Lease then Buyout - Contract Explanation

[mmumman]

Hi,
I am in AZ as well. Is there a chance I could contact you and have your expertise on this car. Thanks!! Mike

Chris is correct. Immediate buyout mitigates almost all of the rent charge (interest) which is applied to both the Adjusted Cap Cost and Residule Value.

Without seeing the contract it would be difficult for me to be exact. But based on the numbers above...

Adjusted Cap Cost is $40141 - $6700 = $33441
Rent charge per month is ($33441 + $21200) * 0.00195 = $106.54
You must have rolled some other stuff into amortized amounts because I calc the base payment at $446.56 without tax and $473.91 with tax. I'll use your monthly of $529 below however.

Adjusted lease balance per section 22D would be $33441 minus any accrued/paid depreciation and amortization...so $423 ($529-$106). Now you are at $33018. Remember that rent charges are earned in advance. So, assuming you do this right away, the portion of unearned rent for the month would be retuned/factored in. Assuming same day buyout, the depreciation and amortized amounts paid is only the first month so it would still be the $33018. This would be the balance subject to rent so $33018 * 0.00195 = $64. The remainder of the $106 rent charge comes from interest on the residual which, as Chris mentioned, is no longer required.

There may be some daily interest factored in as the contract mentions the constant yield method but it would be minimal at best. This is standard for a typical 10 day buyout amount on any loan.

That all said, I would approx your same day buyout (adjusted lease balance per sec 22D) to be approx $33K plus tax, so approx $35K'ish total.

I'd also like to add that I'd take 6.25% along with those license fees anyway of the year. Much higher for both here in AZ.

Chris is correct. Immediate buyout mitigates almost all of the rent charge (interest) which is applied to both the Adjusted Cap Cost and Residule Value.

Without seeing the contract it would be difficult for me to be exact. But based on the numbers above...

Adjusted Cap Cost is $40141 - $6700 = $33441
Rent charge per month is ($33441 + $21200) * 0.00195 = $106.54
You must have rolled some other stuff into amortized amounts because I calc the base payment at $446.56 without tax and $473.91 with tax. I'll use your monthly of $529 below however.

Adjusted lease balance per section 22D would be $33441 minus any accrued/paid depreciation and amortization...so $423 ($529-$106). Now you are at $33018. Remember that rent charges are earned in advance. So, assuming you do this right away, the portion of unearned rent for the month would be retuned/factored in. Assuming same day buyout, the depreciation and amortized amounts paid is only the first month so it would still be the $33018. This would be the balance subject to rent so $33018 * 0.00195 = $64. The remainder of the $106 rent charge comes from interest on the residual which, as Chris mentioned, is no longer required.

There may be some daily interest factored in as the contract mentions the constant yield method but it would be minimal at best. This is standard for a typical 10 day buyout amount on any loan.

That all said, I would approx your same day buyout (adjusted lease balance per sec 22D) to be approx $33K plus tax, so approx $35K'ish total.

I'd also like to add that I'd take 6.25% along with those license fees anyway of the year. Much higher for both here in AZ.

 

[BrandonH]

Are there any national lenders with good interest rates that do a type of loan that can be used to finance the lease buyout? I know it isn’t technically a new car at that point and a used auto loan or a normal auto loan refinance loan might not be allowed for a lease buyout either.

 

[NYLAWBIZ]

Are there any national lenders with good interest rates that do a type of loan that can be used to finance the lease buyout? I know it isn’t technically a new car at that point and a used auto loan or a normal auto loan refinance loan might not be allowed for a lease buyout either.

Credit Unions usually offer the best car loan rates. If you do the buyout early enough in the lease, you will still qualify for new car rates (instead of used car rates, which are higher).

 

[SilverNitr8]

Before I plunge on the lease agreement this weekend, I'm hoping you guys can verify my understanding of the contract.

So let's say I have the following scenarios:

1. MSRP 50,000
2. Gross Cap Cost (Negotiated Value) 45,000
3. VA Tax 4.15% (Sales and Use Tax is collected upfront)
4. Residual 50% <- is this always taken from the MSRP?
6. Money Factor .00229
7. Trade in 10,000
8. Lease Cash + Rebate 8900
9. Acquisition Fee 650
10. Doc Fee 500
11. Lease Term 36
12. TTL = 75

As I understand it, when calculating the first months payment in the contract (6A) constitutes this...
1. Capitalize Cost Reduction (Trade-in + Lease Cash + Rebate) = (10,000 + 8900) = 18900
2. Sales/Use Tax on Capitalized Cost Reduction (18900 *.0415) = 784.35
3. First Monthly Payment:
Adjusted Gross Cap Cost = (Gross Cap Cost - Capitalized Cost Reduction) = 45000 - 18900 = 26100
Residual Value = MSRP * Residual = 50000 * .50% = 25000
Depreciation = (Adjusted Gross Cap Cost - Residual Value)/Lease Term = (26100 - 25000)/36 = 30.56
Rent Charge = [(Gross Cap Cost - Capitalized Cost Reduction) + Residual] * Money Factor = [(45,000 - 18900) + 25000]*.00229 = 117.02
First Monthly payment = Depreciation + Rent Charge = 30.56 + 117.02 = 147.58
4. Refundable Security Deposit = 0
5. Acquisition Fee = 650
6. Initial License, Title, and Registration Fees = 75
7. Sales Use Tax = (Gross Cap Cost * Tax) = 45000 * .0415 = 1867.50

Total Due at Signing = Sum of 1-7 = 18900 + 784.35 + 147.50 + 650 + 75 + 1867.50 = 22424.35

If I buy out my lease then it will be Buyout fee of 300 + Monthly payment (for the days the car is on lease) + Residual 25000 = roughly 25400

Am I right? Also the Sales Use Tax is taken from the selling price before rebates and trad-in right?

 

[Mach_Tuck]

If I buy out my lease then it will be Buyout fee of 300 + Monthly payment (for the days the car is on lease) + Residual 25000 = roughly 25400

If you buyout immediately you would pay the adjusted lease balance as is explained in Post #1 and further defined on the back of the lease agreement...dont remember the section off the top of my head. Your math above looks correct to me. The only unknown is the tax and how it plays into the buyout amount. You state that it is ALL due upfront so i dont imagine there is any more to pay on the buyout. My state works different so i cannot say for sure on yours. Typically you would NOT pay sales tax on the trade on (in AZ you get a credit against new sales tax owed actually), you would on the rebate and lease cash.

 

[shaggystinger]

Before I plunge on the lease agreement this weekend, I'm hoping you guys can verify my understanding of the contract.

So let's say I have the following scenarios:

1. MSRP 50,000
2. Gross Cap Cost (Negotiated Value) 45,000
3. VA Tax 4.15% (Sales and Use Tax is collected upfront)
4. Residual 50% <- is this always taken from the MSRP?
6. Money Factor .00229
7. Trade in 10,000
8. Lease Cash + Rebate 8900
9. Acquisition Fee 650
10. Doc Fee 500
11. Lease Term 36
12. TTL = 75

As I understand it, when calculating the first months payment in the contract (6A) constitutes this...
1. Capitalize Cost Reduction (Trade-in + Lease Cash + Rebate) = (10,000 + 8900) = 18900
2. Sales/Use Tax on Capitalized Cost Reduction (18900 *.0415) = 784.35
3. First Monthly Payment:
Adjusted Gross Cap Cost = (Gross Cap Cost - Capitalized Cost Reduction) = 45000 - 18900 = 26100
Residual Value = MSRP * Residual = 50000 * .50% = 25000
Depreciation = (Adjusted Gross Cap Cost - Residual Value)/Lease Term = (26100 - 25000)/36 = 30.56
Rent Charge = [(Gross Cap Cost - Capitalized Cost Reduction) + Residual] * Money Factor = [(45,000 - 18900) + 25000]*.00229 = 117.02
First Monthly payment = Depreciation + Rent Charge = 30.56 + 117.02 = 147.58
4. Refundable Security Deposit = 0
5. Acquisition Fee = 650
6. Initial License, Title, and Registration Fees = 75
7. Sales Use Tax = (Gross Cap Cost * Tax) = 45000 * .0415 = 1867.50

Total Due at Signing = Sum of 1-7 = 18900 + 784.35 + 147.50 + 650 + 75 + 1867.50 = 22424.35

If I buy out my lease then it will be Buyout fee of 300 + Monthly payment (for the days the car is on lease) + Residual 25000 = roughly 25400

Am I right? Also the Sales Use Tax is taken from the selling price before rebates and trad-in right?

Also, make sure they aren't messing with you on the DOC fee. Two different VA dealers I worked with had doc fees in the $800+ range. It's negotiable but the VA dealers aren't caped on the doc fees like the MD dealers are by law (max $300). Just check the paperwork thoroughly before you sign. Good luck!

 

[SilverNitr8]

If you buyout immediately you would pay the adjusted lease balance as is explained in Post #1 and further defined on the back of the lease agreement...dont remember the section off the top of my head. Your math above looks correct to me. The only unknown is the tax and how it plays into the buyout amount. You state that it is ALL due upfront so i dont imagine there is any more to pay on the buyout. My state works different so i cannot say for sure on yours. Typically you would NOT pay sales tax on the trade on (in AZ you get a credit against new sales tax owed actually), you would on the rebate and lease cash.

Thanks Mach_Truck. Yeah in my state it is all up front and as long as I can show that I am the one who paid it, then I'm good. In section 7 where it lists the items that factor in your monthly payment, letter J. Month Sales/Use Tax, I just need to make sure that is 0 right?

 

[Mach_Tuck]

Also, make sure they aren't messing with you on the DOC fee. Two different VA dealers I worked with had doc fees in the $800+ range. It's negotiable but the VA dealers aren't caped on the doc fees like the MD dealers are by law (max $300). Just check the paperwork thoroughly before you sign. Good luck!

and i thought only AZ dealers extorted people on doc fees!

 

[SilverNitr8]

Also, make sure they aren't messing with you on the DOC fee. Two different VA dealers I worked with had doc fees in the $800+ range. It's negotiable but the VA dealers aren't caped on the doc fees like the MD dealers are by law (max $300). Just check the paperwork thoroughly before you sign. Good luck!

That's funny, every time I talk to a dealership about the doc fee, they just tell me it's not negotiable.... I don't understand why Virginia allows documentation fee to be uncapped when other states regulate it to protect consumers from being handled by dealerships. I've seen anywhere from 699 - 799 in this area.

 

[Mach_Tuck]

Thanks Mach_Truck. Yeah in my state it is all up front and as long as I can show that I am the one who paid it, then I'm good. In section 7 where it lists the items that factor in your monthly payment, letter J. Month Sales/Use Tax, I just need to make sure that is 0 right?

Correct, you should have no monthly tax payment if paid upfront. i suppose the point is moot since you intend to buy it out anyway.

 

[Mach_Tuck]

That's funny, every time I talk to a dealership about the doc fee, they just tell me it's not negotiable.... I don't understand why Virginia allows documentation fee to be uncapped when other states regulate it to protect consumers from being handled by dealerships. I've seen anywhere from 699 - 799 in this area.

$999 is the highest i have seen in AZ at a few of the "luxury" dealers. Have not seen one north of $1K yet but i dont imagine it is far off. Straight f*&*ing robbery is what it is.

 

[sk1p]

I got some information from a VA dealer here, for a GT2. Does this seem like a good deal?

The 622, 585, and 550 were just the dealer trying to lower the monthly to tempt me into signing asap.

I'm likely going to go the lease then buyout(finance) option.

 

[SilverNitr8]

I got some information from a VA dealer here, for a GT2. Does this seem like a good deal?

The 622, 585, and 550 were just the dealer trying to lower the monthly to tempt me into signing asap.

I'm likely going to go the lease then buyout(finance) option.

Which dealer did you go to? You should go get an itemized quote to see what the value of the car is. Monthly payment is not a good basis for deal if you are buying out the lease.

 

[sk1p]

Dulles motorcars in Leesburg.

Well the Net cap after the lease cash and rebate is 42479, is that what you mean by the itemized quote? Fees taxes and 1st payment is 3477.03.

I'm also waiting for the costco auto program dealer to give me a quote.

I'm a car buying noob so i'm taking it slow and learning. The Stinger GT isnt my end all be all car (although it is quite awesome)

 

[SilverNitr8]

Dulles motorcars in Leesburg.

Well the Net cap after the lease cash and rebate is 42479, is that what you mean by the itemized quote? Fees taxes and 1st payment is 3477.03.

I'm also waiting for the costco auto program dealer to give me a quote.

I'm a car buying noob so i'm taking it slow and learning. The Stinger GT isnt my end all be all car (although it is quite awesome)

You should go and get the broken down details, like acquisition fee (650), taxes, doc fees.....when they lumpsum amounts like that, they could be jacking their dealer fee or charging you twice the tax, or increasing the acquisition fee. I would get their MSRP, Selling price, tax, doc fee, acquisition, money factor. Some dealership mark up the MSRP. and make sure you are getting the lease and rebate.

 

[sk1p]

You should go and get the broken down details, like acquisition fee (650), taxes, doc fees.....when they lumpsum amounts like that, they could be jacking their dealer fee or charging you twice the tax, or increasing the acquisition fee. I would get their MSRP, Selling price, tax, doc fee, acquisition, money factor. Some dealership mark up the MSRP. and make sure you are getting the lease and rebate.

Makes sense, i'll call the dealer and tell him to send me all the broken down details in an email or the deal's done and over.

Edit: pfff they said they shredded the deal info when i left.. so i have to come in again tomorrow morning and write all the details down. Bleh.

 

[SilverNitr8]

lol oh the games they play

 

[sk1p]

lol oh the games they play

They can play all the games they want
As long as i get my info.

 

[Waynerm002]

A break down would help, price of the car, selling price, etc..

 

[SilverNitr8]

So I just pull the trigger and leased the GT2 AWD. Can someone check the numbers for me....

Here is my breakdown:
Price of the vehicle: 48096
Rebate applied: 8900
Total Purchase Price:39196
Processing Fee: 799
Business License Tax: 66.09
License Fee: 42.75
Title Fee: 15
Filing Fee: 17
Tax: 1659.79
Total OTD is 41790.63

My breakdown for Amount Due At Lease signing (section 6 of the contract):
Section A: Amount Due at Lease
1. Capitalized Cost Reduction: 25400 (this includes my 16500 Trade-in + 8900 rebates)
3. First Month Payment: 113.46
All else is marked N/A
11. Total 25513.46

Section B: How the Amount Due at Lease will be paid:
1. Trade : 16500
2. Rebates: 8900
3. Cash: 113.46
4. is NA
5. Total 25513.46

Section 11. Itemization of Gross Capitalize Cost:
A. Agreed Upon Sales Value of Vehicle: 48096
B. Sales Use Tax: 1725.88
C. License, Title and Registration Fee: 69.75
E. Dealer Documentation Fee: 799
K. Acquisition Fee: 650
L. Total Gross Capitalized Cost 51340.63
All else is N/A

Section 7. Monthly Payment breakdown:
A. Gross Capitalize Cost: 513450.63
B. Capitalize Cost Reduction: 25400
C. Adjusted Capitalized Cost: 25940.63
D. Residual Value: 26150
E. Depreciation: -209.37
F. Rent Charge: 4293.93
G. Total Base Monthly Payment: 4084.56
I. Base Monthly Payment: 113.46
L. Total Monthly Payment: 113.46
All else in N/A

Ok so the finance manage said that if I buyout the car it will be the residual value + the total of my monthly payment which is 4084.56. However, I don't think he is quite right because that 4084.56 is based on the 113.46 * 35 months. So I think it should just be the residual of 26150 + the 300 buyout right?

So if that is right, with my 16500 down + 300 buyout + Residual of 26150 my total comes out to $42950 Does this seem right? With the 41790.63 OTD I'm slightly confuse how the toal jumped to 42950, there is a difference of 1159.37. 300 of it I know is from buy out so where are the rest?