lease calculation (interest) question

[RVD98072]

I'm reviewing my lease paperwork. I am leasing an inventory car (Model X 100D) that has been marked down ~$11k (including $1k referral credit).

My numbers look like this:

A. Gross Cap Cost: $110,762.00
B. Cap Cost Reduction: 2348.54
C. Adjusted Cap Cost: $108.413.46 (this looks like it's just A-B)
D. Residual Value: $71,330.00
E. Depreciation: $37,083.46
F. Rent Charge: $13,588.56
G. Total of Base Monthly Payments: $50,672.02 (this looks like it's just E+F)
H. Lease Payments: 36
I. Base Monthly Payment: $1,407.56 (this looks like it's just G/H)
J. Monthly Sales Tax: $125.27
Total Monthly Payment: $1,532.83 (this looks like it's just I+J)

The lease money factor is 0.0021 (interest rate 5.04%).

My question is on line item "F" - what is this and how do they calculate this? This number looks high to me if it's just interest payments over 36 months based on $37k at 5.04%?

RVD.

 

[Zaphod]

I'm reviewing my lease paperwork. I am leasing an inventory car (Model X 100D) that has been marked down ~$11k (including $1k referral credit).

My numbers look like this:

A. Gross Cap Cost: $110,762.00
B. Cap Cost Reduction: 2348.54
C. Adjusted Cap Cost: $108.413.46 (this looks like it's just A-B)
D. Residual Value: $71,330.00
E. Depreciation: $37,083.46
F. Rent Charge: $13,588.56
G. Total of Base Monthly Payments: $50,672.02 (this looks like it's just E+F)
H. Lease Payments: 36
I. Base Monthly Payment: $1,407.56 (this looks like it's just G/H)
J. Monthly Sales Tax: $125.27
Total Monthly Payment: $1,532.83 (this looks like it's just I+J)

The lease money factor is 0.0021 (interest rate 5.04%).

My question is on line item "F" - what is this and how do they calculate this? This number looks high to me if it's just interest payments over 36 months based on $37k at 5.04%?

RVD.

Calculating Rent Charge (Finance Fee)

 

[RVD98072]

From Edmunds to calculate the rent charge:

Take the adjusted capitalized cost and add it to the residual. Multiply that amount by the money factor. The resulting number will be the amount of interest charged per month. This is called the rent charge.

So it's basically (110,762+71,330)*.0021=$382.39*36=~$13,500

So I guess I get how it's calculated.

But looking at the big picture, it still seems odd to me that my monthly lease payment before taxes would be about $1,000 if interest rates were 0 but since interest rates are 5.04%, my monthly payments jump up to around $1400 (adds around 35% each month!)

I've never had a lease payment money factor / interest rate this high before but it seems like every % point makes a huge difference in monthly payments.

 

[Zaphod]

Bottom line, Tesla leases are awful compared to say BMW and others which are heavily subsidized to get attractive lease rates. 5% APR on $100K car will definitely add a non-trivial amount to the lease payment.

 

[RVD98072]

I've leased a lot of cars before but most of them have been with BMW (iirc <0.5% interest). I also leased a Nissan Leaf (<0.5% i think) and a Toyota (0.2%), etc. so it was always pretty much negligible.

I knew that 5% was high but didn't think it'd basically raise my payments by 35% every month.

Oh well...

 

[PARNY]

A lease is just a loan that you do not finish paying off. The end value is the residual. The difference is the depreciation on the car. This is divided by the loan term and paid evenly over the term of the loan. You are paying the interest on the balance of the lease which starts at the Adjusted Capital Cost of $108,413 and ends at the Residual Value. Each month you pay principal, reducing the amount borrowed and interest. The amount of principal you pay goes up each month as the balance goes down and the amount of interest you pay goes down each month. During the first year, your average balance is close to $100K so you are paying about $5K in interest. Less in year 2 and less in year 3 adding up to $13588. At the end of the lease, the balance is the residual value.

You can often do better buying the car on a long term loan, say 6 years. After 3 years you will still have a large balance owed on the loan, just like a lease. You can then sell or trade in the care or keep paying and keep the car. Aliant Credit Union offers a 6 year loan with $0 down at 1.5% interest. There are no acquisition fees, disposition fees, damage fees, mileage fees and you get the $7500 fed tax credit. You are assuming the risk that the value of the car will be at or greater than what you owe on the loan if you sell the car but the rates are so much less, you can set up the loan to pay off faster than the lease and still have a lower monthly payment.

Hope this helps.

 

[PARNY]

One more thought. For a rough estimate of the interest on a lease. You borrowed $108,413, the value of the car reduced by any cash down. At the end of the lease the value of the car is $71,330. The approximate average balance is half way between or $89,871. At 5.04%/year the interest is $4529/year or $13,588 for 3 years. This is a rough estimate because the average value of the lease is more than the mid point between the starting and ending balances. You payoff less principal on each payment in the beginning of a loan and more interest each month. At the end of the lease, you are paying more principal and less interest. The sum of both is set to be the same each month and is your monthly payment.

 

[bonaire]

The problem with the leases is that the residual value must be "good" in terms of what the value really will be in 3-years. A lot of the banks took chances with the early EVs on the roads - Leafs and Volts. They took a big bath on the value once the cars were returned and they had to take a $7-10k lower price at auction than the lease's residual value actually was. And that was on $35k msrp type cars, not 100k. If Tesla is self-leasing, then their risk is resale value at 3-years+ may impact their financials if they cannot re-sell at the residual value. They must still be taking the Fed Tax credit somehow and if unable to, this hurts them even more.

 

[RVD98072]

Thanks! This actually helps. I'm not too bad with numbers but lease calculations have always been a bit of a mystery to me.

 

[Hitman007]

5% seems like a high rate to lease. Shop some other options...

 

[RVD98072]

The standard Tesla lease money factor is .0021 or 5.04%.

Yes I agree it's too high. Maybe I'll just buy the car and with the 1.49% app.

 

[Artrageous]

About to lease a model x or maybe buy havent figured it out.. .noticed you got a good deal. let me know if you have any suggestestions...

 

[bonaire]

Why isn't cap cost at least reduced $7500 due to tax credit?