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Leasing: Where does the $7500 Fed. tax credit go?

GasDoc

Member
Nov 15, 2012
806
492
SF Bay Area
I'm looking at leasing vs buying a $91k build.

On Tesla's website, it calculated my monthly payment at $1210

I went to the Edmunds lease calculator. Punched in the same figures. $91k cost, $5k down, $2500 origination fee, 15k miles, 3 years and used a (Tesla supplied) residual value of 62%.

The figures came out exactly the same.

Does this mean that the banks are making an extra $7500 off of each Tesla leased as opposed to any other $91k car? They get to take the $7500 tax credit, right?

If a person buys off their lease, either at the end or anytime, it means they aren't getting any benefit of the tax credit, right?
 

MsElectric

Active Member
Oct 11, 2014
1,604
18
New York
That $7,500 is used in a really bizarre way from what I understand it.

They should apply that $7,500 as a Cap. Cost Reduction. They don't do that.

Last time I checked, they allude to the fact that they add the $7,500 to the residual but there is really no way to verify that. Like you, I did the math and I could not see any proof of the $7,500 being applied to the residual in a transparent way.

Worse yet, if they do in fact add the $7,500 to the residual, it precludes you from ever considering buying the car at the end of the lease period since the car's residual is then $7,500 more than it should be. Bad deal.

I wish more banks would get into offering leasing options for new and CPO cars so there is competition.
 

GasDoc

Member
Nov 15, 2012
806
492
SF Bay Area
So is a 62% residual industry standard or does the Tesla lease offer a higher residual than other cars?

Agree with you that it is a big negative incentive to purchase the car at termination of lease.
 

GasDoc

Member
Nov 15, 2012
806
492
SF Bay Area
Answering my own question, I looked up residual values of Mercedes S class and BMW 7 series and they were in the 42-46% range so it does appear that the residual of the Model S is inflated, lowering monthly payments.

Good if one plans on returning at the end of a lease but a negative incentive to purchase your car. One might be able to negotiate a purchase price at the end if the lease vs turning the car in, though.

If I plug in a residual of 45% the lease payment goes up from $1210 to $1654.
 
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MsElectric

Active Member
Oct 11, 2014
1,604
18
New York
Answering my own question, I looked up residual values of Mercedes S class and BMW 7 series and they were in the 42-46% range so it does appear that the residual of the Model S is inflated, lowering monthly payments.

Good if one plans on returning at the end of a lease but a negative incentive to purchase your car. One might be able to negotiate a purchase price at the end if the lease vs turning the car in, though.

If I plug in a residual of 45% the lease payment goes up from $1210 to $1654.

That's not quite right. The Tesla lease is higher than it should be. So for your $91K Model S, you are looking at a monthly payment of $1,210 after $5k down and a $2500 origination.

For a Mercedes S Class, with a MSRP of $94,400 the monthly lease payment is 1,149 with $6,943 due at signing. So it seems while the S Class costs more, both the monthly lease payment and the money down are less, all without the benefit of a $7,500 rebate.

https://www.mbusa.com/mercedes/special_offers/current

I still feel they are not really factoring in the $7,500 rebate in a transparent way. If they are factoring in the $7,500 it will be an absolute $7,500. You can't really factor that exact amount by specifying an arbitrary percentage based on a variable sale price. I have yet to see concrete and transparent proof of the $7,500 rebate benefiting a lessee.

IMHO the only fair way for Tesla to handle the $7,500 rebate for a lease is to apply that as a Cap. Cost Reduction so that if you later decide to buy the car, you get the benefit of the rebate. They are not doing that.
 

ndhaon91

Member
Oct 5, 2015
106
56
Denver, CO
I had been wondering about this as well. I want to lease to take advantage of being able to deduct the entire monthly payment as a small business owner. But it did seem strange that the numbers don't quite add up.

Is anyone aware of banks that will provide leases for a Model S? I see Ally bank does leasing, but apparently only for Chrysler, Mitsubishi, Maserati, and Aston Martin. Would this require an active partnership on Tesla's part, or simply a willingness for the bank to purchase the vehicle and then turn around and lease it?
 
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ndhaon91

Member
Oct 5, 2015
106
56
Denver, CO
My rep just told me the $7500 is discounted over the 36 months of the lease. So, theoretically, the lease should be $208.33 less expensive per month than a comparable lease.
 

GasDoc

Member
Nov 15, 2012
806
492
SF Bay Area
My rep just told me the $7500 is discounted over the 36 months of the lease. So, theoretically, the lease should be $208.33 less expensive per month than a comparable lease.

I think this is kind of true. It appears that the credit is used by the banks to generate an artificially high residual value of ~62% at the end of the lease. This lowers the payments but makes it unfavorable to buy the car at lease termination unless you can negotiate $7500 off at the end.
 

Lloyd

Well-Known Member
Jan 12, 2011
6,286
2,085
San Luis Obispo, CA
You are assuming that the lease company has a tax liability that they can use the tax credit, and you can't carry it forward. Tesla is not paying taxes. B of A in their leases may not be able to use the credit either. The tax credit was made for individuals to benefit from, not corporations with sheltered assets and losses.
 

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