OK, I'm sorry to start yet another thread on this, but I read the others and I'm still unclear.

If I pay the taxes up front, what amount do I use to calculate the taxes? Is it the lease price? Or is it the net cap cost?

If I roll the taxes into the lease, do the taxes get added after finance charges are calculated or am I paying finance charges on the taxes?

More general question: in NY, do taxes accrue monthly? If so, if I pay the entire tax liability up front, doesn't that mean the finance company is earning money on my tax payment?

Thanks.
LDK

If taxes are paid up front in a lease, it is on the agreed to selling price.

You will pay finance charges on the sales tax amount if you roll it into the monthly payment.

If sales tax is paid up front, the finance company pays that amount to the state up front as well. Then the finance company only earns interest on your monthly payment, excluding tax.

I hope this helps!!

OK, if I understand this correctly, my monthly finance charge would be:

(Net Cap Cost) + (Residual Value) + (Total amt of sales tax due) / Money Factor

So:

Lease Price: $28,902
Net cap cost: $8,808.45
Residual value: $18,788.55
NYC sales tax: 8.375%
Money Factor: .0009

Taxes rolled in to lease, my monthly payment should be $338.93.

Is that correct?

Thanks,
LDK

Basically in the state of New York, the way to calculate the sales tax is:

Base monthly payment x term of lease x sales tax rate in your county (8.375%) = total sales tax due up front.

I need the base monthly payment, term of the lease, and money factor in order to check your figures.

Hope this helps!!

So I'm only paying taxes on the amount of the car I use, not on the sales price of the car?



Net capital cost: $9180.45
Term: 36 months

Depreciation Fee: $255.01

Money factor: .00234

Residual value: $19,496.55

According to what you said, my tax bill, if I pay it up front, is $971.17--

(((9180.45 + 19496.55)*.00234)+255.01))*(.08375)*36= 971.17

If I understand this correctly, my total monthly payment, if I roll my taxes in, is:

(((9180.45+19496.55+255.01+(971.17/36))*.00234)+255.01+(971/17/36)=$349.75

I have asked one of our sales associates to double check your figures and you are calculating the sales tax correctly. Good luck and let me know if there is anything else I can do to help!!

I know this is an old thread but I am still confused as to how the monthly payment is calculated with sales tax being rolled in.

I studied the formula posted by LDK but it doesn't seem to make sense. Also, I tried it on my lease but it's not working. Can someone help?

Here is the formula for calculating tax on a lease in NY:
base monthly payment x term of lease x sales tax rate in your county = total amount owed.
Sales tax is paid up front to the state of NY, but to roll it into your payment, take the total amount owed and divide it by the term of the lease. Example: $300 base payment x 36 months = $10800.00 x 8.25% = $891.00 total owed to NY. Then divide $891.00 by 36 months = $24.75, the total monthly payment including tax is now $324.75.

sk330i,

It's confusing because it is confusing. Also, it doesn't seem to make sense because it doesn't make sense. So, I'll try to "unconfuse" it and make some "sense" out of it. I'll assume that your state computes sales tax on the payment streams and that you're not rolling in the first payment. Because most fund providers utilize a Money Factor(MF), we'll use that approach. Here is the three step procedure.

1st. Compute your monthly base payment (*PMT)...

*PMT = MF(*Adj.Cap+Res.Value)+(*Adj.Cap-Res.Value)/Term

The *Adj.Cap does NOT include sales tax.

2nd. Sales Tax Computation.

Sales Tax Liability(STL) = *PMT x Tax Rate x Term

3rd. Compute your lease payment (PMT) with taxes rolled in...

PMT = MF(*Adj.Cap+STL+Res.Value)+ (*Adj.Cap+STL-Res.Value)/Term

While taxes on interest is debatable and somewhat problematic, interest on taxes is perfectly legitimate even though it may seem like sour grapes. However, taxes on taxes is never a "good thing" as Martha might say. I know that Ohio does not compute taxes on taxes and neither does any other state as far as I know. And so, tax shouldn't be calculated based on a payment that already includes taxes which is why the above procedure computes two payments: *PMT is computed ONLY for the purpose of determining the sales tax. PMT, computed in step 3, is your lease payment and includes sales tax. If you're making a cash down payment (i.e., cap reduction), taxes will be collected on that as well and you'll most likely pay that tax up front. However, I don't advise making a down payment on a depreciating asset.

If your state computes taxes based on Sell Price or the Agreed Upon Value, simply multiply this amount by your sales tax rate and pay up front or; roll it into the lease as indicated in step 3.

Hope this helps.

Sarah, I don't think this is the case. I am actually paying finance charge on the tax since I am rolling it in. I tried your method and my number doesn't match the dealer's. We are off by a few bucks per month.

John,

What you are doing here is esentially calculating the lease with the sales tax paid upfront. Then you take the calculated total sales tax and add it to the cap cost and run the calculations again, only this time you don't add tax since it's been included in the cap cost. I tried this method but it still doesn't match the dealer's number.

sk330i,

You're absolutely correct. The fund provider is not going to pay sales tax on your behalf without charging you interest on the tax that's rolled into the lease. In other words, they're not going to give you an interest free loan. The numbers generated using my three step method should match those of the dealer. If not, then the dealer or fund provider is doing something wrong. Trust me, I see this happening a lot especially in those cases where the first payment is being capitalized in the lease. These people should try learning some mathematics.

Well, for my case, I am rolling in the acq. fee . I am also trying to roll in the sales tax as well. I talked to the salesperson (who's a friend of mine) and he also told me to use the same method as your 3-step instructions. However, he confirmed that doing it this way is not matching what his "lease maker" is presenting to him. He even went to his finance manager but didn't get an answer...I am so confused.

sk330i,

I've been working with some lease software developers in an effort to convince them to mend their ways. So far, I've managed to convince one such developer. The problem is that these people don't understand how to do mathematics including the dealers, software folks, and fund providers. If you like, you can send me an email and I'll be glad to intercede on your behalf. I can't promise you anything but I can, at least, speak their language and MAYBE get them to see what it is that they're doing wrong.

sk330i writes:



sk330i,

I don't know what the dealer or fund provider is doing and won't attempt to guess. The only way for me to know is to contact them.