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Last I checked with Tesla (Dec 2016) the $7,500 is simply added to your residual value. If you don't know what that means, basically it subtracts from your lease cost (a.k.a. capital cost), but adds interest on the $7,500 to your monthly payment, and if you decide to buy the car out at the end of the lease, you will have to pay the $7,500 back (in addition to the interest you paid for it). So, you do get most of the benefit from it if leasing, but loose it if you end up buying the car at the end.
It lowers the sum a little less because you pay interest on $7500 for the entire duration of the lease, so if the lease is 5% APR, you pay $1,125 in interest over 3 years, so it lowers your payments by the sum of $6,375 rather than $7,500. The big hit is if you choose to buy the car out at the end of the lease, they you have to pay the $7,500 extra (already included in your residual value). If ti was treated like a down payment, you wouldn't have paid the interest, nor would your residual (buyout price) be increased by $7,500.I have never heard it explained that way, but it makes sense. I always assumed they treated it like a down-payment so it lowers the monthly payment. So instead of adding the $7500 to the residual, it goes-towards the total lease payments. Either way, it lowers the sum of the monthly lease payments by $7500.
Very interesting. I have bought end of lease cars several times. I'm glad you pointed this out because I'm leasing my i3 and have loose plans to maybe buy it. Probably not now that I'm more informed.
Just to clarify, I was talking about Tesla leasing and my information is from 4 months ago. I cannot tell you how BMW does it.Very interesting. I have bought end of lease cars several times. I'm glad you pointed this out because I'm leasing my i3 and have loose plans to maybe buy it. Probably not now that I'm more informed.
In all cases the monthly payments are reduced by some proportion so there is a benefit there -- in terms of lower monthly payments -- but if the $7500 is added back to the residual at the end, ts as if the credit was taken away from you. and it has also been explained above that even with reduced monthly payments there is funny stuff going on in terms of interest paid throughout the lease term effectively reducing the amount of the credit.
the only way to get the full credit in a lease is if the leasing company reduces the residual by $7500 at the end and the customer purchasing the vehicle.
Clarification: they don't add the $7,500 at the end. They add it to the residual at the beginning, that is how they reduce the cap cost (cap_cost = price - residual). So whatever residual value you see on your lease, already has the $7,500 in it, which is why you pay interest on it every month.