Lease vs. Buy Calculator (with tax credits)

[HockeyPlayer]

Hello. I'm on the fence for my Model X to buy vs. lease. The geek in me says to lease since I'll probably want a new car in 3 years. But the finance part of me wants the full value of the tax credit. There are a lot of calculators out there but few have a place to input the value of the tax credit. If you know a great site or place to download an Excel calculator to run the benefits of one over the other, it'd be so appreciated!

 

[trinites1a]

My understanding is you still receive it just over the course of the lease rather than a lump some at taxes if you finance.

 

[HockeyPlayer]

Some updates on what I've researched in making my lease vs. buy decision. Only some of the tax credits benefit the customer in Tesla's lease program for the Model X. I spoke with my financing manager and he showed me that the residual (amount you would pay to purchase the car at the end of the lease if you wanted to) inclusive of the tax credits is about 57% of the original purchase price. (36 month lease with 15,000 miles per year) If you take the industry average of a 55% residual for a well valued car, the tax credit drops the monthly payment by about 2% of the purchase price which is ~$65.00 per month or <$2,500 over the life of the 36 month lease.

Here's a really useful tool to help you look at the lease vs. buy decision. Go to Find a credit union on CULookup.com - Your Credit Union Locator then "Calculators" and finally "Should I lease or purchase a car" under the auto calculators section. The only thing missing from it is plugging in the federal and state tax credits into the buy side. But you can factor that in manually when making your decision. Benefits to you will depend on how long you want to keep the car (in a rapidly advancing technology marketplace), your individual tax situation and write offs and the flexibility you'd like to have. With a lease, you are committing to the entire 3 year term but can walk away at the end. With a purchase, you can dispose of the car (or in our case upgrade) when you want. Hope this helps. Disclaimer, this is general info and I am not a financial advisor. Your mileage may vary!

 

[Rich Meister]

From my understanding, you can also transfer the lease if you want to walk away. The only benefit I see from leasing is the sales tax implication. On a sale, it's a $10K tax bill due at signing while leasing you pay taxes on the rent charge. So the $7500 tax credit is a wash if you factor in the sales tax for CA residents.

 

[Scrith]

I think an important thing to keep in mind in these lease vs. buy discussions is that they rely upon an expected value for the vehicle in 3 years. With the poor reputation of first-year Model X vehicles, and the soon-to-open Gigafactory drastically reducing the cost of batteries used in the X, their most expensive component, it is my opinion that the actual value of the Model X in 3 years is lower than most people think.

 

[Rich Meister]

I think an important thing to keep in mind in these lease vs. buy discussions is that they rely upon an expected value for the vehicle in 3 years. With the poor reputation of first-year Model X vehicles, and the soon-to-open Gigafactory drastically reducing the cost of batteries used in the X, their most expensive component, it is my opinion that the actual value of the Model X in 3 years is lower than most people think.

I would def have to agree with you on this. The tech is just changing so rapidly and with the Gigafactory up and fully running in 3 years, batteries will be coming way down in price.

 

[HockeyPlayer]

Thanks everyone for your input. I agree with the logic of a faster expected depreciation. If new technology comes around and there are additional entrants in the field, it's likely that the car will depreciate faster than expected which is why I will be leasing. By the way, one can't just "transfer" the lease unilaterally unless you intend to default on the obligation (and obliterate your credit rating). When you sign a lease, you are committing to the full payments committed to in the contract.

 

[⚡️ELECTROMAN⚡️]

Batteries will come down in price, but wouldn't it make sense for Tesla to profit from the price reduction and not necessarily the consumer? They are taking on the risk and hardship of making it all happen. As long as they are priced competitively against the competition they should pocket the battery savings. At some point Tesla deserves to make a profit.

 

[HockeyPlayer]

Tesla NEEDS to make a profit or they will be out of business or bought up by another auto maker. All of the major luxury manufacturers are working on EVs so it'll be a delicate balance of pricing Telsa's great cars to be "in the ballpark" and improving profitability by reducing costs. The Gigafactory and increasing quality to avoid warranty claims are two ways that Elon has highlighted in analyst calls to do this.

 

[Rich Meister]

Thanks everyone for your input. I agree with the logic of a faster expected depreciation. If new technology comes around and there are additional entrants in the field, it's likely that the car will depreciate faster than expected which is why I will be leasing. By the way, one can't just "transfer" the lease unilaterally unless you intend to default on the obligation (and obliterate your credit rating). When you sign a lease, you are committing to the full payments committed to in the contract.

You can transfer a lease for Tesla. There are a few car makers that do not allow it but from what I've seen, Tesla allows lease transfers to a new leasee. Which would make your lease obligation fulfilled. I have transferred 3 BMW leases and they are shown closed on my credit report.

 

[ABCCBA]

When you lease a Tesla, they use US Bank. US Bank allows one transfer, but there has to be 12 months or more remaining in the lease. The lease transfer costs $600. $150 for an application fee and $450 for a transfer fee. Once the transfer is approved by US Bank, the original leasee is released from the lease and has no further obligation. You can do this directly with US Bank, or you can do it through either LeaseTrader.com or SwapALease.com. It is a painless process and is an exceptional way to own a vehicle with no money down and a short lease.

 

[grayguy]

If you take the industry average of a 55% residual for a well valued car, the tax credit drops the monthly payment by about 2% of the purchase price which is ~$65.00 per month or <$2,500 over the life of the 36 month lease.

Is this number factored in with their estimated tax payments on the build your car tool on the Tesla website?

Here's a really useful tool to help you look at the lease vs. buy decision. Go to Find a credit union on CULookup.com - Your Credit Union Locator then "Calculators" and finally "Should I lease or purchase a car" under the auto calculators section. The only thing missing from it is plugging in the federal and state tax credits into the buy side. But you can factor that in manually when making your decision. Benefits to you will depend on how long you want to keep the car (in a rapidly advancing technology marketplace), your individual tax situation and write offs and the flexibility you'd like to have. With a lease, you are committing to the entire 3 year term but can walk away at the end. With a purchase, you can dispose of the car (or in our case upgrade) when you want. Hope this helps. Disclaimer, this is general info and I am not a financial advisor. Your mileage may vary!

I've found a bunch of buy vs lease calculators like this online, but none that help with factoring in tax credits for leases, or ones that help factor for a person who can write off lease payments or depreciation for business use purposes. Typically, the advice I've been given for taxes is that leasing is better than buying for cars that are more expensive that the average vehicle, due to the lease payment being a write off and the fact that depreciation is usually a smaller number.

The think with the X is that you can take a $25k SUV depreciation the first year, so it's more complex. If anyone has a spreadsheet they've put together that factors for these things, I'd love to have a copy. Thanks.

 

[number12]

Take over a lease or buy. You'll want a new car sooner than 3 years

 

[wesley888]

I created an Excel spreadsheet to match the numbers that Tesla gave me down to the decimal points. So that I can understand every single fee that they put in. If you use the other leasing calculator, for leasing, just subtract out the $7500 from the cost of your car will do. The sales tax they charge is on the total lease amount plus all the fees.

For loan, it's much more simple since you get the Tax Credit yourself. You paid the tax yourself. The loan is just the normal loan calculation.

 

[SageBrush]

I spoke with my financing manager and he showed me that the residual (amount you would pay to purchase the car at the end of the lease if you wanted to) inclusive of the tax credits is about 57% of the original purchase price. (36 month lease with 15,000 miles per year) If you take the industry average of a 55% residual for a well valued car, the tax credit drops the monthly payment by about 2% of the purchase price which is ~$65.00 per month or <$2,500 over the life of the 36 month lease.

The full tax credit is received in a lease; the proper comparison that should have been applied above is the Tesla buy-back program. Comparing to "industry average" is apples to celery.

 

[Tedkidd]

Anybody HAVE a lease that's willing to share their numbers?

sale price
down payment
all fees
lease term
residual
money factor

From that we should be able to figure out how much of the tax credit they are giving you.

There is a disconcerting lack of transparency in Tesla's leasing program.

update - seems someone found it in the web source code. On the 60 they use 56% residual/10k after 3 years with a 0018 money factor (4.32%)

Seems like they're only giving up a little more than $2000 of the tax credit, which kinda sucks. Be nice to see the rest in a lower residual at least. Even if you don't qualify for the tax credit, leasing these cars is not a better deal than buying.

Lease Residual and MF

 

[TJtv]

The residual is listed directly in the source code. And I believe it is 52% for 10k/36 months. To that you ADD the $7500 to get the residual value that they use to calculate the lease. From there the math is very straightforward.

They are definitely giving you the full $7500 tax credit in the form of a higher residual when you lease.

However I believe that their 52% base residual is pretty low. And their .0018 money factor is extremely high. So leading may not be so great.

Also with the way the residual value is raised by the $7500 tax credit it makes it and absolutely terrible financial idea to buy the car out at the end of the lease. If you were to do so, you'd effectively be giving up the entire $7500 tax credit in that case.

 

[Tedkidd]

The residual is listed directly in the source code. And I believe it is 52% for 10k/36 months. To that you ADD the $7500 to get the residual value that they use to calculate the lease. From there the math is very straightforward.

They are definitely giving you the full $7500 tax credit in the form of a higher residual when you lease.

However I believe that their 52% base residual is pretty low. And their .0018 money factor is extremely high. So leading may not be so great.

Also with the way the residual value is raised by the $7500 tax credit it makes it and absolutely terrible financial idea to buy the car out at the end of the lease. If you were to do so, you'd effectively be giving up the entire $7500 tax credit in that case.

Revisiting this, the way they manage this, the break even only occurs (not including the higher interest rate) if the car's true market value is $7500 higher than your residual at the end?

 

[grayguy]

I've leased my last 6 cars due to tax write off purposes as an independent contractor. I decided to purchase this time after running some numbers that factor in the $10,000 in credits (federal + California), the stepped up first year depreciation, and the [in my opinion] poor lease deal compared to what I'm used to with BMW.

I'm sure Tesla will have a new version of the model S in the next 2-3 years that make me wish I leased, but that's okay. It's worth the experiment.