Model 3 leasing

[Az_Rael]

Yeah that is like robbery, I'm guessing people sign without realizing? That's crazy

It's OK if you can't qualify for the full tax credit yourself, and you don't intend to buy the car after the lease.

Many Volt owners ended up with leases structured this way when they didn't have enough in taxes to claim the federal credit. So they would often turn the car in once the lease was done, then buy a different used Volt on the open market (for much cheaper usually). That way they still got to take advantage of the $7500 credit (in the form of a lower lease payment)

So it CAN work if you realize all the limitations before going in.

 

[dgpcolorado]

Yeah that is like robbery, I'm guessing people sign without realizing? That's crazy

It is generally understood that people who lease do so to turn the car in at the end of the lease. The tax credit is a big help in lowering lease payments for those who do so.

 

[Jskillz860]

It is generally understood that people who lease do so to turn the car in at the end of the lease. The tax credit is a big help in lowering lease payments for those who do so.

Correct but from what I'm reading on here the lease company is charging an additional 7,500 dollars when turning the car in. After they already recieved the 7,500 dollars for the tax credit, I could understand if you recieved the tax credit money and then they charge you. But from what I've read they are getting double

 

[tga]

Correct but from what I'm reading on here the lease company is charging an additional 7,500 dollars when turning the car in. After they already recieved the 7,500 dollars for the tax credit, I could understand if you recieved the tax credit money and then they charge you. But from what I've read they are getting double

I think you misunderstand it - the leasee only pays if they keep the car, because the residual value is (artificially) inflated. Some numbers might make it clearer:

Say you have a $25,000 ICE, with a residual value at the end of the lease of $15,000. Assume all residual values are equal to fair market value, so the leasing company sells the car for the residual. With the ICE, you "use" $10k of value during the lease. The lease payments have to total to $10k (plus interest).

Use the same numbers, but make it an EV instead. To pass along the tax credit, the leasing company needs to reduce the total lease payments (before interest) to $2500 ($25000-$15000-$7500). They can either reduce the "purchase price" at the front end to $17500, or artificially inflate the residual in the contract to $22500; both have the same net effect. It's probably easier to do the later, since the residual is a guess, anyway (and easier to explain to stockholders and accountants then "giving away" a part of the purchase price).

If the leader gives back the car, the leasing company sells at a paper loss (since fair market value for the EV is $7500 less than what was listed as the residual in the financing contract), but they already got $7500 in the tax credit, so they are made whole.

However, if the leasee keeps the car, they are obligated by the financing contract to pay the full, inflated residual negotiated when the car was originally purchased. In that case, the leasee gets screwed, and the leasing company gets an extra $7500.

Which is why you should never use a lease to finance-to-own an EV.

 

[Jskillz860]

I think you misunderstand it - the leasee only pays if they keep the car, because the residual value is (artificially) inflated. Some numbers might make it clearer:

Say you have a $25,000 ICE, with a residual value at the end of the lease of $15,000. Assume all residual values are equal to fair market value, so the leasing company sells the car for the residual. With the ICE, you "use" $10k of value during the lease. The lease payments have to total to $10k (plus interest).

Use the same numbers, but make it an EV instead. To pass along the tax credit, the leasing company needs to reduce the total lease payments (before interest) to $2500 ($25000-$15000-$7500). They can either reduce the "purchase price" at the front end to $17500, or artificially inflate the residual in the contract to $22500; both have the same net effect. It's probably easier to do the later, since the residual is a guess, anyway (and easier to explain to stockholders and accountants then "giving away" a part of the purchase price).

If the leader gives back the car, the leasing company sells at a paper loss (since fair market value for the EV is $7500 less than what was listed as the residual in the financing contract), but they already got $7500 in the tax credit, so they are made whole.

However, if the leasee keeps the car, they are obligated by the financing contract to pay the full, inflated residual negotiated when the car was originally purchased. In that case, the leasee gets screwed, and the leasing company gets an extra $7500.

Which is why you should never use a lease to finance-to-own an EV.

Ok I understand it but it still sucks and is unfair if you purchase the vehicle, it shouldn't make a difference. If the person buying the car after your lease isn't paying the 7,500 then you shouldn't have to either of you choose to buy. That is ridiculous. I agree in that case that leasing to buy an EV isn't a good option

 

[Jskillz860]

Has anyone had paint protection film done in the past? Is it worth it and what's the cost

 

[dgpcolorado]

...Which is why you should never use a lease to finance-to-own an EV.

When the lease residual includes a federal tax credit. Once the federal tax credit expires all this concern about inflated residuals will become moot.

 

[tfna]

This is not true for Ontario: The Ontario Ministry of Finance will be issuing cheques annually in equal amounts for the full rebate as long as you lease for three years or more. Lease to own is fine for this province. Tesla lawrence also explained that the government rebate is passed along to the lessee. Although I have not yet confirmed the residual, it does not appear to be inflated based on the numbers I have seen. Can someone with an Ontario tesla lease jump in and verify?

Which is why you should never use a lease to finance-to-own an EV.