WAY underwater on purchase. Should I lease?

I'm probably the most underwater Leaf owner on the planet. In Dec 2011 I bought an 2012 SL. I rolled all the costs into the loan so I paid nothing at closing, and because I had pulled a bunch of money out of IRA's to purchase 2 rental properties, the $7500 tax credit simply reduced my tax bill to $0 and not my car loan.

So after all was said and done I had a loan that started at $41,000 with payments of $742 a month.

This month will mark the 2 year point on the loan and on the 15th the balance will be around $24,750. I figure the car is worth $15,000 or so these days. I'm trying to decide if it would be smart to bite the bullet, make a $10,000 payment on the car, and lease a new one.

I'm in Florida, car has 28,000 miles and I've lost one bar about 6 months ago. It seems as if the range has gone down even since the lost bar. The biggest trip we really do is to go downtown for ballgames about 30 times a year and I'm starting to wonder if I can make that trip anymore. I generally would drive 60 MPH on the highway portion and get home with 15 miles or so left. Any less and my comfort level gets a little low. With the battery issues, I've regretted being an owner versus a leaser. Battery replacement program doesn't help me much. I need close to full capacity.

I'm thinking if I bite the bullet, I become a leaser and not an owner, I get a car with new batteries so I don't have to worry about range again for a while, and I get a car with a 6.6 charger allowing me to charge faster for that second trip of the day. I would probably get the SL since I really like cruise control. And depending on the lease I get, it would be nice to chop $300-400 off the monthly expenses.

Seems to me if I get a $400 lease for 36 months I essentially spend the same amount as I owe, so anything better in terms of monthly payment or length of contract saves me money over the long haul. (Except on the purchase I would have a 5 year old car free and clear). And it give me a new car in the meantime.

I'm certainly thinking about starting fresh and then in 2 or 3 years see where the EV market is.

What's the consensus?

In a sense you owe ~$17k on the car and $7500 in income tax, the latter being secured by the car. Not that that really helps, just noting that you didn't lose that badly on the car.

I wouldn't worry about coming home with only 15 miles showing on the GOM.You can safely go a lot lower.

One more thing, I'm in FL too... I can't see making any moves until we get some clarity on the supposed heat-resistant battery.

Sorry, but pulling money out of IRAs to buy rental properties?? I understand that it was probably a good time to buy, but that seems way over the top.

At this point, leasing another vehicle is just going to put you further in the hole. At $742 a month, I think that you are paying off your LEAF faster than it is depreciating.

In my opinion, if you want to continue driving a LEAF, you're better off sucking it up and dealing with the range limitations on your current vehicle for as long as you can. I'd prioritize having a financial comfort margin over a range comfort margin. As far as range is concerned, the worst that can happen is that you run out of charge and to get towed, and life goes on. Also, maybe you can qualify for the capacity warranty and get a new battery before 60K miles.

Keep the car and keep paying the loan. That last 15 miles indicated might seem tight but it is rather conservative and is probably closer to 25 maybe 30 if you slow down and use no climate control.

My loan from 5/2011 is still over $22,000 so you are not that much worse off and I have two bars gone.

Depreciation is always rapid the first two years. Try your best to enjoy the vehicle for year 3, 4 & 5. You will see much less depreciation. Maybe in 2017 a better EV will be available. Trading now does not really improve the car much to make the jump.

Actually pulling the IRA money out for rental properties has turned out to be a tremendously good deal. I was over 59 1/2 so they were "normal distributions", I bought 2 foreclosures out in Phoenix at the bottom of the market. Very nice homes in a golf course community, and the IRA money was just the 20% down payments. The homes have been rented every month, positive cash flow of $400 a month each, and they are worth $50,000 more each now than when I bought.

But I don't want this to be about the homes. Just questioning the financial decision on own versus lease going forward.

And I do appreciate your opinion.

Newporttom said:

Actually pulling the IRA money out for rental properties has turned out to be a tremendously good deal. I was over 59 1/2 so they were "normal distributions", I bought 2 foreclosures out in Phoenix at the bottom of the market. Very nice homes in a golf course community, and the IRA money was just the 20% down payments. The homes have been rented every month, positive cash flow of $400 a month each, and they are worth $50,000 more each now than when I bought.

Click to expand...

Glad it's working out so far. Usually, when I hear people pulling money from retirement accounts, they are doing early withdrawals and have to pay a ton in taxes. Happy to hear that's not your situation.

Besides potentially qualifying for a new battery under warranty with an improved chemistry, another benefit of waiting is that there will likely be more and better EV options when you eventually do decide to change cars.

Newporttom said:

This month will mark the 2 year point on the loan and on the 15th the balance will be around $24,750. I figure the car is worth $15,000 or so these days. I'm trying to decide if it would be smart to bite the bullet, make a $10,000 payment on the car, and lease a new one.

I'm in Florida, car has 28,000 miles and I've lost one bar about 6 months ago....

Click to expand...

I don't see the numbers working for you, but it wouldn't hurt to go to a dealer and see what they are willing to do. If you can get ~ $15K for yours, then it seems to me that you are only really out a few thousand ( $9750 - new $7500 rebate = $2250 +/- additional discount and ? fees) by going the lease route. The problem I see is in the new lease monthly payment. It would very likely be closer to what you are already paying given that you want an SL. You could remediate some of the cost by dropping to a S with QC package. That would still give you QC capability, 6.6KW charger and a meager rear monitor, but you would no longer have HomeLink, cruise control, cargo cover, etc.. Not to mention the cheesy wheels (if that really matters to you).

A few comments:

1) Since you live in Florida, the chance of losing 4 bars and getting a heat resistant battery may be pretty good. I would guess you aren't far from losing your second bar based on your geographic location and mileage.

2) Get a LeafDD or Leaf Spy (link in my signature to the user written manual) so you will know exactly how much energy you have left. Helps a lot with range anxiety.

3) You aren't as far underwater as you suggest, since the $7500 tax credit should be applied to the Leaf, not the properties. Otherwise you aren't playing fair with the accounting.

4) The longer you wait to make a change the better your options will be in regards to getting a car that will meet your needs. You have already had a very large part of the depreciation, I wouldn't suggest jumping ship now.

How far is your trip downtown and back?

Newporttom said:

The biggest trip we really do is to go downtown for ballgames about 30 times a year and I'm starting to wonder if I can make that trip anymore. I generally would drive 60 MPH on the highway portion and get home with 15 miles or so left. Any less and my comfort level gets a little low.

Click to expand...

If driving range is impacting your decision, you need to know what your driving range actually is, not what the car is telling you. You should conduct your own "bottom of the tank" experiment to see how far you can go after the low battery warning illuminates based on your driving style and terrain around your home. If you don't feel comfortable doing that, I wrote an article about exactly that which can be found here. Your probable range after the low battery warning comes on is 15 to 20 miles. Hope that helps.

Trip is 52 miles round trip. (about 1/2 is highway) Like I said last year we got home with about 15 miles. I am probably going to do a test run soon to see how things look at this point.

I've never seen the VLBW. Only the LBW which I get at 9. So it would be nice if there's another "hidden" 6 or 7 miles.

you are not underwater... at least no more than when you bought the car. you essentially bought a $28,000 car with a $41,000 loan. I would sell it and lease. you will probably get a good consideration on a trade and might reduce your debt a bit but best bet is having $5-7,000 cash down payment.

another reason to lease is the near zero interest rates. my total rent charge which is essentially interest on the 3 year lease is $35.75

the other suggestion i have for you is what i did for myself and that was drive slower. you will be surprised at the range gain by slowing down to 55. all i will say about that very unpopular topic

At $742 per month for $41,000, it appears that you financed the vehicle for 5 years at about 3.5%. You may want to consider refinancing the balance at a lower rate. You should be able to get a rate at 2.5% or lower for a 3-year auto loan.

If I were you, I would keep driving the vehicle until it no longer suits my needs. If it will no longer go far enough for my needs, it would consider trading it in on a new Leaf lease. Nissan and the Nissan dealer both have a vested interest in you getting a new Leaf and they should be willing to go the extra mile.

Good luck

You were pretty close on the loan. I did peek at what a lower rate would do for me, and it wasn't very different. I did a test run tonight so see how much mileage I would have after a run to the ballpark. I aborted the trip because I was afraid I would not make it. There's a bridge about 2 miles from the ballpark. Last year, like clockwork I would hit it at about 52 miles left, hit the peak at 47 or 48 and get back to 49 or 50 on the down slope.

Today I aborted the trip 12 miles short of the ballpark and was at 41 miles. It may not have been the best test in the world because we were having a big rain storm but it raises much doubt as to whether the Leaf is going to make it this year.

Newporttom said:

I did a test run tonight so see how much mileage I would have after a run to the ballpark. I aborted the trip because I was afraid I would not make it. There's a bridge about 2 miles from the ballpark. Last year, like clockwork I would hit it at about 52 miles left, hit the peak at 47 or 48 and get back to 49 or 50 on the down slope. Today I aborted the trip 12 miles short of the ballpark and was at 41 miles.

Click to expand...

Pay no attention to the big lying number!
Watch the bars instead. When the display drops down to 5 bars in your 2012, the battery is half full. When it drops to 2 bars you still have a bit more than 30% of the battery energy you started with. And, no, those last two bars are not "red"; they are blue and white just like the other ten, and it is no worse to use the bottom two than the top two. Your battery, with only 11 capacity bars, is still more than 20% full when you get LBW, and has nearly 10% remaining if you drop to VLBW. (smkettner showed you Tony's chart for a new battery. You should be using this one instead.)

I'm not going to tell you whether you should keep the car or not, but it really bugs me when people wring their hands about not being able to make it while refusing to use the bottom quarter or third of the energy in their battery.

Ray

OK I'll try again soon and watch the bars....

planet4ever said:

I'm not going to tell you whether you should keep the car or not, but it really bugs me when people wring their hands about not being able to make it while refusing to use the bottom quarter or third of the energy in their battery.
Ray

Click to expand...

+1 and you really need to borrow something like a LeafDD to check real range on the trip if you're going to base an entire sell/purchase cycle on the outcome.

You're going to pay that $10k one way or the other. Either by making all the payments or by paying it off. That loan sounds dreadful.