December 2010 Lease VS Purchase

[LTLFTcomposite]

Near as I can tell in the world of auto dealing the "invoice" is a mythical creature sent from the heavens to delude buyers into thinking they are driving hard bargains purchasing vehicles at prices that afford the dealer little or no profit. Next time you are at a car dealer take a good look around. The real estate, the taxes, the maintenance, the utilities, the insurance... and all those employees. Does anyone really think all of that is supported by a margin of $99 per vehicle sold?

 

[sjfotos]

Without getting into all the detail, you can assume a mid priced new car starts with a dealer difference between the amount they were invoiced from the manufacturer and the MSRP of around 7%. This excludes the cost of financing the car between the time that they borrow the money to put it on the lot (paying the manufacturer) and the time it is sold. As with any retail business, you will have a certain number of "Edsels" on the roster that punish your average margin. This is especially true in the car business, where manufacturers have elaborate allocation schemes that force you to take a few of those 'boat anchors' on board, even though you told them last year that you couldn't sell that new dream machine of theirs if it was the last ride out of Armageddon-ville.

 

[EVDRIVER]

Near as I can tell in the world of auto dealing the "invoice" is a mythical creature sent from the heavens to delude buyers into thinking they are driving hard bargains purchasing vehicles at prices that afford the dealer little or no profit. Next time you are at a car dealer take a good look around. The real estate, the taxes, the maintenance, the utilities, the insurance... and all those employees. Does anyone really think all of that is supported by a margin of $99 per vehicle sold?

The service and parts dept $$. But that is going to be lonely for EVs.

 

[garygid]

But, that picture does not include the manufacturer-to-dealer "incentive" payments.

Also, how much does a dealer make on sales compared to service?

 

[MixedConviction]

I've never purchased a car before and this really makes me nervous. Mostly because much of the jargon in the tax credit thread went over my head. When I look at the leasing option, I think, "Hey I could afford the 370 a month" but I've heard negative things about leasing cars in general. But I don't have the 35K to fork out if I were to purchase it. I also don't think I'll qualify for the tax credit. Any suggestions? Should I just "leaf" the dream of owning a Leaf for now?

 

[mwalsh]

I've never purchased a car before and this really makes me nervous. Mostly because much of the jargon in the tax credit thread went over my head. When I look at the leasing option, I think, "Hey I could afford the 370 a month" but I've heard negative things about leasing cars in general. But I don't have the 35K to fork out if I were to purchase it. I also don't think I'll qualify for the tax credit. Any suggestions? Should I just "leaf" the dream of owning a Leaf for now?

The tax credit...you just deduct $7500 from the amount of taxes you have to pay that year. So, say you earn $100,000 a year, and you usually pay $10,000 in taxes. You deduct $7500 from the $10,000 leaving taxes owed of $2500. Now, if you've already paid that $10,000 in taxes by having it withheld from your paycheck, you've got a massive refund coming!

Of course, you'll have to adjust the numbers to what you earn and what you pay in taxes. The only way you loose out in the tax credit scenario is if you DON'T pay at least $7500 in taxes per year.

 

[mitch672]

mixedconviction, if you don't yet have $7500 in federal tax liability (sounds like you are a student currently), then leasing is your better option, as you do get the $7500 credit, the leasing company passes it on, so you don't have to get it back on your federal taxes. It's $1999 down, then 35 monthlt payments of either $359 or $379 depending on which model you get (the first payment is included in the $1999 down), then of course you have your states DMV fees and taxes as well. after 36 months you can turn it in, or buy it for what the "residual" is, this is set in the initial lease contract...

 

[AndyH]

For those that have structured their lives so they don't have to pay a lot of income tax, and if they plan to keep the car long-term, it might still be better to forgo the tax credit and buy the car.

We still don't have enough information.

 

[EVDRIVER]

This is not tax advice but I found that based on 09 returns, the credit can be carried over if you file as a business. One thing I also noticed was that the lease payment difference between the SV and SV seems to be too high, I think it pays for the package price in full over the lease term!

 

[mitch672]

This is not tax advice but I found that based on 09 returns, the credit can be carried over if you file as a business. One thing I also noticed was that the lease payment difference between the SV and SV seems to be too high, I think it pays for the package price in full over the lease term!

the math is pretty close: $349 versus $379, a difference of $30 / month for 35 months (initial payment is still $1999 with the first months payment included)

$30 * 35 = $1050

Sounds pretty close to the price difference between the 2 models, with a little bit of interest added in.

and yes, they are having you pay for the entire upgrade over the 3 years, maybe they assume the residual will be the same for both models, makes their calculations easier.

 

[Randy]

As I recall from the reservation process, the difference between the SV and SL Lease payments was $30 per month. Given the pricing difference is $940, that seemed about right on a 36 month lease. Of course, the killer on the lease payment is that taxes aren't included, so that raises the price more. So wouldn't that mean a lease payment on an SL model would be over $400 per month? That is a ways from the $349 "advertised price"...

 

[LTLFTcomposite]

As I recall from the reservation process, the difference between the SV and SL Lease payments was $30 per month. Given the pricing difference is $940, that seemed about right on a 36 month lease. Of course, the killer on the lease payment is that taxes aren't included, so that raises the price more. So wouldn't that mean a lease payment on an SL model would be over $400 per month? That is a ways from the $349 "advertised price"...

Isn't that always how it goes? You walk into the showroom planning to spend X and walk out of the "business manager" office having spent X * 1.2 (or more).