Dumb leasing question.

[SoCalNick]

So, I've never leased a car, and always owned my cars for 10 years or so.

It seems if I buy a MS for 90K, and finance it, I have to come up with 10% down, and pay the "registration & use/sales tax" fees (~$7200).
So, I need to come up with $16K. I'm then financing 81K over 72 months which comes to $1150-1200 per month.

I've seen other posts about leasing, where they come up with about half the down payment and lease payments around $750 per month. It wasn't clear if any of those fees included the registration and use/sales tax.

So, they're paying a LOT less, but what happens at the end of 3 years.
I get that they don't own the car, and ha ve paid ~$33K so far.
Do they get to buy the car at the end, and if so, would it simply be the $90K + 7.2K - $33K = 63K price.
Or does "fair market value" come into play when they are at the end of the lease, and you can aruge that the car is now only worth $50K and purchase it based on that?

Sorry, never leased, and don't know the answer...

 

[mspohr]

Yes, leasing is dumb in most situations.
The leasing company has all of the same expenses (cost of money, title, registration, tax, etc.) that you do plus they have to take the risk of the residual value and, of course, add in profit.
It's a lower monthly payment because you don't get to keep the car. You have to give it back.
If you're short on cash flow and don't plan on keeping the car beyond the lease, this may work for you but it will cost you more money.

 

[nycmike]

Depending on the state you are in, you should factor the price of any tax incentives into your leasing vs buying calculation. Leasing a tesla ma prevent you from taking advantage of the tax incentives... When you work up the leasing details, you can elect for closed end lease or one with a residual where you can purchase it at the end. I've seen financing rates as low as 0.9% so that might be a consideration!

 

[kort677]

leasing is a good choice for some a not so good choice for others. there are many variables in the equation. one of the main ones is about how a person intends on using the car, a high volume driver shouldn't lease a car, a person intent on keeping the car more than 5 years or so should not lease a car. the other side is the person who can live within the mile limitations of the lease agreement and likes to change cars every few years leasing is a great concept. why? because if you take the emotions of the car away and just think of getting the car as a financial transaction you see that you can drive a lot of car for a minimal amount of money. Personally I never put any money down on any lease deals, I look for less than popular cars that don't have a high entry price and a low residual and I stay within the mile agreement.
In the case of tesla if you calc out the lease vs. buy/finance I think you'd find that leasing doesn't offer much of an advantage however leasing does alleviate the obsolescence factor because after 3/4 years any obsolescence is tesla's problem not yours.
so making a blanket statement "leasing is a bad deal" is far from correct.
FWIW, I own my tesla and lease other cars.

 

[SoCalNick]

I'm in California.

I believe that there is the $7500 federal rebate, as well as a $2500 state rebate. I understand that the state rebate is currently unfunded, but that you put your name in the queue, and when they get money, they will send it to you. There is also a So Cal Edison rebate.

If I lease, do I not qualify for the rebates as I have not "bought" the car?? Didn't even realize that.

Has anyone out there bought the car at the end of the lease? What was that like?

 

[kort677]

I'm in California.

I believe that there is the $7500 federal rebate, as well as a $2500 state rebate. I understand that the state rebate is currently unfunded, but that you put your name in the queue, and when they get money, they will send it to you. There is also a So Cal Edison rebate.

If I lease, do I not qualify for the rebates as I have not "bought" the car?? Didn't even realize that.

Has anyone out there bought the car at the end of the lease? What was that like?

Depending on the state you are in, you should factor the price of any tax incentives into your leasing vs buying calculation. Leasing a tesla ma prevent you from taking advantage of the tax incentives... When you work up the leasing details, you can elect for closed end lease or one with a residual where you can purchase it at the end. I've seen financing rates as low as 0.9% so that might be a consideration!

the fed incentive is usually priced into the deal so the lessor gets the payment and passes it though to the lessee via lower initial costs. I would suppose state incentives would work in the same way.

 

[SoCalNick]

GAP Insurance question.

The car essentially loses $10K in value the moment it leaves the lot for no other reason that only the 1st purchaser can claim the 10K federal/state rebates. New cars also depreciate very quickly when they go off the lot for other reasons revolving around that new car smell we all pay a premium for.

So, last time I purchased a new car, the dealership offered a "gap insurnace" package for $500. My insurance agent wanted $400 per year and would take 2 years.

Do people get gap insurance, and if so, where do they get it?

 

[nycmike]

the fed incentive is usually priced into the deal so the lessor gets the payment and passes it though to the lessee via lower initial costs. I would suppose state incentives would work in the same way.

one thing to look into is whether you can realize the tax savings from the federal incentives. You may want to check with your accountant...

 

[SoCalNick]

one thing to look into is whether you can realize the tax savings from the federal incentives. You may want to check with your accountant...

He said yes.

 

[shokunin]

The buyout costs at the end of the lease are spelled out in the lease docs as the residual value and any other fees that may be tacked on the purchase outright.

However, the residual value maybe inflated due to the $7500 federal rebate that the lessor can take advantage. That is part of the risk the lessor is taking, they have to predict what the expected depreciated value of the car will be in 3 years. If they over-estimate, they will lose money.

In California, one benefit to leasing is that you only pay sales tax on your lease payments and not the whole vehicle.

 

[shokunin]

one thing to look into is whether you can realize the tax savings from the federal incentives. You may want to check with your accountant...

The $7500 federal rebate goes to the leasing company (the lessor). A person leasing the car cannot take the Federal credit. However, check with your accountant for the state credits as they vary from state to state.

 

[kort677]

one thing to look into is whether you can realize the tax savings from the federal incentives. You may want to check with your accountant...

if you lease the car the lessor gets the benefits of the tax incentives.

 

[BrettS]

Do people get gap insurance, and if so, where do they get it?

You really need to look at the numbers and decide if it’s right for you. When I bought my Prius a number of years ago I took advantage of a 0% financing offer that Toyota had at the time and also put down a bit of a down payment. I figured that it was unlikely that I would be upside down on that loan at any point and I skipped the GAP insurance. However, a couple of years later I bought a highlander hybrid. This time I had a loan with a very long term (7 years, I recall) and not a significant down payment. Based on those factors I did purchase GAP insurance on that loan. It turned out to be a good move in that case as about 3 years later my wife’s cousin totaled the highlander and our insurance paid about $3000 less than we still owed on the loan. The GAP insurance paid the extra $3000, and the GAP insurance also covered the deductable, so we didn’t have to pay our $500 deductable out of pocket. (Apparently that’s a benefit on some GAP insurance offerings, but not all of them).

The other thing to consider is how much of a hardship it will be to you in the event that the car is totaled and you have to cover a shortage. Using my example, if it wouldn’t be too much trouble to pay the extra $3000 in the unlikely event that your car is totaled and you are upside down in the loan then you may be better off saving the $500 knowing that most likely you will come out ahead in the end. On the other hand, if that unexpected $3000 bill would mean that you wouldn’t be able to put food on the table, then you’re probably better off paying $500 to mitigate that risk.

Finally, you might also want to consider how many car loans you will have over your lifetime. If you take out 10 loans and don’t purchase GAP insurance on any of them you’ll have saved $5000 ($500 x 10 loans). Even if one of those cars is totalled and you need to pay $3000 out of pocket you’ll still be $2000 ahead in the end.

Obviously the numbers can vary significantly depending on the loan amount, the type of car, the loan term and interest rate and more... it’s possible to wind up in a situation where you would be upside down by well over $3000. In the end you just need to run the numbers as best you can and try to figure out how much risk you are willing to take. If you want the peace of mind knowing that you won’t ever be in a situation where you wind up still owning money on a loan after a car is totaled then take the GAP insurance, but as I said above, there are some situations (large down payment, low interest rate, short loan term) where it is very unlikely that you would wind up upside down and it’s probably safe to skip it in those cases.

As far as where to get it, typically the bank or credit union funding the loan will offer it, I believe it can be purchased from third parties as well and often your auto insurance company will offer GAP insurance. I would simply shop around and see who has the best price at the time you get the loan.

 

[bsf29]

We were in the same situation as the OP. We never leased before and typically kept our cars for +7 years. Our MS 60 was where we changed our minds. While everyone has to look at their situation, we believe leasing was the better solution for us. Our primary reason was that the technology is changing too fast and in 3 years AP will be that much better and there will be more competition. We took delivery in February and already Tesla has added "free" items that we would like to have but we didn't feel that PUP and Air Suspension were worth the cost. EAP was the one thing that we did get and I have no regrets. I had been following Tesla for years and knew exactly what we were getting into. TACC works fine. Lane Keeping needs work (currently on 2017.34), but I still use it 60% of the time even on some back roads. Lane Keeping is not at a point where I have it enabled for my wife's profile because you do have to pay more attention. Now the 75 is quicker and has HW 2.5, but we still have no regret getting the car when we did. For the places we visit there are plenty of SC and have no plans to unlock the battery. GAP was included in the lease but our State Farm insurance will also covers us. About our only regret to leasing is that we love driving Dr Manhattan so much that we will probably go over our 15k lease mileage, and will gladly pay that fee.

 

[Ross9733]

GAP Insurance question.

The car essentially loses $10K in value the moment it leaves the lot for no other reason that only the 1st purchaser can claim the 10K federal/state rebates. New cars also depreciate very quickly when they go off the lot for other reasons revolving around that new car smell we all pay a premium for.

So, last time I purchased a new car, the dealership offered a "gap insurnace" package for $500. My insurance agent wanted $400 per year and would take 2 years.

Do people get gap insurance, and if so, where do they get it?

Not everyone is finding lease deals for 700 a month and those are usually on older inventory cars with mileage or showroom condition which is fine. Usually have to wait till end of quarter as well and usually more prevalent in california since there are more inventory cars there. I ordered custom and the money spent over 36 months between lease and finance was actually more on the lease side. I still thought about leasing but decided to buy and hope to keep the car long term. However after 36-40 months most will only have about 35-40k left on the loan and I really think youll be able to get that in trade in or private sell, which is one reason i ended up financing. I also got a 0.99% rate and was able to finance the entire amount which leads to needing GAP and....

As for the GAP, I went through hell on this. Tesla does not offer GAP and neither do the banks they use for financing. A few insurance companies offer GAP type coverage and differing costs and availability by state. Alliant Credit union DOES offer gap for 399 on their loans which includes a deductible reimbursement coverage so if you have one claim it pays for itself. They also offer some of the best rates out there, however based on your state, you may or not be able to get the favored tesla rate from them. Hope this helps.

 

[jdjeff88]

GAP Insurance question.

The car essentially loses $10K in value the moment it leaves the lot for no other reason that only the 1st purchaser can claim the 10K federal/state rebates. New cars also depreciate very quickly when they go off the lot for other reasons revolving around that new car smell we all pay a premium for.

So, last time I purchased a new car, the dealership offered a "gap insurnace" package for $500. My insurance agent wanted $400 per year and would take 2 years.

Do people get gap insurance, and if so, where do they get it?

Both the Tesla and the US Bank leases already include GAP insurance. Of course read the lease papers to confirm, but just having lost my leased car in the floods and getting a new lease you can be sure I paid attention to this. Most leases nowadays also already include it.

 

[kort677]

As for the GAP, I went through hell on this. Tesla does not offer GAP and neither do the banks they use for financing. .

this might be another of those CA quirks, I think that some places require GAP to be in place.

 

[Ross9733]

this might be another of those CA quirks, I think that some places require GAP to be in place.

Only on leases. All leases require GAP. However buying the car doesn’t require GAP

 

[kort677]

Only on leases. All leases require GAP. However buying the car doesn’t require GAP

I don't know of any place that requires gap protection on financing beyond your comprehensive policy