How Much I Paid for My Bolt

[roundpeg]

This thread isn't about what I thought it would be, but thanks for all the informative discussion about leasing!

The net affect for me is it's scared the poop out of me as far as leasing is concerned. Sounds like you hand the leasing company all the high cards and then hope they are either kind to you or they know less about the future value of the car than you do. The former seems highly unlikely and the latter almost impossible.

The other factor, in California at least, is the $2,500 rebate for EVs. The buyer has to own or lease the car for at least 30 consecutive months to claim it (or not have to return it, I guess). Another wrinkle.

 

[Schnort]

Sounds like you hand the leasing company all the high cards and then hope they are either kind to you or they know less about the future value of the car than you do.

It's quite the opposite. You agree on everything up front and you know your exact costs and obligations. They take the risk on the residual at the end of the lease. They're supposed to price it at depreciation plus some profit for them for the risk.

In my case, my i3 is worth considerably less than the residual, so it would be foolish to purchase it. I plan on returning it.

 

[Schnort]

It costs the finance company (usually Ally Financial Services - formerly GMAC - for GM brands) to do this, so there is some negotiating room.

I have an i3 that's about to come off of "lease" (it's the owners choice thing from BMW FS). They basically told me I had two choices: return the car as agreed, or pay the balloon payment as agreed. They said they could not negotiate.

Is this the dealer telling you this? Or the finance company?

BMW Financial Services said that. They're the ones who hold the note.

And like I said, there is no guarantee that you will be able to negotiate a lower purchase price. And if IIRC, the "owners choice" financing was structured differently than a traditional lease, but don't remember the details. What is the balloon payment? Retail (asking price) on used i3's (BEV) seems to be about $20-22K in Oregon.
If it's much more than that, return it and buy a used one? Or maybe the same one back from the dealer

Owners choice was purchase with the term (2 or 3 years) paying interest only payments, then have a balloon payment that's equal to the residual. You have the option to return the car to satisfy the balloon payment. It's basically a lease structured as a purchase (originally, I guess to deal with the federal tax rebates)

And yeah, my ballon payment is ~$28K for a completely stripped model BEV (heated seats was the only option on it). As much as I enjoy the car, I definitely won't be keeping it unless they highly discount it.

 

[DucRider]

And yeah, my ballon payment is ~$28K for a completely stripped model BEV (heated seats was the only option on it). As much as I enjoy the car, I definitely won't be keeping it unless they highly discount it.

Portland BMW has a couple of CPO 2014's @<$20K, both with heated seats, Nav system and a few other goodies. 14K miles on one, 16K on the other.
http://www.bmwportland.com/used-inv...cted=inventory-listing1-facet-anchor-model-31
They likely can't wholesale it for much more than $18K (if that). But if they stick with "Your contract says...", looks like they'll own a used i3.

If you have a good relationship with your local dealer, you might explore a buy back option (or look at their used inventory?) and see if you can't make a deal before you even turn it in.

 

[roundpeg]

Sounds like you hand the leasing company all the high cards and then hope they are either kind to you or they know less about the future value of the car than you do.

It's quite the opposite. You agree on everything up front and you know your exact costs and obligations. They take the risk on the residual at the end of the lease. They're supposed to price it at depreciation plus some profit for them for the risk.

In my case, my i3 is worth considerably less than the residual, so it would be foolish to purchase it. I plan on returning it.

Sorry, no believe. The leasing companies are in the business of having a good handle on residual values and thus minimizing their risk. That's how they make their money. It's like betting against an insurance company. You are gonna lose because they know the game inside out and you don't.

 

[user 387]

Sounds like you hand the leasing company all the high cards and then hope they are either kind to you or they know less about the future value of the car than you do.

It's quite the opposite. You agree on everything up front and you know your exact costs and obligations. They take the risk on the residual at the end of the lease. They're supposed to price it at depreciation plus some profit for them for the risk.

In my case, my i3 is worth considerably less than the residual, so it would be foolish to purchase it. I plan on returning it.

Sorry, no believe. The leasing companies are in the business of having a good handle on residual values and thus minimizing their risk. That's how they make their money. It's like betting against an insurance company. You are gonna lose because they know the game inside out and you don't.

Uh, I am quite certain that all of the details of the lease are specifically spelled out for you before you sign, so once you sign there should be no surprises. Unless, of course, you did not read the terms of the lease before you signed.

 

[roundpeg]

Uh, I am quite certain that all of the details of the lease are specifically spelled out for you before you sign, so once you sign there should be no surprises. Unless, of course, you did not read the terms of the lease before you signed.

Not the point at all. The point is the terms will protect the leasing company's interests, not yours. They know how to calculate residual values better than you ever will. As far as surprises are concerned, it sounds like those are quite possible too since you could easily end up in another negotiation with the leasing company at the end of the lease. It also appears that a lease is an especially bad deal for a buyer who doesn't drive very close to the maximum milage allowed under the terms of the lease before the overages kick in.

 

[Schnort]

Sorry, no believe. The leasing companies are in the business of having a good handle on residual values and thus minimizing their risk. That's how they make their money. It's like betting against an insurance company. You are gonna lose because they know the game inside out and you don't.

Sorry you don't believe. They bet wrong on the residual on my car, and most of the other leased EVs out on the road now.

 

[Anonymous]

> [Leasing is] like betting against an insurance company. You are gonna lose because they know the game inside out and you don't.

No. 75% of EV drivers choose to lease rather than buy, compared to 28% of the overall market. They choose to lease typically because they do a cost-benefit tradeoff between buying vs. leasing and in many cases correctly determine that it's preferable to shift the depreciation risk for EVs to somebody other than themselves. First-generation EVs, including all current Leafs, have experienced significant depreciation, much faster than typical cars. In many cases the original lease terms failed to take this into account, which is why so many people leasing Leafs often end up receiving buyout offers that take thousands of dollars off of the residual value.

Example 1: http://www.mynissanleaf.com/viewtopic.php?t=19561
Example 2: http://mynissanleaf.com/viewtopic.php?f=23&t=1225&sid=293e41dcc2279562a6c7e9a2fa81c3eb&start=310#p468964
Example 3: http://mynissanleaf.com/viewtopic.php?f=23&t=22560&sid=1d5458b0d57eda56c3ee97cc1b21698e&start=20#p471962

All of these examples represent a win for the customer -- the vehicle depreciated faster than the leasing company predicted, so the customer successfully avoided that depreciation risk.

Articles about the dominance of leasing for EVs:
http://www.greencarreports.com/news/1100513_electric-car-drivers-love-em-but-dont-buy-em-why-leasing-rules
http://www.cnbc.com/2015/10/17/ric-cars.html

Bruce

 

[roundpeg]

Sorry you don't believe. They bet wrong on the residual on my car, and most of the other leased EVs out on the road now.

So how do leasing companies make their money, if they lose on most of the cars they lease?

 

[roundpeg]

No. 75% of EV drivers choose to lease rather than buy, compared to 28% of the overall market.

The fact that a lot of people do something does not make it wise. I note in the article you cite that financial wisdom is not the stated reason why a majority of EV buyers lease. In fact the stated reason is because these buyers are anxious to have the next thing ASAP, with the analogy of cell phones. Well that's just another case of the true cost of ownership being hidden. Paying for your depreciation upfront on an installment plan is another. On average lease companies are going be more accurate on residuals than consumers, since that is their business, the same way insurance companies understand risk. Just because they pay out sometimes does not mean they do it more often than not. If that was the case, they'd be out of business.

 

[GetOffYourGas]

Yes, in general leasing companies have a good handle on depreciation. But EVs are not typical cars. The EV market is new and the companies are still learning. But they are getting better. NMAC sets their residuals much lower than they had when I leased in 2012. Leasing EVs only makes sense if 1) you don't qualify for the full tax credit and the company passes it on in full or 2) you want the latest and greatest tech, and aren't really worried about the lowest TCO.

 

[Aidan]

So generally we are paying about 5000.00 more than the anticipated 37000.00. Is this before the credits n incentives?

 

[roundpeg]

Yes, in general leasing companies have a good handle on depreciation. But EVs are not typical cars. The EV market is new and the companies are still learning. But they are getting better. NMAC sets their residuals much lower than they had when I leased in 2012. Leasing EVs only makes sense if 1) you don't qualify for the full tax credit and the company passes it on in full or 2) you want the latest and greatest tech, and aren't really worried about the lowest TCO.

From what I've heard, I'd add 3) because you can't write a check for the full price of the car and don't want to finance conventionally. If you can write that check you can still sell the car whenever you choose and buy the latest and greatest. You may have failed to hide the depreciation from yourself but since you can't escape it either way I don't see the utility of having done so. I might talk to them about financing though. If the rate is really low it might be worthwhile.

 

[roundpeg]

So generally we are paying about 5000.00 more than the anticipated 37000.00. Is this before the credits n incentives?

Most (if not all) of the orders discussed on this board are for the Premier trim line, which is $4.300.00 more than the base LT model. Add the popular Fast DC charging option ($750.00) and there you are, right around $42k before the tax credit and rebates.

 

[ssspinball]

Roundpeg, I think you have misunderstood about leasing. If you go into a lease and don't know anything about money factors, residuals, etc, sure you can get a bad deal. Just as signing any contract willy-nilly without understanding what it means would be a mistake. Every single aspect of a lease is agreed ahead of time and can be run through a simple calculator to confirm. There is no mystery here.

I leased a car for the first time ever because the stars have aligned and various factors around EVs in particular have lined up so a 2-year lease ended up being a good economic choice for me:
1. Laughably inflated residuals. It does not matter to me why they are this way, but it is already off (in MY favor) by around $15k on my car and I have 6 months left on my lease!
2. Federal EV rebate can be claimed every lease cycle. You know full well before signing what amount the lease company is giving you back via cap cost reduction. There is zero guessing involved.
3. Well-known depreciation on ~100 AER or less EVs. The last thing I want to purchase is an asset that depreciates even faster than other similar assets. Maybe the Bolt won't experience this, but it's anyone's guess. With a lease that guess is locked down in a contract ahead of time. And if the opposite happens and it depreciates less than the leasing company expected, well you win then too because you can just buy it out at the end at lower than market price! :mrgreen:

The only real "cost" of a lease are the financing fees and people that go over their mileage limits. So as long as all of the above are more significant than the finance fees (which the most definitely were in my case and are in many EV leases right now), and you stay under the mileage limit, then I think it would be wise to at least consider it.

The part about auto tech changing at the fasest rate in history is just another reason, but that alone isn't the reason I leased.

 

[roundpeg]

Thanks for the additional info on leasing.

On residuals, it still seems to me you are betting against the house. As you say, what the car will be worth at the end of the lease is anyone's guess, but over time the house has to win those bets, or the house is out of business. To me this is a big red sign flashing "Danger, Will Robinson!" I honestly have no clue about how I'd approach this problem with more information than the leasing company has at their disposal.

If the leasing company isn't giving you 100% value on the tax credit, then you lose that much, unless you aren't eligible for the credit. I realize not everyone would be able to claim its full value, but if you are, whatever they take, you lose.

On the milage, correct me if I am wrong, but the residual is calculated based on the assumption that you will drive the maximum miles allowed under the terms of the lease (above which you pay by the mile). So if you drive the car less than the maximum, that's all to the leasing company's advantage.

Fees, according to what I've read, average around a grand for a lease (one to get in, another to get out). Again, that money comes right out of the buyer's pocket. And you are paying them to push their own paperwork. Ugh.

So yes I can see where the total costs can be known ahead of time, but I am still wondering how that knowledge works to the buyer's advantage, unless they drive the car up to but not over the allowed milage AND are better at guessing the residual value than the leasing company.

 

[DucRider]

Thanks for the additional info on leasing.

On residuals, it still seems to me you are betting against the house. As you say, what the car will be worth at the end of the lease is anyone's guess, but over time the house has to win those bets, or the house is out of business. To me this is a big red sign flashing "Danger, Will Robinson!" I honestly have no clue about how I'd approach this problem with more information than the leasing company has at their disposal.

If the leasing company isn't giving you 100% value on the tax credit, then you lose that much, unless you aren't eligible for the credit. I realize not everyone would be able to claim its full value, but if you are, whatever they take, you lose.

On the milage, correct me if I am wrong, but the residual is calculated based on the assumption that you will drive the maximum miles allowed under the terms of the lease (above which you pay by the mile). So if you drive the car less than the maximum, that's all to the leasing company's advantage.

Fees, according to what I've read, average around a grand for a lease (one to get in, another to get out). Again, that money comes right out of the buyer's pocket. And you are paying them to push their own paperwork. Ugh.

So yes I can see where the total costs can be known ahead of time, but I am still wondering how that knowledge works to the buyer's advantage, unless they drive the car up to but not over the allowed milage AND are better at guessing the residual value than the leasing company.

If you are looking to actually purchase the car at the end of the lease, leasing will likely be the most expensive option. The following effectively compare what you would pay to use the car for the first 3 years.
Assumptions:
1) US purchase so $7500 tax credit is available (and you qualify)
2) Trade/sell after 3 years (for apples to apples comparison)
3) Used value after 3 years 43% or $16,123
4) Base LT (no tax, license, etc for simplicity) @ $37,495

Scenario 1: Pay cash
$37,495 MSRP
Less Federal Tax credit gives a net cost of $29,995
If you sell/trade it after the 3 years, you paid $13,872 to use it for 3 years

Scenario 2: Finance
3% APR, 5 yr loan, $2K down
$638/m payment
After 3 yrs you would have paid $22,961
After accounting for the Tax Credit and down payment, that becomes $17,461
Loan Balance would be $14,839 giving you equity of $1,284
Net cost to use is $16,177

Scenario 3: Lease
0 down, 36 mo, $595 acquisition fee, no disposal fee, .00125 MF (3%), 43% residual
$480/m payment
After 3 yrs you would have paid $17,280

As you can see, leasing is the most expensive option. Paying cash is the least.
Leasing and loan calculators are readily available online.

Any financing comes at a cost. With a lease, you pay interest on the entire value of the car while you have it, plus how much of the car you "use up" while driving it. Leasing companies do in fact make money (or how could they stay in business), but they are not 100% accurate on every lease they write.
They are learning - current residuals on Soul EV leases are in the 37% range on 10K mile/yr leases. The Spark EV is also in the mid 30's. If you see a high residual value on an EV lease (Bolt or otherwise), it might be a better deal than financing or paying cash.

If you are looking to keep the Bolt for more than 3 years, leasing is a risky way to finance. But sometimes with risk comes with rewards. With the other 2 options, you know up front exactly what your total cost will be. With the lease, you also know that, but have the option to purchase or walk away at a specified time.

 

[roundpeg]

I once again thank you for your detailed responses to my questions. I will at least hear out the leasing option in the hope that the residual is higher than I expect (much above 40% is worth considering, I suppose). The other possibility is a below-market interest rate for financing, typically a tradeoff for cash incentives, when they offer them. My local dealer didn't seem to be expecting any incentives on this car but it's always possible that they will be offering brand-wide subsidized interest rates by the time the car is delivered. I can afford to pay cash so I can play it any way I want when the time comes. The other fact to know about my situation is that I don't drive a whole lot. My current car is 13.5 years old and has 58k miles on it, about 4.5k miles a year. I'd probably drive the Bolt more than that but probably not anywhere close to the lease limits. I also keep my cars for at least five years.

 

[DucRider]

I once again thank you for your detailed responses to my questions. I will at least hear out the leasing option in the hope that the residual is higher than I expect (much above 40% is worth considering, I suppose). The other possibility is a below-market interest rate for financing, typically a tradeoff for cash incentives, when they offer them. My local dealer didn't seem to be expecting any incentives on this car but it's always possible that they will be offering brand-wide subsidized interest rates by the time the car is delivered. I can afford to pay cash so I can play it any way I want when the time comes. The other fact to know about my situation is that I don't drive a whole lot. My current car is 13.5 years old and has 58k miles on it, about 4.5k miles a year. I'd probably drive the Bolt more than that but probably not anywhere close to the lease limits. I also keep my cars for at least five years.

From this post, it sounds like there might be one other option to consider.
It only works if your income is low enough that you do not pay $7500/yr in taxes (i.e. retired).
Lease the car and the $7500 is used as a cap reduction effectively lowering the "purchase" price. You can then immediately (or within a month or two), "buy out" the lease and avoid the interest charges associated with "borrowing" the $30K balance for 3 years. You will likely have some fees associated with the lease (acquisition, disposal, or ??), but they would likely be less than giving up the portion of the Tax Credit you cannot use (it does not roll over). Read the lease terms very, very carefully before undertaking this strategy.

Another possible "gotcha" is the CA rebate.

Retain ownership of the vehicle in California for a minimum of 30 consecutive months immediately after the vehicle purchase or lease date. Original lease terms of at least 30 months are required for program eligibility.

Register the new vehicle with the California Department of Motor Vehicles (DMV) for a minimum of 30 consecutive months* for use in California.

*Note: ARB verifies vehicle ownership through periodic checks of Vehicle Identification Numbers (VINs) in the California DMV database. If a vehicle purchaser or lessee sells or returns the rebated vehicle to the dealer, ARB or its designee reserves the right to recoup CVRP funds from the original vehicle purchaser identified on the rebate form and may pursue other remedies available under the law for unauthorized early termination of vehicle ownership.

https://cleanvehiclerebate.org/eng/eligibility-guidelines

I think you'd be OK, but there would be a second title transfer from the leasing company to you.