Lease Residual and MF

[Tedkidd]

Its not that I would want to. I am just curious how the monthly payment comes out. It looks like if you add the down payment, 7500 tax credit, and monthly payments then residual on a 2/10k lease is something like 60% (which seems pretty low)

Looks like they're giving you little to none of the tax credit. Not as payment reduction, not as residual reduction.

 

[sdorn]

Looks like they're giving you little to none of the tax credit. Not as payment reduction, not as residual reduction.

Below is part of the new owner package I have on My Tesla. It is info about leasing and explains the residual, etc. They come up with a residual based on "industry standards" and then add $7,500 to it to account for the tax incentive.

 

[Tedkidd]

So what happens if you decide to buy out early?

Do they run the numbers and give you the $7500 discount?

 

[sdorn]

So what happens if you decide to buy out early?

Do they run the numbers and give you the $7500 discount?

My understanding of a lease buyout starts with the previously agreed buyout price at the end of the lease (where the $7,500 credit has already been applied) and then they add to that the outstanding amount owed under the lease contract (potentially discounted some based on the fact you are paying it off early). So you still get the tax incentive in that situation.

Here is some info on how care lease buyouts work, both at the end of the lease and if you buy out early.

Car Lease Buyout - Good Idea or Not? - by LeaseGuide.com

 

[Tedkidd]

That would be nice.

I don't have the tax liability to justify buying the car (if you can't take the credit you suffer additional $7500 depreciation at drive off), AND I would prefer to not pay 4% interest on the car for 3 years.

Ideally I'd be able to lease, then within 6 months buy out the lease and leverage the benefit of the credit that way.

With My Smart the credit basically bought down the monthly payment by about $200 a month.

 

[sdorn]

That would be nice.

I don't have the tax liability to justify buying the car (if you can't take the credit you suffer additional $7500 depreciation at drive off), AND I would prefer to not pay 4% interest on the car for 3 years.

Ideally I'd be able to lease, then within 6 months buy out the lease and leverage the benefit of the credit that way.

With My Smart the credit basically bought down the monthly payment by about $200 a month.

You should check the math to make sure that works before you do it. Not sure how you would get the numbers from the lease company for a buyout before you enter into the lease, but maybe you can get someone at the lease company to break it down for you. Also make sure you understand how those transactions will be taxed. Here in GA you have to pay the full registration tax (7%) when you lease the car and then you have to pay it again if you buy out the lease. That would eliminate most if not all of the $7,500 federal tax incentive.

 

[ChadFeldheimer]

On my US Bank lease, the (early) buy-out amount is indeed based off the residual - which has the $7500 tax credit baked in.

This means that if you buy out the car (early or not), you lose out on the $7500. If you have any wish to eventually own the car (early or not), get a loan not a lease. The interest rate will almost certainly be lower and you will avoid at least $1100 in junk lease fees (acquisition + disposition).

 

[Tedkidd]

"Federal Tax Credit" line implies it is being given to the leasee. "Here, we are going to magnanimously increase your arbitrary residual by a number resembling the tax credit we get so your payment is lower. No, it won't apply at the end if you chose to buy the car, we add it back on."

Really dishonest of them to say they are factoring in the tax credit by bumping up the residual. They're simply taking more residual risk, they aren't actually CREDITing the money they receive.

All that means is you pay $7500 more for the car if you buy it at the end.