VWVortex.com - Learn how to calculate a lease...
 Username or Email Address Do you already have an account? No, create an account now. Yes, my password is: Forgot your password? Stay logged in

# Thread: Learn how to calculate a lease...

1. Little known subject to buyers is Yield Spred Premium.
YSP. Dealerships get YSP(back end premium payment from a lender) when they charge customers with higher rate than they actually qualify.
Don't forget, It is buyers market. Interest Rate is low.

2. I agree with GTiandrewK. I found out this 7 years ago when I bought my first financed car.
My credit wasn't that great so I had to eat the high interest rate. Later I found out from another dealership that the dealer gets a profit from any rate above the one given by the bank.
As always, shoot for the lowest APR or Money Factor.

3.  Quote, originally posted by Intgr8VAG » I agree with GTiandrewK. I found out this 7 years ago when I bought my first financed car. My credit wasn't that great so I had to eat the high interest rate. Later I found out from another dealership that the dealer gets a profit from any rate above the one given by the bank. As always, shoot for the lowest APR or Money Factor.

This is exactly how mortgage lenders make \$\$\$. (This and charging points)

4. Hi All:
Just a couple of other notes on Leasing that I did not see addressed in the other threads.
VW Credit has a Acquisition Fee of \$575. This fee is capatilazed so when you are trying to figure your lease payment take the Cap Cost or sale price and add \$575 to it to arrive at the Adjusted Cap Cost. Then deduct the residual from this number. The number divided by the term equals your monthly depreciation payment. To figure the rent charge take the adjusted cap cost plus residual and multiply by the rate factor. This figure will be your monthly rent fee. Add the 2 figures together and you will have your base payment. In Michigan this payment would be subject to 6% tax adding the 3 figures together would give you your total payment.
As some states charge tax on the total cap cost instead of use tax like in Michigan you would need to know how the tax is figured for your state. If charged up front it would be added to the adjusted cap cost before deductiong the residual.
This brings me to another item the VW Drivers Option Program. The VW Web sites payment calculator is very deceptive as it generally figures the Drivers Option payment to be less than the lease payment. This might be true in a state where the customer pays all the tax up front however, in Michigan and most other States that is not the case. Drivers Option payments here are always higher than lease payments. The purchase option at the end of the contract is the same as the lease. Hence very few people ever use the Driver Option Program in Michigan.
12000 vs 15000 mile leases: The payment increase to go from a 12000 mile lease to a 15000 mile lease is typically between \$10-12 per month. Basically the residual is 2% less on a 15K lease than a 12K lease. So on a vehicle with a \$20000 MSRP the residual would be \$400 less on the 15K lease. On a 48 mont payment it would increase your depreciation portion by \$8.33 400/48. However, the rent charge would decrease as you are adding the same cost to a lower residual before multiplying by the rate factor. So assuming a .00175 rate factor the rent charge would decrease by \$.70 (400x.00175=.70)
On a 4 year lease the excess mileage charge with VW is \$.15 on 12000 mile leases and \$.12 on 15000 mile leases. So a person that contracts for 12K and drives 15K would have an excess mileage charge of \$1800 at the end of 4 years vs paying maybe \$450-500 more up front in payments by selecting the 15K lease in the first place. So the moral is if in doubt take the 15K lease as you will recover the difference in about the first 3500 miles you go over the 12K plan.
Someone asked why advertised lease specials always show a down payment. The logic is simple. Dealers spend thousands of dollars advertising. In Detroit a full page ad in the Detroit News runs between \$20,000 -\$30,000. The object of advertising is to catch the eye of a potential customer by having a very attractive price point. So typically the vehicles advertised will be the lower trim level cars, with manual transmissions, minimal option, the advertised payments are always before tax, and the down payment used is a number we use to arrive at an attractive price point for that vehicle hopefully less than the competitions. A \$199 payment looks much better than a \$231 payment. So by creating the ad with a \$1000 down payment the dealer is able to offer the \$199 price point.
When in doubt about what the dealer is doing simply ask for a copy of the lease worksheet on the add car. You can then apply the numbers to the vehicle you are interested in and keep the dealer honest. In other words the work sheet will tell you the residual %, rate factor, cap cost, down payment. So let say you want the automatic instead of the manual. The MSRP is \$875 more the invoice is \$864 more. Simply apply the new numbers to the work sheet to calculate the payment.
If the dealer is reluctant to share the worksheet information with you find another dealer. A common practice is the Bump. The Bump is to increase profit in the ad deal when the customer changes to a more expensive vehicle, changes the down payment, or the term of the lease. A common bump logically explained by skilled salespeople is the vehicle change. It goes like this:
So the vehicle you want is \$875 more than the advertised car. We are not changing the mark up just adjusting for the automatic transmission. So if we take the \$875 divided by the term 36 your payment will only be \$24.30 more for the automatic. To which most consumers reply OK. The fact is the 875 transmission has a residual of about \$480 so the actual difference in the depreciation portion of the payment is only like \$11.00 per month. The dealer just picked up almost \$500 more profit with the Bump. There are a million ways to create the Bump. So the best advice is take the lease worksheet and analize it. Unless you are leasing the ad car which is generally a pretty safe deal as the profit has been greatly reduced to get you in to the store.

5. WOW! Only 8 posts and such a valuable response! Some people will certainly appreciate your information, even if it was nothing new to me .
Thah Bump example sounded very interesting, even though I immediately knew what was going on . It's best to be on the lookout!
As far as Buyer's Option or Premiere Purchase goes, I agree that if your state only charges tax on the monthly payments, lease is a better option as the acquisition fee is offset by the tax saving (unless you're leasing a Kia Rio, but you'd insane to lease such a low residual value vehicle). Unfortunate states like TX (where I live) Balloon loans are always cheaper than lease since no acquisition fee is in place. Also most states with their stupid vicarious liability laws will stop leasing very soon and a more expensive balloon loan will be the only option to "rent" vehicles.
At any rate, welcome to the Car Purchasing forum, there are several of us who can help others, but any newcomer with the inside info never hurts! [IMG]http://*****************.com/smile/emthup.gif[/IMG]

6. Yeah, a person that understands leasing would catch that Bump right away. However, most consumers do not have a clue.
There are as many ways to bump as there are cars. Another favorite is the mileage Bump. When a customer asks how much more to go to 15K from 12K. Goes like this:
Well lets see the up front mileage charge is \$.10 so your looking for 9000 extra miles. That would be \$900. KaChing...Just racked up another \$500 and change.
Then there is the Credit Challenged soul who knows he is a fish. VW Credit comes back with a B tier or C and we work them back down to an A or B and keep the difference by just not telling the customer we worked the bank back to a lower credit tier.
Another favorite is the \$1000 out of pocket lease where the security deposit is waived and converted to cap cost reduction keeping the payment the same. Net result more \$
I guess the point is Retail Brick and Mortar Sales will never change. I have been at this 20 years. The last 5 doing nothing but Internet business. This is the only way to go. Unfortunately, there are very few dealers that have really embraced the Internet and customers get frustrated waiting days for a response to their inquiry, or worse the sales person trys to handle the e-commerce customer like a Brick and Mortar customer.
We handle it very differently here. I post both MSRP and Invoice prices on every vehicle in stock on our site. I have about 20 different Internet Specials representing basically the entire line up. I even have a special where the customer can request the Internet price structure for every VW via auto-response. I did post it live at one time. However, the Michigan VW Dealers do not actively use references to invoice in their advertising so I made it interactive where the consumer is requesting the pricing. The auto response come right back telling them by model what the mark up is as a percentage over or under invoice. This month most are well under invoice with the dealer cash.

7. I got a spreadsheet to calculate the leasing payments, it works quite well for me. I usually go directly to the dealer and request money factors and residual numbers, they always release that data but they put the "good through date" on the paper, last one was quite impressive. 0.00149 x 36 mo @ 55% for and A4 '03 1.8T. That's about \$430 for a fully loaded one w/ \$2000 down.
Anyway if somebody is interested, I have no problem to share it. I just hope my inbox doesn't get flooded. yvanh@cantv.net

8. Often a dealer will give you a money factor that is marked up. It looks like that happend in your case if that rate info is current.

9. This is a great thread. I've learned a lot already. I'm awful at math (dropped in grade 10) and just know I'm going to get burned when I go to buy my next car. So maybe I can ask a quick question here.
Let's say my next car is \$65,000.
I have absolutely no interest in keeping it longer than 3 years. I have no attachement to owning a car, I'm perfectly happy in just getting rid of it and getting something new.
I live a little beyond my means and want to be able to affod the nicest car possible, but want to keep my montly payments as low as possible.
How should I pay for the car?
I assume it would be to lease it with no money down and use what I would've spent on my downpayment (say \$10,000) for instance each month on my higher monthlies.
Am I correct?

10. In the current car market, if you plan to keep a car less than five years, you are almost always better off leasing because of depressed resale values.

11. My question comes on the favorite issue of sales tax. I understand that the State of Ohio has changed some of their laws recently in this regard, and I haven't been able to dig up the actual statue.
So normally, I recall that in Ohio the sales tax used to be factored based on your monthly payments: "Well, sir - you're payments are \$300.00 per month plus tax".
But if that has changed to the total purchase price (as in a purchase), how does one appropriate the tax to the lease?

12. Use the calculator on page one of this very thread. It will take care of it.
If you want to do it yourself, you just add sales tax to the cap cost and don't add sales tax to the individual payments. Easy as that.
However if your state assesses tax on the entire sale price of the vehicle instead of the monthly payments (this is the case in TX) you might be better off with a premiere purchase/buyer's option balloon loan. No bank fees, easier paperwork, and you don't get double taxed if you decide to keep the car at the end of the term. Also, run the numbers on both scenarios and see which one works out better.
I hope this helps.

13. I am a VW dealer in Mass. and we do it to show a low monthly payment. However; most people put little if no money into a lease.
Why would you put money down towards something that depreciates? Buy a house or something that will gain in value.
Noone should buy a car unless they drive only a few thousand miles a year and keep a car for at least seven years.

14. At the rates we are using today, noone in their right mind would pit money down towards a lease and I "roll in" those fees for most of my customers.
With the money you put into these leases; you could be making a little even on a money market. Better yet...........put your money into a CD you can rollover and you will have made money instead of giving it away to some corporate entity, such as VW or Audi.

15. Got a few instock now and would arrange shipping for the right price!
I am a dealer in MASS and would love to put it together for you! Sounds as if your dealer isn't looking hard enough.
Email me if you are interested or post here.

16. Sold Audi's for Clair International in Boston, MA for years and never got the right calculations from the calculators on Audi or VW's site. NEVER! Don't believe everything that you see on their site. It is only to draw you into the showroom.
I know I should not say this but ; "trust me, it never works out to within \$40 a month." It is always higher than the calculator says it will be. Check it out for yourself..........go to a dealer and try leasing or ballooning a car for the AFS or VCI quote. It will never happen. They will look at you and say you are crazy and you can show them yourself online; but they will show you with an actual lease or balloon calculation done with the numbers that are provided to them by AFA or VCI.

17. With the balloon note the bank also agrees to finance your residual for you, keeping your payment the same until the car is paid off. The catch is... you finance the remaining balance at the interest rates available at the end of the balloon period for however long it takes to pay off your loan.
Too many what if's to deal with and there is no telling how long your loan could be. What happens if rates go back up over 7%?!? You could be paying for that car for a total of 8 years. You probably will be in an equity position after 6 years; but you could have been driving a fresh car long ago, with a warranty, new features, and for a payment that is affordable.
Food for thought!

18. You wrote: "With a conventional loan for 60 months, for the first 20 months or so you actually owe more than the car is worth. With the baloon you owe more than the car is worth for 36-48 months depending on the term of your baloon. You can think of it as a 90 month long conventional loan that you trade in after 48 months.
So your monthly payments on a baloon that runs for 20 months would be the same as the monthly payments on a 60 month regular loan. I hope that made it clear."
This is not accurate at all. Can you give some follow up info, so I can better understand your point?

19. Residuals are provided to all dealers by the lease company and the dealer cannot adjust them for any reason except to compensate for the increase or decrease in the expected mileage you will be driving. The residulas are dependent upon the region you live in as well.

20. Equity is an abstract concept with cars. You can only have true equity if you "own" an appreciating asset. Most new cars will never be worth the purchase price, let alone more. Most people never truly own a car and when you lease it you certainly don't "own" it and when you finance with a bank conventionally you don't "own" it until that last monthly payment is made.
You pay for the equity you think you have!
Figure out how much a car will cost over a five year period financing it conventionally. Once you have paid it off......sell it(this is what most will do). Then figure out how much you put into it in monthly payments, taxes and maintenance. Deduct the selling price of your used car and deduct it from the other incremental costs and this gives you your "true cost of ownership". Once you do this with your lcalculation with your last car; you will never "buy" or want to "own" another car again.

21.  Quote, originally posted by Swampyankee » Sold Audi's for Clair International in Boston, MA for years and never got the right calculations from the calculators on Audi or VW's site. NEVER! Don't believe everything that you see on their site. It is only to draw you into the showroom. ..........go to a dealer and try leasing or ballooning a car for the AFS or VCI quote. It will never happen.

While I agree that the calculator on the VW and Audi website is for rough estimate I would beg to disagree with the fact that you can never get a car for that rate. You can do a lot better in most cases actually since the calculator uses MSRP to get the numbers and you would be insane to pay MSRP for any of these cars nowadays. I am paying \$416/month for my A4 Avant for 39 months and the AoA calculator showed \$470 at that time for my car.
 Quote, originally posted by Swampyankee » With the balloon note the bank also agrees to finance your residual for you, keeping your payment the same until the car is paid off. The catch is... you finance the remaining balance at the interest rates available at the end of the balloon period for however long it takes to pay off your loan."

Not entirely true..... Interest rates, or should I say interest rate increase over the original rate, are capped so it might be lower than the actual current interest rate offered at the end of the term. You have to read the agreement to be able to say anything accurate.
Balloon loans are not made in lieu of 8+ year conventional loans. They are made of in lieu of leases in states where leasing is infavorable tue to taxes or it is not possible any more due to vicarious liability cases. If anyone does a balloon he/she shoud be ready to turn the car back in at the end of the term, especially with the inflated residuals that we've been seeing in the past couple of years. AF and VWC will be losing money left and right on balloon returns (according to an article the automotive industry has lost over \$2 billion (!) in 2002 on negative equity on lease and balloon turn-ins, which is money that lessors and balloon loan buyers won).
 Quote, originally posted by Swampyankee » You wrote: "With a conventional loan for 60 months, for the first 20 months or so you actually owe more than the car is worth. With the baloon you owe more than the car is worth for 36-48 months depending on the term of your baloon. You can think of it as a 90 month long conventional loan that you trade in after 48 months. So your monthly payments on a baloon that runs for 20 months would be the same as the monthly payments on a 60 month regular loan. I hope that made it clear." This is not accurate at all. Can you give some follow up info, so I can better understand your point?

A 24 month lease on a car would cost roughly the same on a per month basis with zero down as a 60 month conventional loan payment. As na example, on a \$30K car a 60 month loan with 5% would be \$566/month (I ignored TT&L for the sake of simplicity). If this car has a residual value of 63% after 24 months (\$18,900), a balloon loan for 24 months would be \$565/month with the last payment being \$18,900. If you don't believe me, just put the numbers into my calculator that is posted on the beginning of this thread. This should drive home the point.
 Quote, originally posted by Swampyankee » The residulas are dependent upon the region you live in as well.

Not if you're leasing an Audi or VW, their residuals and money factors are national rates at the moment .
I find it hard to believe that you're selling cars for a living by posint all this misinformation and confusion..... Given that I am just an "amateur" who is on the other side of the desk and only deals with "car buying" (I don't buy them I rent them) every 3 years it seems like I should be selling the cars instead of you .
Now that we set the records straight let's get back to regualr scheduled programming!

22. If you know so much about the car industry and financing why don't you join the crowd. We could use another "I think I know it all type on our sales floor."
Nice job taking most of my statements out of body and not understanding them fully. Keep up the good work.
You could not hack it in the car business because you have no interest in having an open mind. Apparently; you seem to be a product of the run down school system in the great State of Texas. Are they ranked in the top 48 states for education yet?!? I am sure you'll find some sort of calculator or statistical information to prove your point.
Just so you know....I am in the top 50 nationally for volume sales of VW's and in the top 15 in my region for volume sales of VW's. Who do you think know's more?!? Me or you? I know your response.

Modified by Swampyankee at 12:42 AM 11-3-2003

Modified by Swampyankee at 12:49 AM 11-3-2003

23.  Quote, originally posted by Swampyankee » If you know so much about the car industry and financing why don't you join the crowd. We could use another "I think I know it all type on our sales floor."

I think I can earn my own daily bread wit developing software for a living, thank you very much. And the more I see how car sales operate the less I want in on it....
 Quote, originally posted by Swampyankee » Nice job taking most of my statements out of body and not understanding them fully. Keep up the good work. You could not hack it in the car business because you have no interest in having an open mind.

I quoted every single line from your posts, I did not take anything out of context. I just pointed out that nothing is as simple and clear cut as it might seem. I did not disagree with you on your points for the most part I just tried to state that your answers were not complete or entirely accurate (to which you have yet to rebut). And I have plenty of open mind....

 Quote, originally posted by Swampyankee » Apparently; you seem to be a product of the run down school system in the great State of Texas. Are they ranked in the top 48 states for education yet?!? I am sure you'll find some sort of calculator or statistical information to prove your point.

Hahaha! Best line from you so far! Too bad you're sorely mistaken again (ask me if I'm suprised ). Just because I live in Texas today does not mean I am a born and raised redneck now, does it? I actually grew up in Europe and moved to Texas to get higher education. I successfully graduated from a fully accredited private university ( http://www.tcu.edu ) with a BS in computer science and currently taking master level courses at UTA Arlington part time to get my MSCS degree. And as we all know the UT system is second best to MIT in the nation.....
 Quote, originally posted by Swampyankee » Just so you know....I am in the top 50 nationally for volume sales of VW's and in the top 15 in my region for volume sales of VW's. Who do you think know's more?!? Me or you? I know your response.

Given that you have 14 posts on Vortex and I have been around for a year and a half helping the community I think I'll let my posts speak for themselves. In the meantime feel free to read all my posts in this very thread from page 1 as well as check out the financial calculator that I whipped together for the masses (page 1 in this thread).
And here are some of the financial gems that I managed to put together over time and managed to find this morning (again, look for my name to see what I had to say):
http://forums.vwvortex.com/zerothread?id=933117
http://forums.vwvortex.com/zerothread?id=906203
http://forums.audiworld.com/a4...phtml
http://forums.audiworld.com/a4...phtml
And remember, people on message boards are usually judged by their posts (not the number of them, but their value) and not by their profession. There are plenty of VAG sales managers lurking on Vortex and helping out others. You might want to take notes from Cyberrick to see how it's done..... (he didn't have to prove his point that he's a sales manager, his valuable posts spoke for themselves)

24. can anyone help me figure out what my payment for a vehicle thats 185000 out the door with nothing down will be? would it be the same formula??

25. In order to figure out the payment you need all the pieces of the puzzle.

For advertising information click HERE

Page 2 of 6 First 123456 Last

#### Posting Permissions

• You may not post new threads
• You may not post replies
• You may not post attachments
• You may not edit your posts
•
 Terms of Use