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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 8 of 18

#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

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

Jul 03, 2011 (4:42 pm)

Replying to: delta737h (Jul 03, 2011 12:47 pm)
John,
 
The state itself is half-assed, as you say, particularly the MVC (Which seems to make up rules as it goes along).
 
Unless the laws have recently changed dramatically, New Jersey has historically only charged sales tax on the principal, not the interest.
 
Bank fees have always been taxable, Doc fees and MV fees are not taxable; warranties, etc are.
 
Trade differences, irrespective of equity or not, are tax exempt.
 
Granted the deals that I usually work are highly subvented, rate driven programs where the total lease charges are minimal, but it's still worth bearing in mind. I do know that NJ as well as other states have different ways of computing taxes on leases, it's possible that upfront taxes may well be different than financing them, there was, I do recall, a loophole in Illinois law that allowed this at one point.

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

Jul 04, 2011 (2:49 am)

Replying to: im_brentwood (Jul 03, 2011 4:42 pm)
You said...
 
"Unless the laws have recently changed dramatically, New Jersey has historically only charged sales tax on the principal, not the interest. "
 
That's true but, apparently, SSUTA (2005) changed all of that. I've seen several different NJ dealer (Honda, Infiniti, GMAC (Ally), FMC) lease worksheets, over the last 22 months, compute sales taxes that comply with the SSUTA (2005) legislation in which interest is taxed. Moreover, sales tax is disclosed in the lease agreement which triggers a paper trail. If a dealership consistently over taxes or under taxes, and has the misfortune of being selected for a state audit, it could find itself in a very taxing situation (pun intended). And so, it's extraordinarily unlikely, and a real stretch, to say that these dealers are pocketing the alleged excess tax. Not only is it wrong and downright immoral, no dealer with any brains is going to risk engaging in such illegal practice. Furthermore, there is no way on earth that a fund provider like Honda or GMAC is going to permit sales tax to be computed in a way that violates state laws... ditto for the software providers. Otherwise, it would create a liability culminating in a river of lawsuit filings each hoping to be eventually certified as a class action.
 
There are four (4) methods used to compute sales tax…
 
(1) Tax lease payment streams as they are received. This is the easiest and by far the most commonly used method in such states as CA, FL, PA, and WA
 
(2) Tax selling price (IL, MD, NJ, SC, TX, VA)
 
(3) Tax the sum of the taxable payments (MN, NJ, NY, OH)
 
(4) Tax depreciation (CO)
 
Yup, in NJ there are two methods, both negotiable, in which leases can be taxed. One is tax levied on the selling price (i.e., agreed upon value); the other is tax on the total payments. I can't imagine why any consumer would opt to be taxed on the sell price as it's always cheaper to tax the total payments.
 
Depending upon how the lease is structured, the sales tax calculation can be quite complex especially in NY. To compound the problem, states have different regulations regarding the taxability of fees and rebates. Some tax acquisition fees and rebates; others don’t. Those that tax depreciation often define depreciation differently with respect to one another. Some define it as the difference between the adjusted capitalized cost and the residual while others define it as the difference between the sell price and residual. Some use the mathematically correct formulas to compute taxes in those instances where taxes are capped in the lease; others don’t.
 
In NJ and Ohio, it's illegal to levy sales tax on sales tax. So, whether you pay all the sales tax at lease inception or, finance the tax in the lease, the amount of sales tax liability is the same either way. However, in NY , it's a different story. It's amazing to me why the constitutionality of sales tax on sales tax hasn't been challenged in both federal and NY state courts.
 
John
The AutoLeaseGeek

#75 of 173 Just my $0.02 by kyfdx HOST

Jul 04, 2011 (6:22 am)

I do think NJ lease taxation has changed in the last couple of years..
 
As mentioned, it used to be strictly on depreciation, paid upfront... Now, it's on total payments, again paid upfront...
 
That's just from anecdotal evidence (you know, reading hundreds of posts, each day).
 
regards,
kyfdx

#76 of 173 question on residual by thalthewall

Aug 25, 2011 (4:57 pm)

Replying to: kyfdx (Jul 04, 2011 6:22 am)
is residual calculated as a percentage of MSRP or capitalized cost. Im looking at a kia sorento, and it seems they calculate the residual from the capitalized cost, not the msrp (hence raising the monthly lease payments). This seems to go against most of what i know, is this a Kia practice or is it industry standard or am i missing something?
 
thanks

#77 of 173 Re: question on residual [thalthewall] by kyfdx HOST

Aug 25, 2011 (5:02 pm)

Replying to: thalthewall (Aug 25, 2011 4:57 pm)
Residuals are calculated on MSRP.
 
Some makes (Toyota, for example) restrict the dollar amount of options that can be residualized. You can't really calculate the residual on a Toyota... you just have to get it from the dealer.
 
I haven't heard of Kia doing that, though..

Messages Page 8 of 18

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