Lease vs buy - battery, range, consumer sentiment

[gonefishin]

[I'm having errors posting this so I'm going to try to post in 3 parts]

I've read the threads with the spreadsheets and detailed analysis. I'm about to buy my leaf and I am leaning towards buying and wanted to start a high level discussion focused around the battery pack without getting into the nitty gritty. Basically, a lease costs you several thousand more than if you buy all things considered equal. If you can't take the tax credit, you should lease. If you don't have the cash up front then you should lease. The most relevant discussion remaining in my mind is the performance of the battery. In my analysis, buying makes more sense but I'd like to see what others think.

Under my assumptions of 2% interest rates applied to the google spreadsheet in this forum, I think it will cost me about $4000 more to lease than to outright buy regardless of whether I sell the car or end a lease after 3 years. The big assumption is that the car is worth 45% of its MSRP in 3 years. I was told that most leases assume around 50%, so Nissan is already being a little pessimistic. What are the main concerns for poor resale? I think #1 is battery performance/cost, #2 is limited range compared to newer models, #3 is lack of interest by consumers for a plug-in car.

Battery

Initially I was told the battery had an 8yr/100k warranty so no worries! However, when I examined the 2011 Leaf Customer Disclosure Form section IV.F."Exclusions" it says "The lithium-ion battery, like all li-on batteries, will experience gradual capacity loss with time and use. Loss of battery capacity due to or resulting from gradual capacity loss is NOT covered under the Nissan New Vehicle Limited Warranty") So basically, unless a cell drops off and dies during a year you're stuck.

Let's look at the two possibilities for battery costs. If battery costs remain high then new car alternatives will remain expensive and the Leaf should hold its value. On the other hand, if battery prices drop then it should be cheaper to renew or replace a battery. Homepower magazine (online access is available for a fee) issue 137 July 2010 has an article about DIY refurbishing a Honda Civic Hybrid NiMH battery pack for $380 instead of the $3200 dealer quote or $1250 aftermarket quote, and I suspect you clever leaf owners will figure out the same process.

[continued in part 2]

 

[gonefishin]

Range

What happens when the Tesla-S comes out with a 200 mile range, etc? Personally, my commute is short so I think it wouldn't bother me in the least, but it could affect resale. I just noticed the Tesla-S is available for pre-order for $57.5k w/160 miles or $67.5k for 230 miles, so does that make a $35k Leaf w/100 mile range worth a lot less? So far, the leaf is the low-price leader amongst EVs. The real danger is if someone comes out with a 200 mile range car for <35k, but I have a really hard time believing that. That would indicate much less expensive batteries, which is good for resale. Put another way, let's say you really do want that Tesla-S for $67.5k w/230 mile range in three years. This assumes high battery cost, and strong consumer sentiment. Resale values would then still be high for a Leaf and you can tradein your Leaf and still come out ahead over leasing. Given that the average 12000 miles works out to just 33 miles a day I think there will always be demand for a leaf even if a 200 mile range EV comes to market at the $35k price range since by then a leaf will only cost $16k.

[continued in part 3]

 

[gonefishin]

Consumer sentiment

I recently asked MIT's Energy Initiative Education Task Force co-chair, Professor Vladimir Bulovic, if he thought the leaf was the answer to our fossil fuel cars, or what technology we needed to develop. Surprisingly, he thought that consumer reluctance to plug-in a car every night was the main issue, not technology. I was pretty stunned that a guy who spends his life developing nanotechnology to make energy efficient technology felt that way. But let's think about this - the amazing Toyota Prius has sold 1 million cars in the US in 12 years - just a drop in the national bucket. There's only 290,000 hybrid cars registered in the US vs 254 million registered passenger vehicles (wikipedia). That's just one tenth of one percent! So, realistically the biggest concern for resale may be that we run out of "green" consumers to buy these cars. That is what happened in the past with EV cars. The other side of this issue is gas prices - if they fall to $2/gallon noone will want to buy a hybrid or EV. If consumer sentiment turns on us, then leasing may be a good option.

Lease vs Buy Summary

So I think that the battery costs will be fine either way. Range improvements are unlikely without greater costs and the leaf will probably hold its value as the low price leader. Consumer sentiment is the real wild card along with gas prices, and I think the strongest reason to lease. Remember I estimated that leasing costs $4k more than buying? Residual value would have to drop another 11% to 34% of MSRP or $35k -> $12k over 3 years before leasing is better than buying. According to MSN autos, the worst depreciating car has been the Ford Freestar (see many of those on the road?) at 27%. So, 34% would be pretty low indeed. I'm still willing to be persuaded, but the $4k lost to leasing immediately seems a higher risk than one or all of these factors turning against resale value.
[end of part 3 - the accented name was causing a problem]

 

[LEAFfan]

personally I think range will not be a problem . soon we'll be able to recharge in ten to 30 minutes. we have two qcs already.

sent with speech to text from my android phone

 

[smkettner]

I prefer to own than rent. Not always the lowest cost but that is how I roll. The rest is just noise to me.

 

[mitch672]

I depends on if you are a glass half empty kind of person, or the glass is half full.

Leasing is the glass half empty, and you are hedging your bets, that there will be better EV technology, and you'll want to upgrade to it in 3 years, without the hassle of dealing with your used Leaf, which may or may not have a market, as the thousands of other Leafs come off lease at the same time.

Buying means you are an optomist, and you view the glass as half full, you are not worried about your next EV in 3 years, as you fully intend to drive the Leaf until there is only dust left (or a smoldering battery). For you, the resale value does not matter, as you never intend to sell the Leaf.

That's how I view it. BTW, I will be leasing, as there is yet another reason: Your delivery month is January 2012, and you really don't want to wait more than an entire year for your $7,500 Federal credit, you also pay tax and interest on the $7,500 as well, for the entire life of the car, as that $7,500 is never credited to state sales tax, or loan interest.

 

[Boomer23]

I leased because of the unknown and unknowable resale market for a 3 year old EV.

Remember also that the first generation LEAF has the slow 3.3 kW on-board charger for 2011 and 2012. Hopefully, starting in 2013, Nissan will upgrade to a 6.6 kW or larger charger (hey, that rhymes!). Ford and CODA will be trumpeting their double-speed charging as compared to the LEAF, and Nissan will need to step up and upgrade their charger. And if the driving range of the 2013 model goes up even 10% due to battery improvements, it could have a negative effect on resale value for a gen 1 LEAF.

We have no data to project the degree of the "gradual" capacity loss that Nissan expects, and all that needs to happen in order to scare off potential resale (and new EV) buyers are a few reports in the major newspapers and blogs about a LEAF owner or two who is getting only 50 miles to a charge. Whether the reporting is accurate or not, skeptical potential resale buyers will be scared off.

I'm going to want to upgrade in a few years. Our LEAF is plenty satisfying and fun for a first EV, especially since we get to be early adopters. But I really want an electric sports car. So hopefully by mid-2013, there will be some choices for me out there. But the LEAF is turning out to be a really useful family car, with plenty of room for shopping and fun outings. So if we decide to keep our 2011 LEAF, we'll be able to buy it off the lease with our eyes open, knowing that the car has been properly treated and maintained.

Lastly, we have other uses for the cash that we would have needed to shell out up-front to purchase the LEAF. That, and getting the immediate benefit of the $7,500 federal tax credit because Nissan applied it to the down payment of the lease, was really attractive to us.

For all of these reasons, I felt that the additional cost of leasing was worth it to me.

 

[LEAFfan]

Leasing is the glass half empty, and you are hedging your bets, that there will be better EV technology, and you'll want to upgrade to it in 3 years, without the hassle of dealing with your used Leaf, which may or may not have a market, as the thousands of other Leafs come off lease at the same time.

Not necessarily, my glass is half full and I leased because I couldn't qualify for the full $7500 if I had bought. Also, I'm planning on buying it in three years, but of course, one never knows that for sure until the three years is up. IF I do decide to give it up, someone is going to get a great car because I'm taking really good care of it (which I've done with ALL of my previous cars) as if I owned it.

 

[adric22]

Well, I had to lease. It was the only way I could afford the car. My car payment ended up being right around $400. But if I had to buy the car the payment was going to be a few hundred higher than that. At this point, I have every intention of buying the car at the end of the lease, but I suppose things could change 2.5 years from now.

The battery range won't be much of an issue for me. My daily drive is 10 miles. I'm pretty sure the car will be able to do that for a very long time.

 

[redLEAF]

Consumer sentiment

Lease vs Buy Summary

So I think that the battery costs will be fine either way. Range improvements are unlikely without greater costs and the leaf will probably hold its value as the low price leader. Consumer sentiment is the real wild card along with gas prices, and I think the strongest reason to lease. Remember I estimated that leasing costs $4k more than buying? Residual value would have to drop another 11% to 34% of MSRP or $35k -> $12k over 3 years before leasing is better than buying. According to MSN autos, the worst depreciating car has been the Ford Freestar (see many of those on the road?) at 27%. So, 34% would be pretty low indeed. I'm still willing to be persuaded, but the $4k lost to leasing immediately seems a higher risk than one or all of these factors turning against resale value.
[end of part 3 - the accented name was causing a problem]

'gonefishin' -- I couldn't exactly tell what state you're from (MIT reference perhaps MA?) or where you plan to register the car but one more factor not listed within lease vs buy is state incentives (if any); here in IL leased EV's are uneligible for the IL EPA rebate of 10% of MSRP up to $4,000 (in my case I think it works out to $3,750, excludes some options); with this strong an incentive for an outright purchase it's hard to justify leasing it. Of course several states don't offer anything extra but this should be factored in as well --- those who lease a LEAF in IL leave money on the table unfortunately

 

[navidad]

Just to compare :

In France, the Nissan Leaf costs 30900€ (including governmental bonus) WITH battery.
The Renault Fluence costs 20900€ (including governmental bonus) WITHOUT battery. But for 9400 miles a year, we can (or have to) rent the battery for 96€ per month.
And if the capacity of the battery is under 75% of the nominal capacity, the battery is changed.