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The Lease Vs. Finance Landscape

Discussion in 'Tesla Motors' started by Mickie, Jul 8, 2016.

  1. Mickie

    Mickie Member

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    Since there's no one-size-fits-all scenario regarding finance vs. lease, I ask if anyone has a moment to take a peek at my dilemma and let me know their thoughts. This was posted in another thread but it sort of ballooned into its own thing and figured I'd dedicate a post to it.

    Here it is:

    Ok, so preliminary, personal scenario with numbers I came up with on the napkin which favors financing over lease based on my $90k configuration. Here goes..

    12k/yr lease-- $10,464 down (includes 2.5k order payment). $1052 per month. (This is using Tesla's lease calculator that states the 7.5k tax credit is already figured into the payment.

    Finance car @$95,935 (taxes, discount, etc., total out the door)-- 20% down $21,687=$973/month

    LEASE SCENARIO
    Shell out roughly half the down payment, make your monthlies for a total of $37,872, then give the car back and get hussy patted on the ass for the $395 disposition fee on your way out. $38,267 total. Vanished. Gone.

    FINANCE SCENARIO
    100% higher down payment versus the lease, but, let's say the car's worth roughly 58k after 3 years and 36k miles (I settled on this number looking at a large number of 2013's on autotrader, both private and dealer advertisements. Pretty sure we're in agreement the 60D w/75 upgrade option will retain a nice value, but let's play a down scenario). Using an amortization chart @1.74% interest over 6.5 years and October 1st as initial payment, in that same month in 2019, you'll have paid $33,031 into the car. Add the $21,687 down payment and you're at $54,718 invested. You can spin the 7.5k tax credit any way you want since a lot of factors are involved in that, but for sake of argument, say you're able to collect the full amount and throw it on top of the car--$62,218 total invested. Minus that from the out-the-door price=$33,717 balance left on the car. So with, without, or meeting the tax credit somewhere in the middle, if you choose to sell at the 3 year mark, you're roughly getting your down payment back to do what you will with, all while building equity and owning the car.

    My conclusion: If you're fine doubling down on the down payment and exercising a little diligence with a private sale in 3 years (if you even want to sell at that point), financing seems the all-around better bet. Payments with the financing plan are $79/month lower as well.

    Thoughts?
     
  2. willcasp

    willcasp Member

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    I ran the numbers on a 36 month scenario, and went with leasing. I compared that to a loan for 36 months, and 72 months. The bet I am making is that the technology will advance enough in the next three years that it will have a depreciation impact on the cars that do not have it. Asking prices and selling prices for three year old Tesla's are not the same. The residual value on the Lease is significantly higher than the RGV buyback price after three years.
     
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  3. brkaus

    brkaus Member

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    Part of the reason for the higher residual in lease is the $7500 tax credit is added to the residual. In a cash(loan) purchase, the $7500 is effective used to reduce the sales price.
     
  4. Mickie

    Mickie Member

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    So does my above reasoning seem flawed?

    $33,717 balance on the car in exactly 3 years with financing, which means to at least replicate a leasing scenario and call it a wash, the $90k car would have to sell for approximately $41K. I get this number by adding the balance with the lease's down payment and subtracting the additional $79 a month. (33,717 + 10,464 - 2,844). This nets part of the finance's down payment back, making it just as if you leased. Thing is, I have a hard time believing a new 60D refresh missing only rear facing seats and that faster charging (dual chargers?) is going to tank that badly with 30k'ish miles in 3 years. I'm assuming at least $53k, if not a bit more, which will then recoup money and beat out a lease with any extra dollars you recoup north of $41k. The short of it is, finance down payment of 21,687 minus lease down payment which includes 79 extra a month and the disposition coming to 13,703 means I need to realize only $7,984 (the total difference between the finance down payment and lease down payment with higher monthlies and disposition) over the remaining balance on car, or $41,701 on sale of car if I was to sell in 3 years.

    Does this make sense? Am I nuts over here?? Thoughts, please! I'm due to sign off on financing Monday, and if I'm gonna jump ship to leasing, it's gotta be soon. Thanks guys ;)
     
  5. Mickie

    Mickie Member

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    And to note, I get and appreciate the typical allures of leasing, but what I'm driving at is it really looks like you can still have the benefits of leasing coupled with the benefits of financing and to come out ahead in the end. The way I see leasing, at least in my case, is it's only useful if you're having issues with a higher down payment or you're scared of freakish depreciation, which again, I can't see, even with the Model 3 boogeyman on the horizon.
     
  6. carter_seattle

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    @Mickie it would be easier to evaluate your math if you put it into a public Google Spreadsheet. In general, owning and leasing are almost identical. The main difference is that a lease provides you with a pre-defined dollar amount (residual) that you can spend to purchase the car outright at the end of the term, whereas a purchase means that you take on risk regarding the resale value of the car whenever you decide to sell.

    My thought process is simple: if you plan on living within the boundaries of the lease (mileage and care) it's always better to lease. You can always buy the car at the end of your lease and own it outright. However, if you aren't going to live within the boundaries of a lease, it's a bad deal.

    Here's a lease spreadsheet I put together for my 2013 Nissan Leaf:

    2013 Nissan Leaf (Public)
     
  7. Mickie

    Mickie Member

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    Thank you for this, Carter. Your spreadsheet is straight forward and helpful, putting things in clearer perspective. The hang up with purchasing at lease end is you lose the $7,500 tax credit entirely as they tack it on the residual. I was hoping that wasn't the case as it'd make leasing a lot more attractive in my case.
     
  8. carter_seattle

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    I don't think that's true about the tax credit being tacked on at the end. My understanding is that the tax credit is redeemed by the financing company that "owns" the car while you are leasing it. Have you confirmed this with Tesla?
     
  9. Mickie

    Mickie Member

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    #9 Mickie, Jul 9, 2016
    Last edited: Jul 9, 2016
    Copy/ paste from text exchanges with my Tesla OA:

    I will run the numbers and have them available on Tuesday..please know that it will not make sense to purchase the car after the lease.

    We would be completely forgoing the tax credit

    Me: Oh that sucks. I thought it'd be a guaranteed way to get the credit even with purchase after

    OA: No the tax credit is built into the lease..when you buy the car after its as if the credit never existed
     
  10. carter_seattle

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    I hear what you're saying, but I'd get a 2nd opinion (perhaps even a fresh thread here). It doesn't make sense that they'd factor $7500 into lower lease payments, but then "charge" you $7500 later if you buy the car. Either the financing company redeemed the federal tax credit in the year they bought the car or they didn't. The government doesn't car if you buy the car or Random Finance Company. If they didn't redeem it (for whatever reason) I can't see how they could afford to lease you the car at the lower payments. And since you have the right to turn in the car, they'd have to sell the car at $7500 more than the residual to break even? Doesn't make sense.
     
  11. Mickie

    Mickie Member

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    Yeah it's a little sketchy. The credit is used to bring down the capitalized cost at the beginning thus lowering your payments. I'm not 100% sure how they spin it when buy time comes, but I know if it were that easy to claim the full $7,500, more people would utilize that strategy as many won't qualify for the full credit on their own, financing otherwise.
     
  12. Mickie

    Mickie Member

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  13. carter_seattle

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    Yeah, I was going to point you at that. Really great info. However, it's a little biased towards tax treatment for self-employed people who can deduct lease payments. Most of us can't.
     
  14. Blue Millenium

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    US bank does take the 7500 tax credit and then charge you on the back end if you want to purchase the vehicle. 100% positive. As close to a questionable maneuver as I can see but apparently legal. Regardless, They are an absolute nightmare to do business with and based on first hand experience suggest you look at other options than working with US Bank.
     
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  15. Mickie

    Mickie Member

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    Pretty much reassures me that financing is the way to go in my case.
     
  16. carter_seattle

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    Is US Bank the only option for leading? I can't fathom how anyone would lease a Tesla under those conditions?
     
  17. brkaus

    brkaus Member

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    Simply put, they add the $7500 to the residual value. It still lowers the payments (not as much as if they took it off the cap cost), but makes it more expensive to purchase at the end of the lease.
     
  18. dgpcolorado

    dgpcolorado Member

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    So long as you are sure that you won't want to buy the car at the end of the lease, leasing allows the benefit of the tax credit in the form of reduced lease payments. That, in turn, helps those who don't qualify for all of the tax credit due to having a low federal income tax liability.

    But if you expect to keep the car longer than a lease term, it makes more sense to buy it, given the Tesla lease system where the tax credit is added to the residual value. (Yes, it makes no sense to do it that way, but it is what it is. Perhaps someday they will change it to make it fairer.)
     
  19. Mickie

    Mickie Member

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    I heard Obama was trying to make it a $10k point of sale straight rebate. That'd be hot before November.
     
  20. dgpcolorado

    dgpcolorado Member

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    The chance of such a thing getting through Congress is miniscule. It is more likely that Congress would kill the current tax credit than increase EV incentives in any meaningful way.
     

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