Some lease questions ...

[HIOJim]

Insure or hedge? I'm still uncertain, despite your rhetorical argument.
TT

Go with your gut. If you buy and things don't pan out, you gambled and you lost. You will not have lost all your retirement savings and you will pick up and move on. It's just a car.

The fact that anecdotal evidence suggest Nissan dealers are pushing the lease option makes me want to buy. But then, I always have my tin foil hat nearby....

 

[evnow]

No, but I am required by state law to carry insurance on my car. I am not required to lease it, so there is a choice involved.

Collission is not required if you buy. Only liability.

Unless they really suck on this implementation, I just don't see a 3-year old Leaf selling for less than $13K, but who knows?

Yes, who knows. The resale value depends on
- Competition
- Battery Situation
- Gas Price

So, even if (2) above is good - the others are beyond everyone'e control. We could get a competitor (including Gen 2 Leaf in 3 years) which has
- Better exterior
- Higher KW charger (like Focus EV!)
- More range
- Heated seats (like Leaf 2012)
- Liquid cooled/heated batteries

Lacking all or any of the above could dent Leaf value. The basic question is - will Leaf market value follow normal car prices or more like a V1 electronic product (HDTVs!). If it is like other cars, in 3 years the market value will be similar to residual. If like an elctronic product, definitely lower.

Personally, I'm sure, if I buy I'll not sell and get a new EV. Hassle of selling (and convincing my wife that I need a new car) will see to it. Leasing will force that decision point :twisted:

 

[ttweed]

The fact that anecdotal evidence suggest Nissan dealers are pushing the lease option makes me want to buy. But then, I always have my tin foil hat nearby....

:lol: I like that! The contrarian gambit.

I have to sign off now, I hear the black helicopters circling outside...

TT

 

[Gonewild]

plant let assume you pay the rebate outside the loan. Because why finance the rebate how would that work out much better then right? Buying over leasing.

By "rebate" you clearly seem to mean here the federal tax credit. At this point you won't be able to get that credit until 2012, unless you can get a little bit of it every paycheck by adjusting your withholding. There is no way that you can have all - or even very much - of it available at the time you purchase the car. That is why I assumed you would need to finance the entire cost of the car, including the $7500.

Obviously my entire calculation assumes you don't have a big horde of cash on hand. I made that assumption so I could do an "apples to apples" comparison with leasing.

I was thinking of pulling $7,500 off of my equity line of credit it has a 2.25% rate variable. I then do a tax exempt on my pay check again this year as I did last year do to solar and new A/C unit installed. I do not pay $7,500 in income taxes I was thinking of taking money out of my 401k and paying a penalty because my age is 51. Does that penalty qualify to be used against the rebate or only the income of the money taken out. If you know or anyone else? I then can use the left over money to pay off the last $10,000 I owe on my home.

 

[wwhitney]

This is a $3042 overall difference, as far as I can tell. Quite a bit more than 3%. And if the residual is financed, not cashed out, there would be additional interest costs there. Of course the purchase scenario requires a more rapid outlay of capital, and waiting for a year before recovering the $7500 tax credit, but this is as "apples and apples" as I can make this scenario, with my limited experience with leasing.

$3042 is not an apples-to-apples comparison because you have ignored the time value of money. You need to pick a discount rate. E.g. if your short term savings are earning 2% and will cover the entire purchase cost, use 2%. Or if you would borrow the funds to buy at 3%, use 3%. Then you can convert the future payment schedule of leasing into an equivalent total upfront payment and compare that to the total upfront payment of purchasing. So for 2% discount rate, your leasing numbers roughly give:

$9.5K upfront -- no discount
$16K over 3 years -- approximately 3% discount or $480
$17K in 3 years -- approximately 6% discount or $1020

So your $3,050 difference becomes a $1,550 difference. Also you should penalize the buy option by the one year you wait to get the $7,500 tax credit back, which is $150. So with a 2% discount rate, we have a $1,400 premium for leasing. If the discount rate is 3%, it becomes only a $600 leasing premium.

Cheers, Wayne

 

[planet4ever]

Lease
Total cost of payments = $25478
Residual value = $15,580
Sales tax on residual at lease end = $1363 (unless I am mistaken and this is included in lease payments somehow?)
Total outlay = $42,421

Correct, except that you don't actually pay that much. The $25478 includes the $7500 that you never have to pay. It is, however, a fair number for the comparison you use because you didn't deduct the $7500 from the purchase side, either.

Purchase
Price = $35005 (this is from the Gross Capitalized Cost entry on the lease)
Sales tax = $3063
REG and Doc prep = $547
Interest on loan = $764 (1.99% for 2 years on 36,615 loan after $2k DOWN)
Total outlay = $39,379

Also correct, with the same caveat. However, as I pointed out before, it isn't a fair comparison. You neglected to mention that your monthly payment on the purchase loan is $1,557.49. Look at it this way:

First year costs
Lease: $6,886.53 [includes 12 payments, the first as part of the $2K]
Purchase: $19,132.39 [includes 11 payments]

Second year costs
Lease: $5,342.76
Purchase: $11,189.88 [after deducting $7500]

Third year costs
Lease: $5,342.76
Purchase: $1,557.49 [final payment on loan]

As you yourself admitted, the purchase is way front-loaded, which is fine if you have the money and no place better to use it. (You wouldn't happen to have a 7% house mortgage you could pay down, would you? I know, I know, you get a big tax break on that mortgage interest, so it might effectively be more like 4.5%. At least this year. I'll give you even odds that you won't be getting that break three years from now.)

 

[planet4ever]

$3042 is not an apples-to-apples comparison because you have ignored the time value of money. You need to pick a discount rate. E.g. if your short term savings are earning 2% and will cover the entire purchase cost, use 2%. Or if you would borrow the funds to buy at 3%, use 3%. Then you can convert the future payment schedule of leasing into an equivalent total upfront payment and compare that to the total upfront payment of purchasing. So for 2% discount rate, your leasing numbers roughly give:

$9.5K upfront -- no discount
$16K over 3 years -- approximately 3% discount or $480
$17K in 3 years -- approximately 6% discount or $1020

So your $3,050 difference becomes a $1,550 difference. Also you should penalize the buy option by the one year you wait to get the $7,500 tax credit back, which is $150. So with a 2% discount rate, we have a $1,400 premium for leasing. If the discount rate is 3%, it becomes only a $600 leasing premium.

Good analysis, Wayne, except I think you missed a subtle point on the upfront for the lease. You never pay the $9.5K, only the $9.5K minus $7.5K = $2K. See the right side of section 4 in Omkar's statement.

 

[Gonewild]

my house rate is 6.5% so paying it off would save me interest on the last 10,000

 

[TimeHorse]

Personally, I have an alternate scenario for y'all:

Step 1) Move to a Tier 2 State
Step 2) Open a high-interest savings account; I found one at 1.3% with bonus interest.
Step 3) Create a budget: cut all unnecessary expenditures and scrimp and save as much as possible.
Step 4) Direct Deposit the money you save into you high-interest savings account
Step 5) Collect your high-interest saving at the end of the year and buy yourself a brand-spanking new 2012 LEAF with Heated Seats Trim and the 6.6kW charger option.

Hey, and as the OP, can someone just answer my question about the 18,000 - 20,000 miles per year cost on a LEAF lease?

 

[wwhitney]

Good analysis, Wayne, except I think you missed a subtle point on the upfront for the lease. You never pay the $9.5K, only the $9.5K minus $7.5K = $2K. See the right side of section 4 in Omkar's statement.

The original poster of this comparison had the $7.5K in both scenarios as an upfront cost, so I left it there. Taking it out of both scenarios has no effect on the lease premium. And I did adjust the buy scenario for the cost of having to pony up the $7.5K for one year before you get it back. Of course if you buy later in the year, or you go to the trouble of adjusting your withholding throughout the year, then you get that $7.5K back sooner and the cost is less than I first posted.

Cheers, Wayne

 

[wwhitney]

I was thinking of pulling $7,500 off of my equity line of credit it has a 2.25% rate variable. I then do a tax exempt on my pay check again this year as I did last year do to solar and new A/C unit installed. I do not pay $7,500 in income taxes I was thinking of taking money out of my 401k and paying a penalty because my age is 51. Does that penalty qualify to be used against the rebate or only the income of the money taken out. If you know or anyone else? I then can use the left over money to pay off the last $10,000 I owe on my home.

I'm not sure I follow you 100% but let me just point out that if you incur a penalty from early withdrawal on a 401k, that is an extra cost regardless of whether you cover it with the tax credit. So other lease/buy issues aside, if you can't otherwise make use of the tax credit, you'd still be ahead by leasing since you could capture the tax credit without incurring that extra cost.

Cheers, Wayne

 

[evnow]

Hey, and as the OP, can someone just answer my question about the 18,000 - 20,000 miles per year cost on a LEAF lease?

See updated lease sticky. You can prebuy miles at 10 cents a mile.

 

[Gonewild]

I was thinking of pulling $7,500 off of my equity line of credit it has a 2.25% rate variable. I then do a tax exempt on my pay check again this year as I did last year do to solar and new A/C unit installed. I do not pay $7,500 in income taxes I was thinking of taking money out of my 401k and paying a penalty because my age is 51. Does that penalty qualify to be used against the rebate or only the income of the money taken out. If you know or anyone else? I then can use the left over money to pay off the last $10,000 I owe on my home.

I'm not sure I follow you 100% but let me just point out that if you incur a penalty from early withdrawal on a 401k, that is an extra cost regardless of whether you cover it with the tax credit. So other lease/buy issues aside, if you can't otherwise make use of the tax credit, you'd still be ahead by leasing since you could capture the tax credit without incurring that extra cost.

Cheers, Wayne

Thanks Wayne

What I was thinking if I am getting the money from the penalty back in the rebate did it REALLY COST ME ANYTHING? I know all the talk about loss of future income in my 401k to me is a non issue.

 

[LEAFer]

Hey, and as the OP, can someone just answer my question about the 18,000 - 20,000 miles per year cost on a LEAF lease?

See updated lease sticky. You can prebuy miles at 10 cents a mile.

What's the "post-buy" cost ... IOW ... what does the lease say about c/mile when you return it above the agreed upon miles ?

 

[wwhitney]

What I was thinking if I am getting the money from the penalty back in the rebate did it REALLY COST ME ANYTHING? I know all the talk about loss of future income in my 401k to me is a non issue.

Well, yes, if you could have instead realized that tax rebate by leasing the car and then buying it at lease end.

Cheers, Wayne

 

[Train]

Collission is not required if you buy. Only liability.

It depends on the state where you live, your lender and the insurance carrier.

If you buy the car for cash, then you would not have to pay collision.

But if you finance the buy, in many cases the bank itself will require you to have collision because you have a significant amount still owed.

 

[Train]

I do not pay $7,500 in income taxes I was thinking of taking money out of my 401k and paying a penalty because my age is 51.

I would not take any money out of a 401K unless it was an absolute emergency. Especially not to help purchase a depreciating asset.

 

[Train]

I believe that this is the perfect situation in which to lease. After three years, you know newer Leafs ( Leaves ) will have improvements and there will also be other EV's out there to consider, some which may, for whatever reason, be a better choice. If you decide you want to keep the Leaf, you can buy it.

Leasing is popular to many people because it allows them to get a newer car every two or three years.

With this newer technology and the fact that many newer EV's will be forthcoming, leasing appears to be a favorable option.

 

[planet4ever]

Good analysis, Wayne, except I think you missed a subtle point on the upfront for the lease. You never pay the $9.5K, only the $9.5K minus $7.5K = $2K. See the right side of section 4 in Omkar's statement.

The original poster of this comparison had the $7.5K in both scenarios as an upfront cost, so I left it there.

Again, I agree with your analysis, but you still seem to be missing the subtle point. Due to a thread split, the original post is no longer on this thread, but it can be seen here: http://www.mynissanleaf.com/viewtopic.php?f=27&t=2192

Section 3 says:
$9,500.00 AMOUNT DUE AT LEASE SIGNING OR DELIVERY

That is what you were looking at. But Section 4 says:
$7,500.00 Rebates and Non-Cash Credits
$2,000.00 Amount To Be Paid In Cash
---------
$9,500.00 Total

I'm harping on this because I don't want anyone to think they are suddenly going to need to come up with nearly ten thousand dollars in order to lease.

 

[wwhitney]

I'm harping on this because I don't want anyone to think they are suddenly going to need to come up with nearly ten thousand dollars in order to lease.

I agree that you don't need to come up with $9.5K at lease signing, just $2K. And that fact is already represented in the analysis.

Cheers, Wayne