Buy vs. Lease

[LeftieBiker]

Leasing is not for people who have the mentality of wanting to keep a car for a decade or so.

If you want to own an EV but either don't qualify for the federal tax credit, or aren't certain you will still want the EV you have in mind in three years, then leasing is often the way to go. The residual on a 2016 Leaf, with 107 mile range, is about $12k - very "buy-able." The tack that GM is taking on leasing may mesh better with typical American lessees, but to experienced EV drivers it is a slap in the face. They are basically saying, to retirees and others with low taxable income, "If you want to actually own a Bolt, win the lottery."

 

[JupiterMoon]

Several of your arguments are contradictory, or are puzzling, at least.

What parts are contradictory?

Leasing, it appears, is great for people who really like the idea of having a new car every few years. I've heard that reasoning expressed for leasing an EV here any number of times. It's like your phone, it's gonna be obsolete in three years. To me, those are the people who are making a car a priority in their lives. Leasers are the ones who like to say they totally fooled the leasing company into giving them an unrealistic residual. A buyer and keeper does not care in the least about the future value of the car. They don't care because they have no reason to care. They plan on keeping the car until it has negligible value.

I'm not strictly talking about EV's...I'm talking about leasing any car. It has nothing to do with being obsolete. That's not the issue here..at least not for me. Leasing doesn't make your car the priority. It makes it a tool to use both economically - both in the sense of a write off and also not having to be nickle'd and dime'd later on after the cars warranty has expired. It also is far more hassle free in some cases where service costs and procedures are included (for some manufacturers not all). I also personally don't know anyone who leases their car and says they fooled the leasing company. Nor do I know anyone who is leasing who cares what their car's future value will be because they don't plan to ever buy the car they are leasing. So I'm not sure where you are getting that from.

I paid cash for the Bolt, just as I have for every car I've ever owned. This is not being in a "bind" but just the opposite. Being in a bind, to me, is being forced to turn in a car after an arbitrary time period and having to get another even though I might be perfectly happy with the one I am driving. I'd pay to avoid that hassle. Fortunately, avoiding it actually costs less.

Usually people who lease do not consider returning their car and getting a new one as a "bind". They enjoy getting a newer model and don't see it in a negative light like you do. Instead, what they do see in negative light is future issues and repairs were they to keep the car they leased for a far longer period of time. They choose to deal with the "hassle" of the change over to another new vehicle over having to spend time at a dealership over and over again for careful maintenance and obvious repairs down the road. It's a personal choice.

Are you talking about repairs outside of warranty? My last car I've owned for nearly 14 years and I think it's had two out-of-warranty repairs aside from oil changes. So it's difficult to know what kind of BS you are talking about here. Maybe you've owned some really lousy cars, I don't know.

Most people I know are not so lucky to own a 14 year old car and only have two out-of-warranty repairs. That's an exception and not a rule. It's not BS, it's reality. Just because you have had good fortune with used cars doesn't mean others have. And frankly most people don't have time nor the energy to deal with car issues...especially people in LA where their cars are their legs to get around unfortunately. Up until 2008, I only owned used cars. I started driving over 20 decades earlier. I had my fair share of problems, leaks, etc. Why the hell should I drive such vehicles when I can drive a new, clean, up-to-date in both safety and tech vehicle?

This is a personal choice. If you are happy driving around in a 15 year old car, more power to you. I'm not. There's no right or wrong. But the merits are clear and different.

 

[JupiterMoon]

Leasing is not for people who have the mentality of wanting to keep a car for a decade or so.

If you want to own an EV but either don't qualify for the federal tax credit, or aren't certain you will still want the EV you have in mind in three years, then leasing is often the way to go. The residual on a 2016 Leaf, with 107 mile range, is about $12k - very "buy-able." The tack that GM is taking on leasing may mesh better with typical American lessees, but to experienced EV drivers it is a slap in the face. They are basically saying, to retirees and others with low taxable income, "If you want to actually own a Bolt, win the lottery."

I agree GM is being a piss-poor company about the Bolt right now. But then so was BMW with their i3 when it first came out. But regardless that's not an issue with "leasing." That's an issue with GM.

If someone who wants to lease is on the fence about what they want to do after the lease is over, they shouldn't lease. That's my opinion. Leasing should be done only if you know what you are going to do or are the type of person who is going to return the car at the end of the lease.

 

[gpsman]

Like I said earlier, I can afford to go either route.
Neither buy or lease has any significant advantage for me. Which is why I'm looking for miniscule advantages to tip the scales.

Unfortunately, the scales are pretty well balanced.

Leasing for example means the hill top reserve feature and trying hard to never fully drain or fully recharge to protect battery longevity has no value.
I'd probably charge once a week and run that battery scale the full range.

OTOH if I buy, I will obsess over "optimizing" everything. But not a negative. I'd consider that a hobby! ( like getting 150% of EPA gas mileage rating out of my hybrids, while most people get 75% )

In the past I spent zero minutes on this subject.
Buy was the only choice.

Many people here have made strong, even compelling reasons to lease. But I just realized that I was an earlier adopter of hybrids, and I never considered a lease on them and was comfortable with ownership. An EV today is no riskier than first generarion hybrids. Tell me why this is wrong.

Leaning towards purchase 50.0001%.
Leaning towards leasing 49.9999%.

My fed tax liability is 5 digits.... well for 2016 anyway.
I could lose my job tomorrow.
Then I guess that throws a monkey wrench into the works. If the first owner never claims the $7500 credit can the second owner? I should think yes, adding resale value. Right?

 

[LeftieBiker]

I agree GM is being a piss-poor company about the Bolt right now. But then so was BMW with their i3 when it first came out. But regardless that's not an issue with "leasing." That's an issue with GM.

That's pretty much what I wrote.

If someone who wants to lease is on the fence about what they want to do after the lease is over, they shouldn't lease. That's my opinion. Leasing should be done only if you know what you are going to do or are the type of person who is going to return the car at the end of the lease.

I'm not sure how it helps to buy a car if you aren't sure that you want to keep it more than three years. ;-)

BTW, at least one person seems to think that leased cars have to be turned in when the lease ends. Not usually! A high residual can make that the best option, but you can usually buy the car if you love it or think it's worth keeping.

 

[Schnort]

If the first owner never claims the $7500 credit can the second owner?

Nope.

 

[WetEV]

Buy vs lease can be complex.

There is one key point. Cost vs Risk.

Leasing is likely to more expensive. Leasing is lower risk.

Leasing companies make money. By leasing, you are paying them to take risks. See Casinos, long term you don't win. See insurance, if you can't afford the risk but can afford to have someone else take it, it can be prudent to do so.

A couple of special cases: If you can expense a lease for a business, leasing makes more sense. If you can't get most or all of the Federal tax credit, leasing makes more sense. If you drive more miles than a lease allows, buying makes more sense. If you are more likely to get a new car every 3 years, leasing makes more sense. If you are more likely to own for 10 years, buying makes more sense. If your credit is bad, owning makes more sense.

Where it gets complex is when multiple factors apply.

 

[michael]

it's true that leasing companies make money, but also consider that American business is judged by this quarter and next; not by what might happen in three years.

The car companies want to sells units NOW, at a profit. The leasing companies want to book business NOW. If they plant time bombs of unrealistic residuals that might or might not explode three years down the line, oh well.

Executives know that if they don't show results now, they won't be around in three years to deal with the consequences. If they can be successful now, they will be promoted and the consequences will be someone else's.

I'm confident today's EVs will be of very low value in three years. Manufacturers and leasing companies are willing to take that risk to get my business today. That's why I'm leasing EVs even though previously I would buy conventional cars

 

[gpsman]

I'm confident today's EVs will be of very low value in three years. Manufacturers and leasing companies are willing to take that risk to get my business today. That's why I'm leasing EVs even though previously I would buy conventional cars

I'm in this boat. I would always buy a conventional vehicle.

I also believe the EV's will depreciate faster.
But I don't care if I love the car and want to keep it 10 years. I just don't KNOW if I will love it. Mostly worried it will be too small.

NOT worried it won't last 10 years.

 

[floamis]

I'm confident today's EVs will be of very low value in three years. Manufacturers and leasing companies are willing to take that risk to get my business today. That's why I'm leasing EVs even though previously I would buy conventional cars

I'm in this boat. I would always buy a conventional vehicle.

I also believe the EV's will depreciate faster.
But I don't care if I love the car and want to keep it 10 years. I just don't KNOW if I will love it. Mostly worried it will be too small.

NOT worried it won't last 10 years.

This is the view I am taking as well. I have no doubt the car will be fine for 10 years. That would also be the most cost efficient approach. However, EV's are more like smartphones than traditional cars. I don't know if I would want to own the same smartphone for the next 5+ years, with the way they improve each year. Same thing with EVs, they are improving so fast each year; I'm pretty sure the urge to get the latest and greatest (whether it's Bolt 2.0, Model 3, or Leaf 2.0) for me will be overwhelming in 3 years time. That has certainly been the case with other sorts of tech for me! I will gladly pay the premium on a lease to satisfy that urge (as well as the curent urge for the Bolt) down the line.

 

[marshallinwa]

Leasing is not for people who have the mentality of wanting to keep a car for a decade or so.

They are basically saying, to retirees and others with low taxable income, "If you want to actually own a Bolt, win the lottery."

Not every retiree has a low income. Plus even if their retired income is low due to not spending much of their savings, in some cases, the retiree may have an enough 401k or equivalent savings that can be converted to a Roth Ira and use up $7,500 federal tax credit, if they should choose to spend their savings on an electric car.

Frankly, I think low income individuals would be better off investing in increasing their skill set so they can earn more money then buying a new car.

Personally, these electric cars have been depreciating so much over three years, that I've been considering a used Kia Soul EV. What still keeps me looking at the Bolt is the range issue with these used EVs, the upgrade to my electrical panel, and the on-board charger issue with the Kia Soul EV.

 

[JupiterMoon]

I think a great idea that I'd definitely sign up for in order to keep my EV for a longer period of time is to lease the battery pack. Like Renault is offering as a ln option for the Zoe.

The Zoe's new pack is identical to the old one size wise and is directly replaceable with older Zoe's already out on the road.

In three years, six years, whatever, the Bolts pack could be upgraded to a newer denser, faster charging pack that can be simply dragged and dropped into your current Bolt.

That's how I think it should be. It would also raise residual values of EVs as most people judge the their depreciation on battery tech and not much else.

 

[JupiterMoon]

Leasing is not for people who have the mentality of wanting to keep a car for a decade or so.

They are basically saying, to retirees and others with low taxable income, "If you want to actually own a Bolt, win the lottery."

Not every retiree has a low income. Plus even if their retired income is low due to not spending much of their savings, in some cases, the retiree may have an enough 401k or equivalent savings that can be converted to a Roth Ira and use up $7,500 federal tax credit, if they should choose to spend their savings on an electric car.

Frankly, I think low income individuals would be better off investing in increasing their skill set so they can earn more money then buying a new car.

Personally, these electric cars have been depreciating so much over three years, that I've been considering a using Kia Soul EV. What still keeps me looking at the Bolt is the range issue with these used EVs, the upgrade to my electrical panel, and the on-board charger issue with the Kia Soul EV.

Easier said than done in terms of investing money into acquiring a new skill. This country's economic structure is very unforgiving and people have little to no safety net to fall back on if they are required to earn more money while doing something else at the same time.

And gets even harder when your age goes up and you've got a system that couples ones healthcare with having to have a job. It's such a broken system it's embarrassing.

 

[LeftieBiker]

And they call EV enthusiasts "elitists"... I guess a few of them actually are.

 

[wwhitney]

I'm pretty sure the urge to get the latest and greatest (whether it's Bolt 2.0, Model 3, or Leaf 2.0) for me will be overwhelming in 3 years time. That has certainly been the case with other sorts of tech for me! I will gladly pay the premium on a lease to satisfy that urge (as well as the curent urge for the Bolt) down the line.

You can satisfy that urge with a purchase as well, by selling the car in 3 years. The economics of the lease versus buy question then becomes a question of forecasting the value of the car in 3 years, arguably a difficult forecast.

For a detailed example, take a loaded LT with an MSRP $39,790, a sales price of $1,000 off MSRP, 9% sales tax, $400 in license fees, and an $80 doc fee. The out the door cost to purchase is $42,761. If you lease for 36 months at 0.00072 money factor, $2,500 in CCR from GM, a 60% residual, and a $2,500 driveoff payment, your monthly payment including tax will be $402/month. If you get $2,500 from the California rebate program, your total lease cost is $14,465 (that's 35 * $402 plus $395 disposition fee).

If instead you finance the car at, say, 3% on a 5 year loan, again with $2,500 driveoff reimbursed by the $2,500 California rebate, that's a $737/month payment, assuming no loan fees. After 35 payments of $737, your remaining loan balance will be $17,140. If you pay off the loan at that point, your total cost for the car will be $35,435 (that's 35 * $737 + $17,140 - $7,500 federal tax credit).

So in this example, if the 3 year old Bolt can be sold for at least $21,000 in 2020, you'll be better off buying than leasing. If the 3 year old Bolt is worth less than $21,000, you'll be better off leasing. This assumes the cash flow works for you either way, ignores the differential time value of the two cash flow schedules, and includes some rounding at a couple steps.

Note that the lease in this example has a residual of $23,874 and a capitalized value of $35,614, so the total lease fees and interest are $2,532. While the loan interest is $2,674. That is, while the lease has an effective interest rate of 1.73%, it has $990 in acquisition/disposition fees, so the total cost is close to the 3% interest on the loan. If the loan rate were lower, the breakeven 2020 market value would be lower. For example, at 0% loan APR, it would be $18,300 (that's $32,761 net cash purchase cost - $14,465 lease cost).

Cheers, Wayne

 

[floamis]

I'm pretty sure the urge to get the latest and greatest (whether it's Bolt 2.0, Model 3, or Leaf 2.0) for me will be overwhelming in 3 years time. That has certainly been the case with other sorts of tech for me! I will gladly pay the premium on a lease to satisfy that urge (as well as the curent urge for the Bolt) down the line.

You can satisfy that urge with a purchase as well, by selling the car in 3 years. The economics of the lease versus buy question then becomes a question of forecasting the value of the car in 3 years, arguably a difficult forecast.

For a detailed example, take a loaded LT with an MSRP $39,790, a sales price of $1,000 off MSRP, 9% sales tax, $400 in license fees, and an $80 doc fee. The out the door cost to purchase is $42,761. If you lease for 36 months at 0.00072 money factor, $2,500 in CCR from GM, a 60% residual, and a $2,500 driveoff payment, your monthly payment including tax will be $402/month. If you get $2,500 from the California rebate program, your total lease cost is $14,465 (that's 35 * $402 plus $395 disposition fee).

If instead you finance the car at, say, 3% on a 5 year loan, again with $2,500 driveoff reimbursed by the $2,500 California rebate, that's a $737/month payment, assuming no loan fees. After 35 payments of $737, your remaining loan balance will be $17,140. If you pay off the loan at that point, your total cost for the car will be $35,435 (that's 35 * $737 + $17,140 - $7,500 federal tax credit).

So in this example, if the 3 year old Bolt can be sold for at least $21,000 in 2020, you'll be better off buying than leasing. If the 3 year old Bolt is worth less than $21,000, you'll be better off leasing. This assumes the cash flow works for you either way, ignores the differential time value of the two cash flow schedules, and includes some rounding at a couple steps.

Note that the lease in this example has a residual of $23,874 and a capitalized value of $35,614, so the total lease fees and interest are $2,532. While the loan interest is $2,674. That is, while the lease has an effective interest rate of 1.73%, it has $990 in acquisition/disposition fees, so the total cost is close to the 3% interest on the loan. If the loan rate were lower, the breakeven 2020 market value would be lower. For example, at 0% loan APR, it would be $18,300 (that's $32,761 net cash purchase cost - $14,465 lease cost).

Cheers, Wayne

Understandable. I probably should've mentioned that a reason for me to lease is the ease of it all. The payments are simpler, and lower. I don't have to apply for the $7,500 tax incentive. I also don't need to worry about the depreciation. I won't lose sleep if it turns out leasing cost more than buying. More importantly, I don't need to have to sell the car later on. I know I don't plan on keeping the car for more than 4 years, so why not lease in my case? I understand leasing is not usually the better financial decision, but at least for the Bolt, it is the better decision for me right now.

 

[stevewa]

We debated long and hard about this. I'm a big believer in buying things and getting their full value out of them. But in this case we went with the 36 month lease. To get to a payment we'd be comfortable with would have meant a large downpayment, effectively gambling on whether or not the federal tax credit will exist by the time we file our 2017 taxes. Plus, we got badly burned on the poor resale of the LEAF which we purchased outright in 2011 (this is probably the biggest influencer on our decision making as of now).

I'm also amazed at how much simpler the entire process is for a lease versus buying. We spent maybe 15 minutes with the finance manager versus the hours it always seems to take for a purchase.

We will see how I feel about it in three years when I'm facing any return fees or a inflated purchase price for a used car, but right now it seems like we made the right choice.

Our lease details:

Trim Level LT
Options Fast Charge provision
Comfort/Convenience package
Driver Confidence package
Kinetic Blue Metallic

Total list price with Destination 39,690.00
Plus Title/License/Registration +384.00
Plus Lease Acquisition fee +595.00
Plus Documentation fee +115.00
Gross Capitalized cost 40,784.00
Cap Cost Reduction -4,076.81 (2,500 from GM, balance cash down)
Adjusted Cap Cost 36,707.19
Residual Value -23,020.20
Depreciation and amortized amounts 13,686.99
Rent Charge +1547.85
Total base of scheduled payments 15,234.84
Monthly payment 423.19

Our cash down plus first monthly was $2000. If we had done no cash down our drive off would have been in the $470 range.

 

[Lithim]

Heres one testimonial for leasing:
In 2013 I leased (first time ever) a 2012 electric car for two years. Toward the end of the lease I contacted the finance company to ask about negotiating the residual value. They were not willing to discuss the issue.
On the day I was turning in the car at the end of the lease I asked the salesman at the dealership to contact the finance company. Lo and behold they offered a price that was about 43% of residual. I took the deal and am now the owner of my formally leased car.
My year car can now be purchased used at various sites across the country for about 67% of the price I paid almost two years ago.
Stay charged my friend

 

[Anonymous]

Heres one testimonial for leasing:
In 2013 I leased (first time ever) a 2012 electric car for two years. Toward the end of the lease I contacted the finance company to ask about negotiating the residual value. They were not willing to discuss the issue.
On the day I was turning in the car at the end of the lease I asked the salesman at the dealership to contact the finance company. Lo and behold they offered a price that was about 43% of residual. I took the deal and am now the owner of my formally leased car.
My year car can now be purchased used at various sites across the country for about 67% of the price I paid almost two years ago.
Stay charged my friend

Great experience! Good for you. Haven't you encountered any problems in your car? Your story could be a great encouragement in leasing a car. Maybe your leased car is in good condition and you are a good owner of it. That is because you maintain your car until now and get some profit on it in the future.

 

[ssspinball]

Lease for 2 years with the $7500 credit back from the leasing company. Then lease again for 2 years with another $7500. That's what I'm doing. No unknown depreciation risk AND cheaper than a purchase.

Of course this requires a manufacturer that offers competitive 2 year leases and the full $7500 credit, which Chevy currently doesn't.