Check My Math

[Via Chicago]

Evening All,

I'm hoping someone can help me see where I'm going wrong with my math. Today I received a quote on a GT2 AWD. Below are the details.

36mo/12k lease
MSRP = 52,300
Offered Purchase Price = 50,750
Money Factor = .00198
Residual = 51%
Lease Cash = 7,200
Taxes = 8.375%
Title/Lic/Fees = 1,200

With nothing down, I'm getting a payment of about $698. The dealer is saying the payment will be $736. Before I even start to negotiate on their offered purchase price, I want to understand why our numbers are so far off. Am I missing something? Happy to share my calcs if it helps.

Thanks in advance, everyone.

 

[Chris]

Evening All,

I'm hoping someone can help me see where I'm going wrong with my math. Today I received a quote on a GT2 AWD. Below are the details.

36mo/12k lease
MSRP = 52,300
Offered Purchase Price = 50,750
Money Factor = .00198
Residual = 51%
Lease Cash = 7,200
Taxes = 8.375%
Title/Lic/Fees = 1,200

With nothing down, I'm getting a payment of about $698. The dealer is saying the payment will be $736. Before I even start to negotiate on their offered purchase price, I want to understand why our numbers are so far off. Am I missing something? Happy to share my calcs if it helps.

Thanks in advance, everyone.

Post your calculations.
Did you remember sales tax?

 

[Via Chicago]

MSRP = 52,300
Purchase Price = 50,750
Title/Licence/Fees = 1,200
MF = .00198
Residual = 51%
Tax = 8.375%

Gross Cap Cost = 51,950 = 50,750 + 1200
Adjusted Cap Cost = 44,750 = 51,950 - 7200
Residual Value = 26,673 = 52,300 * 0.51
Depreciation Amount = 18,077 = 44,750 - 26,673
Base Payment = 502.14 = 18,077/36
Rent Charge = 141.42 = .00198 * (44,750 + 26,673)
Tax = 53.90 = 0.08375 * (502.14 + 141.42)
Monthly Payment = 697.45 = 502.14 + 141.42 + 53.90

 

[Via Chicago]

In looking at my quote again, I'm a bit more clear on what they're doing. They listed a purchase price of 50,750 and then they did a cap cost reduction of only 5,650 (instead of 7,200). The difference between 7,200 and 5,650 is 1,550. If I add 1,550 back onto 50,750, I'm right back at the MSRP of 52,300. So they've basically quoted a lease payment on MSRP but switched a few numbers around to try to make it look otherwise. I will give the sales guy a chance to respond, but this is the type of stuff that makes me dread car shopping.

 

[Chris]

Might be your "rent charge" calculation that's off.

The .00198 MF comes out to 3.55% interest. When you are trying to calculate this you need to look at it as two loans. (Both at 3.55%) the first one is the loan on the depreaction amount. Figure this as a normal loan. The other loan you need to add in is an interest only loan on the residual.

Go to: Lease Calculator
Put in your numbers, when I did it using your numbers it came out at 716, but I don't know if your state taxes the lease cash, or how they tax the lease itself. There also could be a lease aquistion fee in there somewhere..

Bottom line is you need the dealer to break it all down for you. Make them show you exactly how they got the number..

 

[Via Chicago]

I thought a .00198 MF broke down to 4.752 (multiplying .00198 by 2400). I'm now able to replicate their numbers, and I feel more confident in my own calculations.

 

[Chris]

I thought a .00198 MF broke down to 4.752 (multiplying .00198 by 2400). I'm now able to replicate their numbers, and I feel more confident in my own calculations.

my fault, I plugged in the wrong number on leasehackr.

 

[Via Chicago]

No worries. I appreciate you replying and linking that site. Thank you, Chris.

 

[MarkyMark]

MSRP = 52,300
Purchase Price = 50,750
Title/Licence/Fees = 1,200
MF = .00198
Residual = 51%
Tax = 8.375%

Gross Cap Cost = 51,950 = 50,750 + 1200
Adjusted Cap Cost = 44,750 = 51,950 - 7200
Residual Value = 26,673 = 52,300 * 0.51
Depreciation Amount = 18,077 = 44,750 - 26,673
Base Payment = 502.14 = 18,077/36
Rent Charge = 141.42 = .00198 * (44,750 + 26,673)
Tax = 53.90 = 0.08375 * (502.14 + 141.42)
Monthly Payment = 697.45 = 502.14 + 141.42 + 53.90

Thanks Via Chicago for clearing this up - that is the rent charge.

Rent Charge = 141.42 = .00198 * (44,750 + 26,673)

So the bank takes the depreciated amount, AND the starting Cap Cost (which the customer and dealer work out), add them together and then smack it with about 4.8% interest and throw that on monthly for 36 months. Wow!

I was missing adding in the Cap cost portion. I couldn't figure out why on earth, but it's all making sense now...

STILL, I can still use the GT $4800 lease cash, negotiate down $2500 (fall/winter - assuming all things are still equal of course), and do the buy-same day move, and it comes out to be about $36,500 or so in total (including a loan for the residual.

That's better than what I could negotiate off the sticker today for a purchase. It hurts to pay interest on the residual in the lease, and pay it all, then turn around and have to finance it, but if Kia Financial is willing to pony up $4,800 for me to play the game, so be it Jedi.

Now, there are some fees associated with this lease, purchase same-day move - something abut $300 or $600, I really don't know, but if you do, I'm all ears!

Thanks so much!