e.g., cash, trade credit, incentives), then these amounts are deducted from the gross cap. The difference is called the adjusted capitalized cost. If there are no amounts financed and no cap reductions, then the agreed upon value, gross cap, and adjusted cap will all have the same value.
 
The base lease rate is that rate with zero dealer profit and is offered to those with outstanding credit. The base rate, AKA buy rate, doesn't mean the dealer doesn't make a profit on the deal. It only means that they don't make a profit on the financing piece. Money factors are generally based on a tiered structure. For example
 
0.00200 + 0% reserves (0 dealer profit)
0.00220 + 1% reserves
0.00240 + 2% reserves
etc...
 
Some fund providers incorporate a fixed dollar amount into their money factors which means that the dealer earns a profit regardless of the money factor. I think American Honda Finance does this but I'm not not sure.
 
A base rate of 2 may mean a money factor of 0.00200 or, it may mean an interest rate of 2%. And so, you need to get clarification. Ally Bank (GMAC) is one of only a few fund providers that uses an interest rate.
 
The money factor is used to compute your monthly payment...
 
Payment = F x (C + R) + (C - R)/N
 
F = Money Factor
C = Adjusted Cap Cost
R = Residual Value
N = Term (months)
 
If you have an interest rate, it can be converted to a money factor approximation by simply dividing the interest rate by 24. So, a 2% interest rate equates to a money factor of approximately 0.02/24 = 0.00083. By the way, money factors are formatted as 0.00XXX.
 
Hope this helps.
 
John
The AutoLeaseGeek

#67 of 173 Re: newbie question [delta737h] by karl_e

Jun 02, 2011 (1:02 pm)

Replying to: delta737h (Jun 02, 2011 9:45 am)
Yes. It cleared up the difference. Thank you for the details.

#68 of 173 Re: How to Calculate Monthly Lease Payments [kirstie_h] by carfreak1229

Jul 01, 2011 (2:57 pm)

Replying to: kirstie_h (Jan 13, 2010 6:41 am)
You could do ALL of this with a calculator and possibly mess up, or you could punch the numbers into WWW.Leaseguide.com 's calculator">link title

#69 of 173 NJ Leasing by im_brentwood

Jul 02, 2011 (10:16 pm)

In New Jersey you only pay sales tax on the difference between the sales price (gross cap) and the residual, NOT the payment.
 
Example:
 
Car is $20,000
Acq fee is $595
 
Gross cap cost $20,595
 
residual is $11,000
 
$9,595 is taxable.
 
Basically you're only paying sales tax on the depreciation, NOT the depreciation plus interest.

#70 of 173 Re: NJ Leasing [im_brentwood] by delta737h

Jul 03, 2011 (2:47 am)

Replying to: im_brentwood (Jul 02, 2011 10:16 pm)
Unless there have been NJ legislative changes recently and, with all due respect, consumer retail leases in NJ are taxed in much the same way that they are here in Ohio. In Ohio and NJ, tax is levied on the sum of the monthly payments, including interest. To wit and per
 
http://www.state.nj.us/treasury/taxation/pdf/ssutlease.pdf
 
"Agreements for a term of more than six months: The lessee pays the sales tax to the lessor either on the original purchase price of the leased property or on the total of the periodic payments required under the lease agreement. (Whether the tax will be calculated on the purchase price or the total of the periodic payments is negotiable between lessor and lessee.)
Note:
Interest or finance charges will not be excludible from the lease payments when calculating the amount of tax due."
 
Source:
 
http://www.state.nj.us/treasury/taxation/pdf/ssutlease.pdf
 
http://www.state.nj.us/treasury/taxation/mvleasetrans.shtml
 
http://www.state.nj.us/treasury/taxation/streamfaqs.shtml
 
John
The AutoLeaseGeek

#71 of 173 Re: NJ Leasing [delta737h] by im_brentwood

Jul 03, 2011 (9:49 am)

Replying to: delta737h (Jul 03, 2011 2:47 am)
It's different for automobile sales.
 
http://www.state.nj.us/treasury/taxation/pdf/njcar.pdf
 
Pararaph 63 on page 16. Legislation has been effect since at least 1989. There's a more concise explanation, but it's not on a public website (DealerTrack)
 
I work New Jersey lease deals every day, it's important to know this as a number of unscrupulous dealers will use the other method during negotiations to pick up gross.

#72 of 173 Re: NJ Leasing [im_brentwood] by delta737h

Jul 03, 2011 (12:47 pm)

Replying to: im_brentwood (Jul 03, 2011 9:49 am)
Unless I'm missing something, there is nothing in the New Jersey Sales and Use Tax Act, Streamlined Legislation (P.L. 2005, c. 126, effective October 1, 2005, that suggests or implies that SSUTA does not apply to retail automobile leases.
 
The following document...
 
Streamlined Sales and Use Tax Law: Motor Vehicle Leasing Issues
(Based on Questions from the National Vehicle Leasing Association)
 
The information below applies to leases entered into on and after 10-1-05, which is the effective date of the adoption of the streamlined sales tax provisions.
 
http://www.state.nj.us/treasury/taxation/streamfaqs.shtml
 
at paragraph (8) provides...
 
8. What is the tax base under the total lease payments method?
 
For purposes of the total lease payments method, is the amount of the lessee’s trade deficit paid off through the lease excluded from the tax base? Yes, the amount of the trade deficit is excluded.
 
Are separately stated delivery charges excluded? Delivery charges incurred to transport the vehicle to the dealer/lessor’s place of business are included in the tax base. Prior to October 1, 2006, delivery charges that related to delivery of the vehicle by the dealer/lessor directly to the lessee were excluded from the tax base. On and after October 1, 2006, delivery charges that relate to delivery of the vehicle by the dealer/lessor directly to the lessee are included in the tax base.
     
Are separately stated interest, financing, and carrying charges excluded? No, such charges are not deductible in determining the tax base under the lease payments method.
 
Also, see...
 
http://www.state.nj.us/treasury/taxation/mvleasetrans.shtml
 
You cited an old document from 1989. The revised (SSUTA 2005) seems to supercede the old (1989). Accordingly, and without definitive proof to the contrary, I would reasonably assume that total payments are taxed, including interest, per SSUTA (2005). I would like to see the more concise explanation from DealerTrack and confirm the same with the NJ Dept. of Revenue. Until then, I have little choice but to assume that NJ currently taxes retail automobile leases at 7% using the total number of payments, including interest, as the tax base unless, of course, the code of regulations state otherwise.
 
If what you're saying is true, then it's a half-assed way for the NJ Dept. of Revenue to do business as there doesn't seem to be any documentation regarding your claim.... at least not at the NJ website that I can see. Of course, definitive proof can be found in the NJ Code of Regulations as that's the final authority and not the website.
 
What you're claiming is that tax is levied on the depreciation amount disclosed in the lease. If the tax rate is 7% and the depreciation amount is $8,000, then the sales tax is $560. I assume that NJ defines depreciation as the difference between the adj cap and the residual per the FRBB's Reg. M. In addition, cash cap reductions (e.g, customer cash, cash incentives, loyalty cash, etc.) are taxable and trade deficits (i.e., negative equity) are not taxed as well as trade credit. Also, acquistion fees are taxed seperately if not included as an amount capitalized.
 
Just out of curiousity, have you made tax calculations manually to confirm that your software is computing tax on just the depreciation which excludes interest charges? Who is your software provider?
 
John
The AutoLeaseGeek

Messages Page 8 of 18

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