Dec 28

Why I Chose to Buy Not Lease the Chevy Volt

 

[ad#post_ad]I am someone who typically leases my cars.  I like the simplicity of monthly payments and the ability to turn in a car after three years so as to be able to go out and get a new one.  For the most part the lease allows me to pay the depreciation of the vehicle without having to deal with the hassles of selling it.

It was my original intention to do the same with the Volt, but after reviewing the difference between leasing and buying I decided to buy it in the end.

The main differences for the Volt that led me to this decision was the presence of the $7500 tax credit and the possibility of having a particularly valuable car after two or three years, due to limited supply, an early VIN  number (008), and possible underestimation of residual value in the lease.

Before going into this discussion I strongly advise anyone buying a Volt should only be paying MSRP and not a dollar more.  If your dealer wishes to charge a surcharge, go elsewhere.  Each car has a profit for the dealer baked in.  Beware of variably named items such as coating, tinting, prepping and freight and shipping.

Though I have the added option of heated leather seats, for the purpose of this exercise, consider a base model with an MSRP of $41,000 and 15,000 miles per year (higher than the usual 12,000).  Also keep in mind my discussion for the sake of discussion is a bit simplified and slightly inaccurate.

Leasing

When you lease a car, your monthly payment is based on the selling price, the down payment, the residual value, the tax on the car, and the money factor which is the interest rate the bank is charging.

To calculate the lease price you add the cost of the depreciation (MSRP -RV), the financing cost [(MSRP) + RV x MF], and the tax (MSRP*tax).  Divide the sum of these three by the number of months of the lease and you have the monthly payment.

The finance plan for the Volt, however, is skewed unfavorably against anyone who might wish to buy the car at lease end.  The leasing company, US Bank, gets the $7500 federal tax credit.  They could have applied that to reduce the selling price of the car, but instead tacked it on to the residual value, artificially inflating it.  In either case, the depreciation paydown would have been the same, but by tacking it on to the residual value you would have to pay back that $7500 if you decided to buy the car at end of lease. I took issue with this.

As it stands, the car costs $41,000 and has a residual value of 43% (at 15,000 miles per year).  That means at lease-end it is worth $17,630.  The depreciation paydown should be $23,370/36 or $649 per month. The $7500 tax credit is added to the residual value, and there is a $2500 down payment (includes first month payment.) There is also a $695 destination charge and a $2000 cap cost reduction which is a large subsidy apparently paid by GM, and another redeeming value of the lease. Thus the total depreciation paydown is $41,000 – ($17,630 -$695 + $7500 + $4500). That’s $12,065, which divided by 36 is $335 per month.

The finance charge is an extremely low 0.6% APR which converts to a money factor of 0.00025. The finance charge is thus (RV + MSRP * MF), or [($17,630+$41,000)*.00025] which equals $14.65 per month. At this point the lease is thus $350 per month.

The last item to add is the tax.  Though the Volt lease deal is $350 per month, taxes on the car have to be added.  They amount to ($41,000*.0875).  That sum divided by 36 months equal $100 per month.   Thus the total monthly payment is $450. I, however drive 22,000 miles per year.  Adding 21,000 more miles at 18 cents per mile is $3780.  Divided by 36 months and adding to each month results in a grand total of $550 per month.

Thus at the end of three years I would have paid out $21,950. To then buy the car would cost an additional $25,130 for a total cost of $47,800.

Buying

I reasoned the best way to buy the car outright would be to put down $7500 in cash and then recover it next April when I receive the tax credit. This would allow me to purchase the car for $33,500. The finance company will float you the $7500 (with interest) that can be paid back in April of 2011. Or they will give a 0 percent loan for the $7500 if you pay for the rest of the car in cash.

 Added taxes is $2931, which are unfortunately paid on the pre-tax credit amount. Also I chose to finance the car which is offered at 4.74% adding $5999 in interest when paid over 6 years. In this scenario, the total effective cost is $42,431 which is still significantly less then the $47,800 it would cost to first lease then buy.  Also by owning, I could also easily choose to sell the car at year 2 or 3, a much more difficult proposition if I had leased it.

Conclusion

The lease deal is extremely favorable if you are certain you will only want the car for three years and plan to drive less than 15,000 miles per year, or are limited by a monthly budget.  If you wish to take full advantage of the tax credit and plan to sell the car, buying is the better option. Purchasing is also a benefit as the future market value of the car may turn out considerably higher than the 43% currently estimated on the lease, depending on battery performance and the future price of gas.

What have you done or decided to do?





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This entry was posted on Tuesday, December 28th, 2010 at 7:19 am and is filed under Financial, Launch. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

COMMENTS: 109


  1. 1
    Ted in Fort Myers

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    Dec 28th, 2010 (7:34 am)

    I will probably put more miles on my Volt than leasing will allow and pay it off sooner rather than later. Three years maybe. I can hardly wait for March. My Volt is still not even tracking yet. Sure wish Michigan was on of the initial roll out states and I could have my Volt already like the rest of you guys. Morning Lyle.

    Take Care, TED


  2. 2
    barry252

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    Dec 28th, 2010 (7:39 am)

    Great Post Lyle! Ever since the Volt’s Lease Terms were released, I planed to lease. However, when ciphering the Fed Tax Credit of $7500, plus Maryland’s Credit of $2000 and 50% Tax Credit for the Voltec Charger and Installation, adds up to about $10,000 off of list. That was too much to pass up. I agree that the Volt’s scarcity will hold the price high and GM’s warranty alleviates the servicing anxiety.
    I’ve had my Volt for over a week, kept it charged and yet have had to look at a gas station. This is a REALLY cool feeling!

    Have a safe and Happy New Year!!


  3. 3
    Michel Paquin

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    Dec 28th, 2010 (7:44 am)

    I’m worried with the replacement cost of the battery pack. I’m thinking that by leasing, someone else will have to deal with this since I’m planning to own it for three years and I don’t plan to drive it more that the 12,000 miles.


  4. 4
    Jim I

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    Dec 28th, 2010 (7:55 am)

    Based on Lyle’s figures, his monthly payment works out to about $707 per month for 60 months.

    I guess this decision all depends upon if you really plan to keep the Volt for the next 8-10 years.

    For me, if GM produces the MPV5 or some variant, it would be a more practical vehicle for our needs, so therefore the three year lease would make more sense for the Volt. And then buy the next generation of EREV, which may be cheaper.

    So it is a gamble. If you think there will be more EREV models, and one of those is really what you want/need, then the lease makes sense. If the Volt is your long term goal, then buying is the way to go.

    JMHO


  5. 5
    Mark Z

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    Dec 28th, 2010 (8:14 am)

    Great analysis, Lyle. However, too many calculations at this time of the morning for me.

    It was CorvetteGuy who mentioned the lease some months ago that got me to a Chevy dealer to order the Volt. Now these decisions have become a family matter in regard to taxes and estate planning, so purchasing will have more advantages for us. Each case is different and I applaud your paragraph comparing the lease .vs. buy decision to help the Volt purchaser to choose what is best for them.


  6. 6
    JDan

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    Dec 28th, 2010 (8:39 am)

    I would be able to get around $10,000.00 for a trade in and apply the $7,500.00 which would bring the cost of a volt below $30,000.00. However I drive about 5 miles round trip each day to work so the Volt at this time would be considerably more expensive than keeping my 2007 Saturn Aura XR which is paid off. Due to the low mileage I drive I probably use less gas than the average Volt driver will in a year. ;) I will have to wait a few years until the cost comes down, technology improves, and my son graduates college. It is fun and interesting reading about all the Volt experiences here. I definitely would like to join your ranks, and some day I will. Best wishes to all.


  7. 7
    Bob

     

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    Dec 28th, 2010 (8:39 am)

    Great analysis.

    When I have leased, I do not put any money down. On a lease you pay finance charges on the entire amount regardless of down payment, so why should you not hang onto your money?

    So are you paying finance charges on the $7500 or not in this system?


  8. 8
    Tom W

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    Dec 28th, 2010 (8:51 am)

    I believe the cost of the cars will fall in 3 years and the variety of models will increase. I also believe in 3 years batteries being put in the cars will be 20-100% better in all measurable ways.

    So since I wouldn’t get a vin # less than 10, I will lease for 3 years (of course in Ohio thats still a year away), and then re-evaluate. I would also expect that if you lease in 2011 that in 2014 it is possible that supply may have finally caught up with demand combined with falling (not rising prices like normal cars) prices, and that they may offer lease holders more generous terms to buy the car then the lease dictates.

    In any case a 3 year lease allows me to drive electrically, do my part as an early adopter and then be able to buy a car in 2014-2015 that is superior to the 2011/2012 model.


  9. 9
    Baxter Hood

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    Dec 28th, 2010 (8:58 am)

    With 50% of the poll buying perhap they realize leasing is like fleecing. I can’t afford the fleecing.
    I want a Volt so I’m trying to make my payments before I get it.
    Hoping the price will come down too.


  10. 10
    Frank the jacka$$

     

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    Dec 28th, 2010 (9:05 am)

    @Lyle – With the vin# 008 you should buy it! If you ever decided to get rid of it CALL/CONTACT ME! I can’t mentally validate buying a new one for the price, but would love to buy a low vin number used model after dep. One day I will own a volt sedan and volt SUV.


  11. 11
    Rashiid Amul

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    Dec 28th, 2010 (9:10 am)

    barry252: I’ve had my Volt for over a week, kept it charged and yet have had to look at a gas station. This is a REALLY cool feeling!

    That is so awesome. I would love that feeling.


  12. 12
    MichaelH

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    Dec 28th, 2010 (9:14 am)

    A number of people have made posts on the forum about the lease arrangement ending with US Bank as of January 3, 2011 (next Monday). According to these posters, there is no information regarding what lease deals will be available after that date. One mentioned that the $2000 credit would go away and interest rates would change. Some information came from Volt Advisors.

    This may be very impacting on those who were planning on leasing but won’t be getting their Volt until later.


  13. 13
    WK4P

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    Dec 28th, 2010 (9:18 am)

    The fact that GM is so heavily subsidizing the lease seems pretty remarkable. Practically a 0% interest rate AND a $2K cap cost reduction on a car they contend they are losing money on and are bound to sell all they can produce amazes me. Sounds like they were hell-bent on getting to a $350 lease payment. If I wanted a Volt for 3 years I’d have to seriously consider GM’s offer of 0.6% interest AND a $2000 price reduction (cap cost reduction). You don’t get either if you buy.

    As with any car purchase the big unknown is resale value. It seems Lyle is counting on his car being worth more because it is VIN 008. This might be true if the car was parked and had 1000 miles on it in 3 years. But would YOU pay more for a 3 year old car with 66K miles because of it’s VIN number? Not me. I’d just as soon have a low mileage VIN 10,000 than a high mileage VIN 008.

    Use tax on a lease in NC is normally figured at 3% of the lease payment. For a $350/month payment the use tax would be $10.50/month. If you guys in NY are paying $100/month in tax I hope you’re at least getting a good smooch.

    My personal opinion is that with new entries into the segment and new technologies being developed the resale value of the Gen 1 Volt has some serious questions. Couple this with the incentives GM is offering to lease I think the lease is a great option if you want a Volt now and a new car in 3 years. but if you’re going to keep it forever regardless of what new entries or technology becomes available then purchasing is probably your best bet.


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    John

     

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    Dec 28th, 2010 (9:41 am)

    Lyle – did you compute a R.O.I. on your monthly payments (I compute $707 for 60 months) when you compare Electric EV miles versus gasoline miles in a mid-mileage vehicle (ie. 28 mpg) over the course of the 60 months? I know this isn’t a cost-savings decision of yours to get the Volt over a high-miler but I wonder if you have determined your monthly gasoline savings in terms of decreasing the impact of the monthly payment.

    In most cases, leasing a car is a poor way to drive. Even pundits like Dave Ramsey call it “fleacing” the car buyer.

    I would like to know if a Fed Tax Credit for buying a used EV car will ever be applied for the “mortal man”. Those who cannot afford MSRP new vehicles will need to be given incentives to purchase used EVs like the Volt. At $17500-20000 for an off-lease lower miles Volt will be a great solution for many people who want to move off older “rust buckets” to something “new to them”. A tax credit for new construction only is very limiting for the overall population.


  15. 15
    scottf200

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    Dec 28th, 2010 (9:47 am)

    From ?’smyvolt in this post it indicates the lease arrangements may be changing Jan 3rd to “NOT include the $2k buy down”.

    http://gm-volt.com/forum/showthread.php?6029-True-Cost-of-Your-Purchased-Volt&p=51631#post51631

    Was talking to a Volt Advisor a minute ago trying to whine my way into getting a CSX rail car number. In the course of the conversation, he advised that the US Bank leasing program expires January 3, 2011 and will be replaced by a different program that does NOT include the current $2k buy down and low interest rates. I may have read that somewhere on this forum and just forgot it. However, that explains why so very few Volts have been delivered. A few, perhaps a couple of hundred, got to take advantage of the GM advertised rates ($2,500 down, $350 per month) but by controlling the delivery dates, the rest of us will get what we get. Hmmmm.


  16. 16
    John

     

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    Dec 28th, 2010 (9:49 am)

    scott #15 – isn’t that change at this point starting to hurt the next wave of buyers? Or at least show that leasing just isn’t that attractive (as Lyle points out even for the more-favorable method).


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    TheRFMan

     

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    Dec 28th, 2010 (9:52 am)

    As far as I know, in most jurisdictions, tax is only paid on the lease payment each month, not on the value of the car. That’s one of the advantages of leasing.

    Luc


  18. 18
    Baltimore17

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    Dec 28th, 2010 (9:53 am)

    I drive less than 10,000 miles per year, have always kept cars for at least ten years, and have always had the cash up front. Looks like a “buy”.


  19. 19
    JohnK

     

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    Dec 28th, 2010 (9:53 am)

    It seems odd that the monthly payment can vary so widely, even based on sales taxes. The low rates kind of hint at a high expected residual value which just makes me want to keep my (eventual) Volt longer. I, like Ted, certainly hope that Michigan Volt orders start to show some life (beyond 1100) soon. Of course I hope they roll out to the rest of the country soon also (after I get mine, did I say that out loud?).


  20. 20
    hamchief

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    Dec 28th, 2010 (9:59 am)

    Jim I,
    Lyle’s term is 72 months. His payment would be about $566.

    Lyle (or anyone),
    Please confirm this.

    My dealer is telling me high $600′s. I need to find out what he thinks the purchase price will be.


  21. 21
    Frank the jacka$$

     

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    Dec 28th, 2010 (10:14 am)

    Oh great just when yall thought that you might be able to get a Volt.
    5$ per gallon gas is predicted…… by an industry ‘expert’
    http://money.cnn.com/2010/12/27/markets/oil_commodities/index.htm?hpt=T2
    If it turns out to be true the demand for electric propulsion should increase.


  22. 22
    WK4P

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    Dec 28th, 2010 (10:19 am)

    “From ?’smyvolt in this post it indicates the lease arrangements may be changing Jan 3rd…”

    The entire GM lease and incentive program probably changes Jan 3rd. As such, it is conceivable that the lease program on the Volt could change. A “Volt advisor” (I assume a salesman) would need to tell you that the program ends on Jan 3, because that is what the program states, he has no guarantee of its continuance. Given that the Volt has just been released and the fact that it has been advertised with a $350 lease payment I doubt the program changes, and even if it does I would anticipate the new program would still work out to a $350 payment.


  23. 23
    EVO

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    Dec 28th, 2010 (10:29 am)

    Lyle’s driving log projects him doing about 22,000 miles a year, more than the 15,000 a year he pulled out of his — and about twice as many miles per year as the average American drives, which definitely suggests owning over leasing. One of the counterintuitive things I found with my electric motorcycle is that I consistently put more miles on it than the gasser it replaced, because it’s more fun to use than my gasser so I now take longer, more scenic routes.


  24. 24
    WK4P

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    Dec 28th, 2010 (10:30 am)

    It seems interesting that US Bank wants to own the Volt for $17600 at the end of three years. If I were buying a Volt I’d consider this carefully. It mean that if I pay $33500 for a Volt today my 45K mile Volt is projected to only be worth $17600 in 3 years. In other words it’s depreciated at an average of $440/month, not even considering the cost of financing or having $41K tied up in the car. Knowing this projection makes a $350 lease sound like a pretty good deal, especially since we anticipate new entries in the EV segment and new technology to ramp up quickly.


  25. 25
    ClarksonCote

     

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    Dec 28th, 2010 (10:39 am)

    WK4P: It seems interesting that US Bank wants to own the Volt for $17600 at the end of three years. If I were buying a Volt I’d consider this carefully. It mean that if I pay $33500 for a Volt today my 45K mile Volt is projected to only be worth $17600 in 3 years. In other words it’s depreciated at an average of $440/month, not even considering the cost of financing or having $41K tied up in the car. Knowing this projection makes a $350 lease sound like a pretty good deal, especially since we anticipate new entries in the EV segment and new technology to ramp up quickly.  (Quote)  (Reply)

    Not really though, the $17k you’re referencing is before they add the $7500 tax credit back in, which is clearly something they feel is indicative of the end value of the Volt if they want to then sell it at $25k

    join thE REVolution


  26. 26
    Jim I

     

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    Dec 28th, 2010 (10:42 am)

    hamchief: Jim I,
    Lyle’s term is 72 months. His payment would be about $566.Lyle (or anyone),
    Please confirm this.My dealer is telling me high $600’s. I need to find out what he thinks the purchase price will be.    

    ===========================

    You are right, I missed. I guess it was too early in the morning to do all that math………. :-)

    But on the other hand, I have never financed a car for more than 48 months. Six years of car payments just does not seem right!


  27. 27
    Jim I

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    Dec 28th, 2010 (10:45 am)

    ClarksonCote:
    Not really though, the $17k you’re referencing is before they add the $7500 tax credit back in, which is clearly something they feel is indicative of the end value of the Volt if they want to then sell it at $25kjoin thE REVolution    

    ========================

    I am a bit confused about this. The leasing company gets the $7.5K rebate and then charges it back again at the end of the lease? How does that work? Is it just me, or does that sound like they are double dipping????

    Help me out on this one!


  28. 28
    Tagamet

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    Dec 28th, 2010 (10:49 am)

    Frank the jacka$$: Oh great just when yall thought that you might be able to get a Volt.
    5$ per gallon gas is predicted…… by an industry ‘expert’
    http://money.cnn.com/2010/12/27/markets/oil_commodities/index.htm?hpt=T2
    If it turns out to be true the demand for electric propulsion should increase.    

    Articles from links contained on the very same page suggest that $5 gas isn’t such a likelihood anytime soon.

    Be well,
    Tagamet


  29. 29
    Randy

     

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    Dec 28th, 2010 (10:51 am)

    I think the best reason for leasing is that in 3 years the new model will likely be far advanced from the present model. At least electric only range.


  30. 30
    WK4P

     

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    Dec 28th, 2010 (10:54 am)

    ClarcksonCote says: “…the $17k you’re referencing is before they add the $7500 tax credit back in, which is clearly something they feel is indicative of the end value of the Volt if they want to then sell it at $25k”

    While US Bank is willing to sell you the Volt for 25K after 3 years, they are only willing to have the 3 year old Volt on the books for $17.6K, which is what they feel its true value will be. They are hedging their bets in their creative use of the tax credit, but are unwilling to put the 3 year old Volt on their books for more than $17.6K. In other words, US Bank will hope the 3 year old, 36K miile Volt will bring bring $25K, but they won’t bet the house on more than $17.6K


  31. 31
    Tagamet

     

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    Dec 28th, 2010 (10:54 am)

    John: I would like to know if a Fed Tax Credit for buying a used EV car will ever be applied for the “mortal man”. Those who cannot afford MSRP new vehicles will need to be given incentives to purchase used EVs like the Volt. At $17500-20000 for an off-lease lower miles Volt will be a great solution for many people who want to move off older “rust buckets” to something “new to them”. A tax credit for new construction only is very limiting for the overall population.

    On the other hand, I believe that the Volt is able to stand on its own and be very successful without government support. I’m not sure how you are defining the “common man”. Ain’t we all? JMO.

    Be well,
    Tagamet


  32. 32
    Dave K.

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    Dec 28th, 2010 (11:19 am)

    My wife and I like to own. And we keep our vehicles 8 to 12 years.

    The price of liquid fuel and cars are trending higher.
    New car MSRP 1968-2020: Mustang, CR-V, Accord… ect.
    1968 $3k
    1975 $5k
    1986 $10k
    2000 $20k
    2010 $27k
    2013 $30k?
    2020 $34k?

    =D-Volt

    OilFebDelivery.jpg?t=1293552593


  33. 33
    WK4P

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    Dec 28th, 2010 (11:24 am)

    Tagamet says “…I believe that the Volt is able to stand on its own and be very successful without government support.”

    The key is at what price will the used Volt stand on its own? That’s the problem US Bank is dealing with in setting residual values vs. lease-end purchase price. Their creative use of the tax credit covers their butt both ways. Setting residuals too high has forced many banks to exit the leasing business over the past 10 years. US Bank is unwilling to set the residual too high, thus using the tax credit on the back end as a sheild instead of as a cap cost reduction. Pretty creative on their part.


  34. 34
    Tagamet

     

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    Dec 28th, 2010 (11:28 am)

    WK4P: Tagamet says “…I believe that the Volt is able to stand on its own and be very successful without government support.”The key is at what price will the used Volt stand on its own?That’s the problem US Bank is dealing with in setting residual values vs. lease-end purchase price.Their creative use of the tax credit covers their butt both ways.Setting residuals too high has forced many banks to exit the leasing business over the past 10 years.US Bank is unwilling to set the residual too high, thus using the tax credit on the back end as a sheild instead of as a cap cost reduction.Pretty creative on their part.    

    So wouldn’t that mean that used (lease) Volt’s will be available at pretty affordable prices? I hope so>

    Be well,
    Tagamet


  35. 35
    CorvetteGuy

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    Dec 28th, 2010 (11:32 am)

    FINALLY !!! Our first Volt has arrived. It’s in the Service Dept getting prepped. My favorite surprise so far… it has the “2011 MotorTrend Car of the Year” logo with calipers right on the window sticker! Cool.


  36. 36
    John

     

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    Dec 28th, 2010 (11:35 am)

    Tag – my note about “common man” is really anyone with a family budget who makes less than $100K a year – which is about 80% or more of the population based on Wikipedia (below). If you have a family of 4 who pay a mortgage, adding a $600/mo car payment is not always a smart thing to do. The recession going on and our need to dig out from under high debt (individually, family, state and federal govt) says that we should really think smartly about our purchasing decisions. Now, for those who can afford a new car and it is a Volt and all the stars align for them – all the better. The Volt’s target market is basically mid to upper middle class based on price and the payoff the Volt offers. The lease is good if you want to rent the car at $450/month or so as Lyle states but it’s not a “money saving proposition”. You’re buying green, some cool technology and some pride in renting. I’d rather own the car in that case – and that comes with a $600+ monthly price tag.

    The numbers below are based on income – there are people who have low income but high savings who can buy the car for cash, so they are outliers of this graph. Someone 70 yo who has SSI income has low income but could have a few million dollars in investments stashed away.

    http://en.wikipedia.org/wiki/Household_income_in_the_United_States

    335px-Personal_Household_Income_U.png


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    Dec 28th, 2010 (11:43 am)

    Dave Ramsey says never lease a car it’s the most expensive way to drive a car. But I guess if your a rocket scientist or a neuro surgeon it’s okay. Lol.


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    WK4P

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    Dec 28th, 2010 (11:43 am)

    Dave K says, “The price of….cars are trending higher”

    This is not true. In real dollars vehicle prices have dropped over the past 20 years.

    My doctor and I had a converstation about this (in the examination room of all places) and I argued that car prices had actually fallen over the past 20 years. When I started in the auto business in 1990 I ordered some “loaded” (as loaded as a 1990 model could be ordered) Chevy K1500 Ext Cab 4x4s. The MSRP came in at $20K. There were no rebates on the trucks at the time. 20 years later the same truck “loaded” (with much more equipment) will sticker for about $40K and have rebates and financing incentives to further lower the cost. In the same time inflation has more than doubled, making the 2010 truck’s $40K pricetag LESS in 1990 dollars than the 1990 model, even though its equipment content has increased. As we sat there my doc researched this on his laptop and was surprised to come to the same conclusion.

    Another example I usually give. In 1975 my mother graduated college and started her teaching career. Her starting salary was $8500/year. She bought a 1975 Monte Carlo which stickered for $6,000 and had no rebates. In 2010 a teacher’s starting salary will be around $30K and a new Monte Carlo will be approximately $26-27K before rebates reduce the sticker price to $24-25k. Again no difference in real dollar price of the car, even though it has much more equipment and is much better built.

    Given this, what do you think will happen to the real price of EVs over the next 20 years as competition ramps up and technology improves?


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    WK4P

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    Dec 28th, 2010 (11:56 am)

    Hal says, “Dave Ramsey says never lease a car it’s the most expensive way to drive a car.”

    I don’t know who Dave Ramsey is but how did he arrive at that conclusion? If you want t drive a new car every three years then without question leasing is cheaper than buying. If you want to buy a car and keep it 10 years you’ll probably be better off buying the car. It all depends on what your goals are.

    Of course if we all wanted the cheapest way to drive we’d buy $1000.00 car, drive it a year or two, sell it for parts and do the same again next when it died. You definately can’t drive a new car for under $1000/year of depreciation. Heck, the cost of collision insurance will probably cost you more than $1000/year by itself, something you don’t even need with a $1000.00 car. Who cares if the air works, it’s the cheapest way, right?


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    Dave G

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    Dec 28th, 2010 (11:56 am)

    Dave K.: My wife and I like to own. And we keep our vehicles 8 to 12 years.

    Same here.

    We’ve also never had car payments. When we were younger and couldn’t buy a new car with cash, we just bought a used car instead.


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    Noel Park

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    Dec 28th, 2010 (11:59 am)

    I drive as many miles as Lyle does. The additional mileage charge would kill me. No lease for Noel, LOL.

    Happiest of New Years to all.


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    Dec 28th, 2010 (12:02 pm)

    Great article Lyle and very informative following discussion. If Lyle has the facts right then leasing a Volt, which seemed a no-brainer to me for normal situations, isn’t such a good deal. My question is whether the buyout at the end of the lease really does “add back” the $7500. If it does then you’re effectively losing the tax credit. But if it’s only there as a nominal number for state sales tax purposes, and the real buy out price is $7500 lower, then leasing is a good deal. At the end of the day whether to lease or buy is just about the numbers. There is no general answer. Here, if your purchase price will be $7500 more if you lease then buying is a no-brainer because you will never make up $7500 over the life of the car.

    People should be comfortable buying rather than leasing the Volt because the Volt battery pack should last a long time. The battery warranty covers 80% of capacity at 8 years, suggesting the battery will be working even at 15 years. That range may be limited, but you will still have some EV range, and generally one doesn’t drive a 15 year old car that many miles. IOW the Volt would still work great for short trips. Plus the range extender will still give you more if you need it. Note that the Volt battery warranty stands in contrast to the Leaf battery warranty which only covers a 40% degradation over 8 years.


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    LeoK

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    Dec 28th, 2010 (12:03 pm)

    MichaelH: A number of people have made posts on the forum about the lease arrangement ending with US Bank as of January 3, 2011 (next Monday). According to these posters, there is no information regarding what lease deals will be available after that date. One mentioned that the $2000 credit would go away and interest rates would change. Some information came from Volt Advisors.This may be very impacting on those who were planning on leasing but won’t be getting their Volt until later.  (Quote)  (Reply)

    This is normal for all leases. Residual value guides are typically published quarterly, thus almost all lease deals end at the end of the quarter. in the case of the VOLT, I would not expect the basic lease terms to change going into Q1 or even Q2. If anything, with all the positive publicity and early demand for the VOLT, it is conceivable that the residual percentage could actually INCREASE over time, thus having a positive impact on montthly payments.

    As for leasing, I am a BIG proponent of leasing. However, I completely concur with Lyle’s decision to buy. I too am troubled by US Bank’s treatment of the $7,500 tax credit – the consumer who is giving their business to GM should be the ultimate beneficiary of this credit – not the leasing company. The $7,500 should be shown as a cap cost reduction on the lease – essentially pre-paying a portion of the depreciation. As it stands now, the ONLY people who should consider leasing are those who will definitely only drive the car for 3 years with predictable annual mileage. Anyone who may want to consider buying the car out at the end of their lease should simply buy it upfront. You can always trade or sell your VOLT after 3 years – and you will have gotten the benefit of the $7,500 tax credit. JMHO.


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    Dec 28th, 2010 (12:06 pm)

    Tagamet says, “So wouldn’t that mean that used (lease) Volt’s will be available at pretty affordable prices? I hope so>”

    That’s the way it usually works out. That’s whjy many financial gurus will tell you to never buy a new car, always buy one 2-3 years old. We’ve all seen the ads where dealers advertise a year old Ford Taurus for half the price of a new one.

    Heck, I bought my laptop off-lease. It cost me about half the price of a new one and does all I need it to do. I can use the savings to take a trip and take the laptop with me so I can use it. :-)


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    Dec 28th, 2010 (12:09 pm)

    Noel Park says, “I drive as many miles as Lyle does. The additional mileage charge would kill me.”

    But remember, if you own the car the more miles you drive the more your car will depreciate, thus increasing your cost of ownership. You’ll pay for the miles either way.


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    Dec 28th, 2010 (12:10 pm)

    WK4P: If you want t drive a new car every three years then without question leasing is cheaper than buying.

    Consumer Reports did an article on this a while back. Their ownership period was 4 years (slightly longer than yours), and they also took into consideration how much interest you’d get by hanging onto your money (yeah, that’s back a few years), and how much you get for your 4-year old car.

    Anyway, here were the results:
    • Buying cash was the cheapest
    • Financing was $500 more
    • Leasing was $2000 more

    Again, this is for a 4-year period, but with these results, I can’t imagine leasing a car for 3 years would be cheaper than buying.


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    pjkPA

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    Dec 28th, 2010 (12:13 pm)

    As far as I’m concerned … It is always cheaper to buy ….

    I keep cars for at least 9-10 years… and lately more than that. I see what is published by journalism majors as “cost of owership” and I have never spent half of what “they” say.

    I think you did the right thing Lyle.


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    Dec 28th, 2010 (12:22 pm)

    “My question is whether the buyout at the end of the lease really does “add back” the $7500. If it does then you’re effectively losing the tax credit.”

    This is only true if you buy the car at lease end. DO NOT go into a lease with the intention of buying the car at lease end. Like LeoK above I am troubled by the fact that US Bank is using the $7500 tax credit to hedge their bets. I too believe the tax credit should be used as a cap cost reduction. This use of the tax credit is creative, but not to the consumer’s benefit.

    If you lease a Volt then realize you will turn the car in after 3 years and hopefully find a wide range of better options to choose from.


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    Dec 28th, 2010 (12:30 pm)

    Are you allowed to use GM card credits? That would cut the cost by another $3500.


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    DonC

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    Dec 28th, 2010 (12:33 pm)

    Tagamet: Articles from links contained on the very same page suggest that $5 gas isn’t such a likelihood anytime soon.

    Tagamet: So wouldn’t that mean that used (lease) Volt’s will be available at pretty affordable prices? I hope so

    These issues are linked. Actual price at the end of the lease will be set by supply and demand. The lessor can’t fully cover their butts by setting a high residual price. If the residual price is more than $10K above market price then people will just walk, leaving the lessor with a car which it will have to sell at a $2.5k loss. This is a mile version of what happened in 2008 when the SUVs came off lease and there was no demand with gas over $4/gallon. On the other hand, lessors owning a Prius coming off lease in 2008 didn’t have the same problem. Everyone leasing those exercised their buyout option.

    Which brings us to gas prices. I don’t have a crystal ball and you can find “an expert” predicting anything you want to hear, but what strikes me is how high commodity prices are generally. Oil doesn’t seem to be an aberration. In 2008 what we can call “the deniers” said that this was all the result of speculation and that there was plenty of oil. But it’s more than two years later, the economies of most developed countries are still operating far below capacity, and the prices are still high. That can’t be speculation. It’s beginning to look like demand from the less developed countries is driving demand and consequently the price of oil. Taken together with the fact that oil production levels have stayed flat for the last four years, suggesting supply constraints (yes things like oil sands can produce oil but only at a high price), and we seem to have a recipe for gas going to $4/gallon, at least in some places as the economies of the developed countries recover, pushing demand up even more. (Gas where I am is already about $3.25 or so, almost $3.50 at some expensive places, so we don’t have that far to go).

    My guess is that if three years down the road gas is $1/gallon above where it is now you won’t find any super great deals on Volts because demand will be high.


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    Dec 28th, 2010 (12:42 pm)

    Dave G,

    You’d be surprised. Honestly 4 years is simply too long to lease a car. That 4th year brings many expenses into play for a lessee that he will never deal with in a 3 year lease, such as repairs, maintainence, etc. Ironically the cost of ownership tends to decrease that 4 th year because depreciation rates slow as each year passes. That’s why it will always be cheaper to own one car for 9 years than 3 cars for 3 years each.

    I’d like to see a breakdown of CR’s numbers. How long of a finance term did they figure? A four year lease should be compared to a 6 year finance term. I’d bet CR used a four year finance term, something very few of us do. I’m confident that if I could look at specific numbers that a 3 year lease would be cheaper than buying a car under a 5 year finance term then trading the car in 3 years.


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    Dec 28th, 2010 (12:47 pm)

    WK4P: This use of the tax credit is creative, but not to the consumer’s benefit.

    It’s a benefit because, in states like CA, if the credit is used as a cap reduction you avoid having to pay sales tax on the credit when you drive the car off the lot. In CA that would be something like $750. My impression was that at the end of the lease there were two numbers for the buyout: the price you actually pay and the bill of sale which is $7500 more. You pay the lower amount PLUS the tax (only) on the higher amount. That gives the state its sales tax money and you get to buy the car at the actual residual. That’s how I thought they were structuring it.

    That would be a benefit because if you walk at the end of the lease you don’t pay the sales tax on the cap reduction and, if you do buy the car, you delay paying the sales tax for three years. Either way you’re better off.

    If you actually have to buy the car for the higher price then forget it, the lease is a terrible idea.


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    DonC

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    Dec 28th, 2010 (12:58 pm)

    Dave G: Again, this is for a 4-year period, but with these results, I can’t imagine leasing a car for 3 years would be cheaper than buying.

    You simply can’t make statements like this. There are too many variables. If the lease rate is 0% for four years and the financing rate is 6% do you really think leasing could be worse? Or if the manufacturer is pushing leases and you can get the car for $2000 less than you could buying it could leasing be worse? Or if you could get a return of 12% on your money (meaning what you didn’t pay for the car) do you think leasing would be worse?

    Leasing is no different than financing. If doubt this just run the lease numbers for 5 years with a residual of $0 and compare that to a purchase financed over 5 years. Use the same interest rates. What you’ll find is the payments are the same. (There will be the acquisition fee and some tax on tax but not a big deal).


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    Dec 28th, 2010 (1:01 pm)

    DonC,

    There is a point where the price of oil/gas affects the economy. Most economists felt that was about $3.50/gallon. As the economies began to fall off so did the price of oil, drastically in fact. It seems as if oil/gas prices are again trying to find that tipping point. What will happen when they cross that point this time?

    On the other hand look at computers. As faster, more powerful computers come out the market for used ones of lesser processing speed falls drastically. It wasn’t long ago a 500 mhz 256 meg used computer was valuable, now you can’t give one away. As EV technology and choices increase will it have a similar effcet on Gen 1 Volts? I think that’s the big question and why US Bank is hedging its bets with its creative use of the tax credit. US Bank has found a way to cover its butt either way.


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    Frank

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    Dec 28th, 2010 (1:38 pm)

    How do you buy a volt? The dealers in my area don’t know much about it except they expect one by the end of the year in January.

    One dealer said they could order one.

    How are people buying them?


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    Dec 28th, 2010 (1:54 pm)

    DonC: Or if you could get a return of 12% on your money (meaning what you didn’t pay for the car) do you think leasing would be worse?

    If interest rates were that high, then leasing and financing rates would be a lot more as well. You can’t have one without the other. They go together.


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    Dec 28th, 2010 (1:56 pm)

    Great analysis Lyle, I only have one question. If you had taken delivery of the Volt January 2011 and paid in cash opting for the 0 percent loan for the $7500, would the payback then be due April of 2012? If you so, I think you would have had 15 months to come up with the $7500 regardless of your tax situation?


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    Dec 28th, 2010 (2:01 pm)

    Think about this. An off-lease Volt after three years could have residual of $17,500 to 20,000. If cost of scale is found, battery tech is boosted and electronics made for lower sourcing costs – the price of new should (and I should say should!) come down to about $33K without rebate. I doubt that today’s 2011 Volts will be able to sell for the premium used rates of $20K due to technological costs of scale. So folks are buying a great car that should be supplanted by great mass production. Basically, paying maybe a $5K or more premium for being first-year adopters.

    I love the car, the idea, design and the execution. I probably will be buying one in early 2015 or so after keeping my current car 10 years. But I’d only buy one new if it is below $34K before rebate. I doubt our government will be offering $7500/car at that time either due to our budget problems. By then, there will also be 3 or 4 similar models from the competition coming to market as competition to help tighten the costs.


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    SWAIN

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    Dec 28th, 2010 (2:08 pm)

    Hello,

    I’m Mark Swain and I’m also on the Customer Advisory Board. My personal VOLT #12 arrived last week as well and I went with the lease option. This is a new thing as I NEVER lease cars. The key is that I don’t plan on keeping the car after the three year term. There are many electric cars on the horizon including new versions of of the VOLT. I’m not sure if the new VOLT (or can’t say) will be different at this point but in California the new version will be eligible for the car pools stickers which the 2010 model is not. Basically I really like my new VOLT but want to keep my options open in three years for new advancements in EV technology.

    ====SWAIN::—-


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    Dec 28th, 2010 (2:42 pm)

    Lyle, thanks for breaking it down nice and simple.

    This has been debated as nauseum before but the conclusion as you stated is simple, only lease if you are SURE you are not going to buy at the end.

    Being new technology it is still risky to put that much money into something when you are not sure how it’s going to hold up over time.


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    Dec 28th, 2010 (2:47 pm)

    SWAIN: Hello,

    I’m Mark Swain and I’m also on the Customer Advisory Board. My personal VOLT #12 arrived last week as well and I went with the lease option…

    Hi, Mark – Thanks for commenting here! This brings to mind an off-topic suggestion I’d like to make to you as well as to Lyle and all other CAB members like Chelsea Sexton and Colin Summers…

    Please consider posting your Volt test reports, driving impressions, suggestions for improvements, etc on related multiple sites. By that I mean at the official CAB site (http://www.gmvoltcab.com/) PLUS on each of your own sites. I monitor several CAB member sites and have thus far been surprised & disappointed to see, frankly, a dirth of CAB member postings at the CAB site and/or the other individual Volt- or EV-related sites. Just write up anything you think worthwhile, post it on one site, then copy/paste it to THIS site and several or all of the others you know of. I can assure you no one will criticize you for duplicate postings or for being somewhat off topic!

    My reasoning? That (for example) this site, Lyle’s, probably has more hits, i.e., more exposure, than most of the other Volt sites combined. It’s therefore more likely to get the word out to more people. And if most CAB members would also copy/paste anything they post anywhere else on several other Volt-related sites, many more people will learn about your findings.


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    Cari

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    Dec 28th, 2010 (2:47 pm)

    “The lease deal is extremely favorable if you are certain you will only want the car for three years and plan to drive less than 15,000 miles per year, or are limited by a monthly budget.”

    This is us in a nutshell. I sure hope they can work out the lease in our favor or we will have to reconsider our options. We can’t swing a 600/month payment. (maybe more on a buy). We lease to afford a nicer car than we could just buy.

    I do have concerns about residual. In three years, are that many people going to want to spend a lot for this car? Will they want to spend 25,000 for a used one of these? The newer generation of the Volt will be out with probably better battery life and range. I expect GM to become more competitive with the pricing. Other car makers will enter this market which at this point is somewhat limited (many are still resistent to the idea of hybrid or electric cars). I am hoping we are starting a growing trend. I don’t know what all gas saving technologies will come around in the next several years, but this is a great step. So I do have concerns about the option of buying. Just as I am excited about the advances and prospects for this car, technology will develop even more as the years go by. I would want the newer version in three years. I like having a car under warranty with roadside without paying for extended coverage. Cari


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    Dec 28th, 2010 (2:49 pm)

    SWAIN:

    Hello, I’m Mark Swain and I’m also on the Customer Advisory Board. My personal VOLT #12 arrived last week as well and I went with the lease option…

    Hi, Mark – Thanks for commenting here! This brings to mind an off-topic suggestion I’d like to make to you as well as to Lyle and all other CAB members like Chelsea Sexton and Colin Summers…

    Please consider posting your Volt test reports, driving impressions, suggestions for improvements, etc on related multiple sites. By that I mean at the official CAB site PLUS on each of your own sites. I monitor several CAB member sites and have thus far been surprised & disappointed to see, frankly, a dirth of CAB member postings at the CAB site and/or the other individual Volt- or EV-related sites. Just write up anything you think worthwhile, post it on one site, then copy/paste it to THIS site and several or all of the others you know of. I can assure you no one will criticize you for duplicate postings or for being somewhat off topic!

    My reasoning? That (for example) this site, Lyle’s, probably has more hits, i.e., more exposure, than most of the other Volt sites combined. It’s therefore more likely to get the word out to more people. And if most CAB members would also copy/paste anything they post anywhere else on several other Volt-related sites, many more people will learn about your findings.


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    Dec 28th, 2010 (2:54 pm)

    Dave G: If interest rates were that high, then leasing and financing rates would be a lot more as well. You can’t have one without the other. They go together.

    Dave, my returns have been well above 12% for the last two years and interest rates have been very low. If all you’re looking at is short term CDs or Treasury bills then, yes, interest rates move with returns. But if you expand the universe of investments to things like stocks or REITs or even longer term bonds then the returns move in opposite directions — the lower the interest rates the higher the returns. In fact the same holds true for longer term bonds. For example, bond prices move inversely with interest rates. As interest rates drop the bonds you hold increase in value.

    (FWIW I don’t consider myself to be an investment genius by any means. It’s just that it would have been hard not to do well for the last two years since so many asset classes doubled in value.)

    I’d also suggest to people that looking at their mortgage would be a good idea. Depending on the rate they might be better off leasing a car and using the extra money to pay off the mortgage. Especially in the early years relatively small payments have a big impact on the amount of interest you pay over the life of the mortgage. A lot depends on the difference in the rates. Again, like I keep saying, there isn’t any way to claim that leasing is better than buying or vice versa. It depends on a lot of factors.


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    Dec 28th, 2010 (2:56 pm)

    SWAIN: I’m Mark Swain and I’m also on the Customer Advisory Board.

    Mark, can you shed some light on how the buyout would work IF you decided to buy the car at the end of the lease? Are there two prices or is the tax credit actually added back in? TIA.


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    Dec 28th, 2010 (3:49 pm)

    “Also I chose to finance the car which is offered at 4.74%”

    Sounds like a bad deal. 2.99% or lower financing is available in a number of places like penfed or even Bank of America.


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    Dec 28th, 2010 (3:55 pm)

    Nelson: Great analysis Lyle, I only have one question.If you had taken delivery of the Volt January 2011 and paid in cash opting for the 0 percent loan for the $7500, would the payback then be due April of 2012?If you so, I think you would have had 15 months to come up with the $7500 regardless of your tax situation?    

    Actually the stated deal was June of the year following the purchase. So if he had purchased it in January 2011, the 0% $7500 would have been due June 2012, or ~17 months.


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    kent beuchert

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    Dec 28th, 2010 (4:57 pm)

    (click to show comment)


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    Dec 28th, 2010 (5:20 pm)

    I did plan on buying Volt and have the Volt bumper magnet (now on my water heater), but the price jumped up too much for me.

    I’ll wait to see what comes down the pipes in the next few years. My house is worth less than a 1/3 of what it was, plus I put almost a 1/3 down, which is gone, probably forever.

    I just can’t justify the extra expense of the Volt at this time. I can go buy a Cube (which we like) for $16K, and guess at about 30MPG, adds another 10K at 3$ per gallon for 100K miles (but at a much slow rate of expense). $26K to 100,000 miles.


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    Dec 28th, 2010 (5:30 pm)

    OT.

    Sent an email to fueleconomy_dot_gov asking why Volt was not posted yet:

    http://gm-volt.com/forum/showthread.php?6053-fueleconomy.gov-response&p=51790#post51790

    They said it should be up in ‘a week or so’.


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    Dec 28th, 2010 (6:11 pm)

    Jim I: ========================I am a bit confused about this. The leasing company gets the $7.5K rebate and then charges it back again at the end of the lease? How does that work? Is it just me, or does that sound like they are double dipping????Help me out on this one!  (Quote)  (Reply)

    If I had to guess, they’re just playing games with numbers. This is partly how they’re able to lease at such a low interest rate and money factor.

    By comparison my loan for purchasing my car was at 4.9% and my credit score is just over 800. To lease at 0.6% or whatever it is would be ludicrous without somehow getting more money, and this is how they’re doing it IMHO.

    join thE REVolution


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    Dec 28th, 2010 (6:13 pm)

    Loboc: OT.Sent an email to fueleconomy_dot_gov asking why Volt was not posted yet:http://gm-volt.com/forum/showthread.php?6053-fueleconomy.gov-response&p=51790#post51790They said it should be up in ‘a week or so’.  (Quote)  (Reply)

    FWIW, the Nissan Leaf isn’t listed yet either.

    join thE REVolution


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    Dec 28th, 2010 (6:16 pm)

    For me, I can’t afford a Volt so I aint gonna buy one. Aint gonna lease either.
    I find the $41,000.00 too much for my broke azz. Not even the Fed & CA rebates make it affordable for me. OK i’m pathetic……lol.
    All I need is a simple EV really. Even the LEAF is overkill but may be an option. I have a 10 mile one way commute. Shoot man, even half a LEAF is overkill.
    Maybe in a few years a cheaper EV will come and fill the needs of pofolk like myself.


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    Dec 28th, 2010 (6:17 pm)

    kent beuchert: The tax credit you would get from buying (that I involuntarily helped pay for)   (Quote)  (Reply)

    Think again, a tax credit is something I was going to pay that I don’t have to pay. It has nothing to do with the money you pay in, and you did not pay for it.

    GM bailout, well that you could say you paid for. But you also paid for lots of other things too… Big Financial and oil subsidies for example, just to name a few.

    join thE REVolution


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    Dec 28th, 2010 (6:22 pm)

    Had the 220 volt Charger installed this morning. Where’s my Volt????


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    Dec 28th, 2010 (6:28 pm)

    ClarksonCote: Think again, a tax credit is something I was going to pay that I don’t have to pay. It has nothing to do with the money you pay in, and you did not pay for it.

    If he didn’t pay for it and I didn’t pay for it, then who paid for it?
    And if I’m helping pay for it, how can I “Opt Out”? :-)


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    Dec 28th, 2010 (6:47 pm)

    I made the following off-topic comment in yesterday’s thread (leading to a doubly off-topic comment today):

    Chevrolet Volt Electric Car Arrives at Atlanta Chevy Dealership:

    http://news.yahoo.com/s/prweb/20101224/bs_prweb/prweb8036611

    Mark Frost, General Manager of Jim Ellis Chevrolet in Atlanta, GA, announced today that the dealership has acquired one of the highly anticipated Chevrolet Volts.

    “We had so many customers inquiring about the Chevrolet Volt — and thinking it odd that such a highly-touted vehicle was not going to be available for a year – that we went to New York and purchased one. And drove it back 900 miles!” said Frost. “With a Volt, if you are using it mostly for commuting, you never have to use gas again! However, unlike the other electric vehicles on the market, with the Chevrolet Volt, you can still drive to Florida if you want to go on vacation. The gas engine generator kicks in to power the car. And of course, with vehicles like the Prius, you simply don’t have the option to never use gas,” Frost noted. “It’s nice to see that the latest, greatest in automotive technology is coming from Chevrolet, an American company,” Frost added.”

    This Volt has been announced in a series of radio commercials, and I hope the line stretches back to the street. We shouldn’t have to wait a year in a region with such interest.

    Are you watching, GM?

    Today, I visited Jim Ellis Chevrolet, and spoke to Mark Frost. My report will follow in a later comment, complete with pictures.

    Stay tuned!

    /sorry, couldn’t resist … ;-)

    .


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    Dec 28th, 2010 (7:22 pm)

    ClarksonCote:
    FWIW, the Nissan Leaf isn’t listed yet either.join thE REVolution    

    FWIW, the Tesla Roadster isn’t listed yet either. What’s up with that?

    GSP


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    Dec 28th, 2010 (7:26 pm)

    After 3 years with the GM-Volt community, I can’t imagine Lyle leasing. Glad he didn’t. What I hope is Lyle will run for a House seat in Congress. This country needs those who appreciate the importance of America in manufacturing and what place manufacturing plays in the role of all of us. Without electric cars, this country goes broke.


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    Dec 28th, 2010 (7:33 pm)

    John,

    The more that manufacture electrics, the better for economies of scale. Hope it happens. Hope you’re right, and GM is saying the same thing you are. They expect to bring costs down as car counting goes up.

    BP just announced they expect a gallon of gas in the US to hit $5 gallon in 2012. Electrics are now here to stay.


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    Dec 28th, 2010 (7:36 pm)

    CorvetteGuy,

    Awesome! They earned that sticker – every letter, every word. Proud USA citizen.


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    Dec 28th, 2010 (7:53 pm)

    Jackson: I made the following off-topic comment in yesterday’s thread (leading to a doubly off-topic comment today):

    How could a report from a “Volt store” be off topic? It’s the best possible! Maybe Lyle will post it as the lead in article.


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    Dec 28th, 2010 (8:02 pm)

    WK4P: “My question is whether the buyout at the end of the lease really does “add back” the $7500. If it does then you’re effectively losing the tax credit.”This is only true if you buy the car at lease end. DO NOT go into a lease with the intention of buying the car at lease end. Like LeoK above I am troubled by the fact that US Bank is using the $7500 tax credit to hedge their bets. I too believe the tax credit should be used as a cap cost reduction. This use of the tax credit is creative, but not to the consumer’s benefit. If you lease a Volt then realize you will turn the car in after 3 years and hopefully find a wide range of better options to choose from.  (Quote)  (Reply)

    You are right on –Lease and turn it in.
    Remember that the lease company gets the car back when you turn it in which than goes to the auction most times and if they guesed wrong on the residual they only get what it is worth at that time.
    On Lyles figures he is paying $100 per month for taxes (NY ouch) in CA and most you pay only the tax on the monthly payment which in CA would be $30 and with under 12k miles the total would be $380 and not $550.
    Us Bank is actually not putting this $7500 in the cap cost reduction but bumping the Residual to 61.164% to get the low payment.

    Buy is not always the best way so don’t just dismiss it as some times they have very low interest on a lease and reg rates on the buy. Also you have to evaluate the res to see if it is fair.


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    Dec 28th, 2010 (8:16 pm)

    The only way I would lease a Volt over buy one is if I knew for sure the EEStor EESU powered Converj would be available in 2014.

    NPNS

    EEStorCap.jpg?t=1293585343


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    Dec 28th, 2010 (8:24 pm)

    Can you point to any word from anyone that EEStor will even happen? It’s been so much vaporware over the last few years that it seems like it may not hit the market let alone any of the DoD plants that support the research. If it was a possibilty, you’d see such technology out of the big battery labs and not a small shop in Texas. So far it’s been not too far off from what would be seen on an episode of X-files.


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    Dec 28th, 2010 (8:43 pm)

    John: Can you point to any word from anyone that EEStor will even happen?

    This is my point. A 2011 Volt @ $33,500 is available now.
    EV’s are becoming more and more popular. Limited supply and likely price increases. All Volts with VIN’s under #100 should be bought over lease. Even if a battery replacement is needed in 10 years. The cost will be relatively low with exchange. And the 1.4L ICE may have 20,000 miles on it in 10 years.
    If we see 300,000 EV on the road by 2015. The Volt is the one that won’t need to fight over a recharge dock along the highway. 800,000 EV by 2019? You’ll still be charging your Volt with your Voltec 240V right inside your own garage.
    A new way of life is straight ahead. As new Volt owner Barry has stated. He’s been driving a couple weeks. Still no gas station stop.

    =D-Volt


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    Dec 28th, 2010 (8:52 pm)

    Tuesday December 28, 2010, 8:29 pm

    BEIJING (AP) — China said it is reducing the amount of rare earths it will export for the first half of the year by more than 10 percent — likely to be an unpopular move worldwide since the minerals are vital to the manufacture of high-tech products.

    http://finance.yahoo.com/news/China-shrinks-rare-earths-apf-2574493440.html?x=0&sec=topStories&pos=main&asset=&ccode=

    =D-Volt


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    Dec 28th, 2010 (9:04 pm)

    CaptJackSparrow: If he didn’t pay for it and I didn’t pay for it, then who paid for it?And if I’m helping pay for it, how can I “Opt Out”?   (Quote)  (Reply)

    I paid for it, by not paying for it! :) You have automatically been opted out! ;)

    join thE REVolution


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    Dec 28th, 2010 (10:18 pm)

    I see a lot of people sweating over $2000-$7500 questions. If you are worried over this type of detail maybe you should not being looking to acquire a VOLT at this time. The bottom line is that from a pure financial perspective, at the current price it does not make financial sense. The next two to three years of production will easily sell out at this price to people that can afford it. After three years, there will be a number of used VOLTs on the market at a more reasonable price for you guys that are worried about a few hundred bucks a month. Also, the models coming out in 4 years should be lower cost and/or have be even better performance.

    I would recommend you let the early adopters with money lead the charge. They can afford any hiccups that might arise. You can get a Chevy Cruze if you are a GM person or maybe a Honda Fit, etc if you really need a good low cost and efficient vehicle. An $18,000 dollar difference between VOLT and Cruze can buy a lot of gas over next few years.

    The Volt technology will move forward as there are plenty of high income people willing to invest in the purchase or lease. If you don’t have the money, you need to think with your head and not with your heart.


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    Dec 28th, 2010 (10:38 pm)

    As you know, the Chevrolet Volt is currently available in only a few select markets. While some regulars on this site have been extremely lucky to live in these areas, most of us must reconcile ourselves to a year long wait.

    This does not mean doing nothing.

    Just as Dr. Lyle Dennis has proved that one person can change the world with the creation and publishing of this site; the following story illustrates the power that each and every one of us holds to make a difference.

    On Monday I posted this comment:

    Chevrolet Volt Electric Car Arrives at Atlanta Chevy Dealership:

    http://news.yahoo.com/s/prweb/20101224/bs_prweb/prweb8036611

    Mark Frost, General Manager of Jim Ellis Chevrolet in Atlanta, GA, announced today that the dealership has acquired one of the highly anticipated Chevrolet Volts.

    “We had so many customers inquiring about the Chevrolet Volt — and thinking it odd that such a highly-touted vehicle was not going to be available for a year – that we went to New York and purchased one. And drove it back 900 miles!” said Frost. “With a Volt, if you are using it mostly for commuting, you never have to use gas again! However, unlike the other electric vehicles on the market, with the Chevrolet Volt, you can still drive to Florida if you want to go on vacation. The gas engine generator kicks in to power the car. And of course, with vehicles like the Prius, you simply don’t have the option to never use gas,” Frost noted. “It’s nice to see that the latest, greatest in automotive technology is coming from Chevrolet, an American company,” Frost added.”

    On Tuesday, I went to Jim Ellis Chevrolet, in Atlanta Georgia, to see this Volt: and had the good fortune to meet and speak with General Manager Mark Frost.

    Jim Ellis Chevrolet is part of the Jim Ellis dealership group; which includes several European brands, as well as a Buick and GMC dealership. It is a very large, long established operation with good reputation.

    4hz4eq.jpg

    A quick glance out front:

    api4qs.jpg

    27y36aa.jpg

    When I entered the spacious showroom, I did not immediately see the Volt. I had heard that the car was not available for sale, but could be seen by visitors to the dealership. I was approached by Leland Sims, a Sales Associate. When I asked to see the Volt, I was soon ushered to the Service Department (I would later learn that the dealership is using the car to get a head start on training before the car releases nationwide).

    The first Chevy Volt in the Southeast has a White Diamond Tri-coat exterior, and black interior with white accents. It sat between two cones against a wall display highlighting dealer accessories.

    143oy05.jpg

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    It was a kick just to sit in it. I was one of those fortunate few who won a trip to New York City in March to drive a production-intent prototype. While it had been essentially the same as the production car ‘under the skin,’ much finishing and detailing was left to be done. Most of the display systems in the pre-production Volt hadn’t been finished, for example, and the dash we saw was essentially a mockup. The production Volt at Jim Ellis Chevrolet shows what a terrific job the engineers have done to “flesh out” our favorite car. It even has that new car smell!!!

    As an example, take a look at the charge port on the pre-production Volt that I saw in NYC: (a little hard to see, but it’s pretty basic):

    2s6szlc.jpg

    … compared to the finished version:

    206eogk.jpg

    Every detail I saw emphasized what all of our resident owners report; fit-and-finish of high quality, a great attention to detail, a solid feel and look.

    I was told that although there were no “lines out the door” (as I had hoped), the interest level was high; and many had come to see the car. I explained to Mr. Sims who I was, (a frequent commenter on this site) and he told me that I was not the first person from here (he thought) to visit on this day (was that you Mike in Atl? … but he did think I was the first to bring a camera. ;-)

    I did not attempt to turn the car on. If the production Volt is actually better than what I drove in NYC, it must be unbelievable. I would have to be in another part of town in a short time, and I was a bit nervous in my first attempt at journalism (we owe Lyle even more respect than we do already).

    When I finished taking pictures, I thanked Mr. Sims and told him to congratulate Mark for his excellent idea. He offered to let me congratulate him in person …

    2wr2rv5.jpg

    (Leland Sims left, Mark Frost right)

    Mark (and an employee named Jeff) drove to New York to buy their Volt. Jeff bought the car, Mark paid for it, and they drove it 900 miles back to Atlanta; in what turned out to be something of an epic journey. They stopped to view the lunar eclipse on Dec 20. They had to pull over to the side to rest for 3 hours. A policeman pulled them over to ask ”Is that a Volt?!” (I may have embellished that last just a bit, but don’t it sound cool?)

    Since there are no GM authorized electricians to install the 220V charger in our area, they got a bright idea: they stopped in Tennessee to buy a LEAF charger. I hated to hell him that it probably wouldn’t work (at one point we were told that handshaking between the charger and car would take place before current flow began … can anyone confirm this for the production version? Can a LEAF level II charger recharge the Volt?)

    Upon arrival in Atlanta, they reset the gauges and Mark drove it over the Christmas holidays: Mpg so far, 104.

    The dealership figures that it costs $2.18 to recharge at basic GA Power rates. I don’t know the basis of their calculations, but I think this a bit inflated (but still respectable considering local prices above 3 dollars, with 5 dollar gas on the horizon). This doesn’t take into account possible off-peak metering or other rate schedule possibilities.

    Mark was very approachable and friendly; and one didn’t have to talk to him for long before appreciating how thoroughly he gets the basic premise of the car; and agrees with most of us here that the primary mission of the Volt is energy independence; with perhaps a lower-key environmental message following somewhere further back. I don’t think he had been aware of our site, but it is amazing how closely his views match the majority opinions here. He intends that his dealership will become “ground zero” for regional (or at least Metro Atlanta) Volt sales, and demonstrates a zeal and dedication to pull it off.

    He freely admits that he’s using the Volt to draw visitors to the dealership to see other models, notably the Cruze. He agrees with what many have said here about this new model: GM has really done their homework on this car. He made an impressive endorsement: “I bought the first one … for my daughter.”

    I started out this article by observing that one person can make a difference, and that it applies directly to this case. I would like to call attention to this phrase from the news story:

    “We had so many customers inquiring about the Chevrolet Volt — and thinking it odd that such a highly-touted vehicle was not going to be available for a year – that we went to New York and purchased one. And drove it back 900 miles!”

    Mark told me that two local TV stations were coming out to do stories about the dealership’s Volt.

    This all started because individuals, many individuals went to their local dealer to ask about the Volt.

    This has lead to at least one far-sighted dealership taking the initiative; which could lead to an avalanche which might move GM. Go forth and do likewise.

    Will the Deep South get it’s Volts in less than a year?!! Stay Tuned. :-P

    More pics:

    25555cz.jpg

    2eczpte.jpg

    Are these marks evidence of the training? Note that these cables are bigger than most peoples’ fore fingers:

    2a0m4k9.jpg

    There is no underhood sign of the “Volt Monkey,” but I doubt it would be visible under these plastic guards, if it still exists:

    2lm04s5.jpg

    10n6o2t.jpg

    ‘Bye, Ya’ll!

    .


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    Dec 28th, 2010 (10:52 pm)

    New technology needs early adopters to become main street… true.

    I’ll keep my lovely aged Saturn(s) few more years and then, I hope to shift to a Voltec.

    No thanks, no lease for me.

    Fyi http://tinyurl.com/278ke6u gas average $4.40/gal US in the Montréal, Qc area.


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    Dec 28th, 2010 (11:38 pm)

    On Topic:

    You made the right decision, Lyle.

    :-)

    .


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    Dec 29th, 2010 (12:25 am)

    CaptJackSparrow: For me, I can’t afford a Volt so I aint gonna buy one. Aint gonna lease either.
    I find the $41,000.00 too much for my broke azz. Not even the Fed & CA rebates make it affordable for me. OK i’m pathetic……lol.
    All I need is a simple EV really. Even the LEAF is overkill but may be an option. I have a 10 mile one way commute. Shoot man, even half a LEAF is overkill.
    Maybe in a few years a cheaper EV will come and fill the needs of pofolk like myself.    

    Ummm..Captain…you need to be riding a bicycle for only 10 mile commute! No excuses :)


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    Dec 29th, 2010 (4:16 am)

    Wayne: I did plan on buying Volt and have the Volt bumper magnet (now on my water heater), but the price jumped up too much for me.I’ll wait to see what comes down the pipes in the next few years. My house is worth less than a 1/3 of what it was, plus I put almost a 1/3 down, which is gone, probably forever.I just can’t justify the extra expense of the Volt at this time. I can go buy a Cube (which we like) for $16K, and guess at about 30MPG, adds another 10K at 3$ per gallon for 100K miles (but at a much slow rate of expense). $26K to 100,000 miles.  (Quote)  (Reply)

    FYI….Not sure where you live but I think the CUBE is a bad choice… very little car with very little tires… saw one stuck on a very little grade .. not good in the winter. Chevy Cruze would be a much better choice.


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    Dec 29th, 2010 (5:33 am)

    Jackson: “We had so many customers inquiring about the Chevrolet Volt — and thinking it odd that such a highly-touted vehicle was not going to be available for a year – that we went to New York and purchased one. And drove it back 900 miles!”

    Mark told me that two local TV stations were coming out to do stories about the dealership’s Volt.

    This all started because individuals, many individuals went to their local dealer to ask about the Volt.

    This has lead to at least one far-sighted dealership taking the initiative; which could lead to an avalanche which might move GM. Go forth and do likewise.

    Superb journalism (& photojournalism), Jackson!!! I enjoyed every photo & every word of your story! Take heed, future Volt dealers, owners & enthusiasts, of what individual initiative can do!!!

    .


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    Dec 29th, 2010 (6:36 am)

    Jackson: …one person can change the world…

    And in sharing the Jim Ellis Chevrolet Volt story, you have done that as well. Way to go Jackson! With a few more +1′s, your news story is gonna turn other dealerships “green” with envy!

    The waiting list is growing at dealerships throughout the nation. GM, increase production now!


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    Dec 29th, 2010 (7:58 am)

    Thanks Jackson!
    I am on the wait list at Jim Ellis and have been ‘bugging’ them to see how much weight they can pull to get Volt’s soon in the ATL area.

    Going to check out that Volt today! Thanks for the article.


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    Dec 29th, 2010 (12:08 pm)

    Lyle said “I, however drive 22,000 miles per year. Adding 21,000 more miles at 18 cents per mile is $3780.”

    Huh ?

    I thought the lease allowed 12k miles a year. If that is right then the mileage fee is 0.18*3(10k)=$5400.

    My thoughts on leasing:
    Lyle has a low VIN number. Everybody else in this forum does not.
    The real question is how accurately GM estimated future RV. If reliability problems crop up, or a future generation car is considerably improved, or the Volt is cancelled then the the RV will be wildly over estimated.

    We also have to take battery depreciation into account, which is around twice the rate as the rest of the car if we expect the car to last 20 years and the battery 10 years. Since half of the car is battery cost, this implies that Volt depreciation will be about 50% higher than a conventional car, all else being equal. If a typical GM car depreciates 50% in 3 years, I anticipate 75% depreciation for the Volt.


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    Dec 29th, 2010 (4:32 pm)

    I think guessing that the car will be worth money because of the vin no. and possible exclusivity is just that: Guessing. That said, I also like the idea of buying things up front. I’ve never leased a car and have always bought a car for cash. I’m also very old fashioned in that I will generally keep a vehicle well past the mileage and age most Americans tend to do: My Tacoma is 15 years old and 240,000 miles. My Brother’s Avalon has 275,000 miles. The savings via buying only every 15 years or so is tremendous.

    All said and done, even $30,000 cash is something I’d rather not cough up for a car- any car. We’re saving cash for a house and once that’s done and its paid for in full THEN we’ll consider a new car and even then, I’m going to be extremely hesitant to spend more than $10,000-$15,000 on a car which means a used car and something with halfway reasonable fuel economy- as in 35-40MPG.


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    Dec 31st, 2010 (12:00 am)

    I leased, and I usually buy cars and keep them for ten years and well over 100,000 miles. Why change this time? The differential in down and monthly payments is substantial. In Lyle’s case it appears that leases are taxed on the full price of the vehicle, where in California tax is only paid on the monthly lease payment. My VIN is in the 600s so likely not as much of a collectible factor. I will likely put on less than 15,000 miles per year and our second car is a Prius so for long trips at reasonable gas mileage that is what we will drive.

    My gamble is that there will be substantial improvement in battery and EV technology within the next three years and that the 2014 Volt and its competitors will be very appealing. Three years of investing the difference in down and monthly payments will be a nice amount to put down on my next car.

    I agree fully that if you plan on keeping this car more than three years or drive over the allotted miles that leasing is a worse deal than buying.

    If I fall in love with the car and want to keep it, I’ll take a $7500 hit in terms of the tax credit. Or, after turning it in at the end of the lease, I can ask the dealer if he wants to sell that used Volt that just came onto the lot. Without the tax break, the used-car price of the Volt is likely to be far less than the residual, and the leasing company already has that money.

    Or, after nice low payments for three years, I can buy or lease a brand new 2014.


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    jabusse

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    Dec 31st, 2010 (12:21 am)

    the batteries degrade over time. Think of the Lithium battery in your cell phone. Millions are made every year so the technology is pretty well nailed down. in 3 years most of the cell batteries work at maybe 75% of original capacity. So what does the warranty really say for the volt? I am sure the warranty will leave you limping into 10 years or 100K miles with a minimal performing battery pack which will cost around $12,000 to replace. Given the regular depreciation rate of the gm product which after 3 years would normally leave you with a $17K car think about it. you really have a 17K car looking at a $12K replacement in 7 years or less. If you drive 15K/year you would only have 5 years left before you need to budget $12K to replace the pack. So your car is worth much less than 17K in my book. Also at the 10 year mark you still have a ten year old chevy (so most everything else is falling apart). Given that a gas or diesel powered honda, volvo, bmw, toyota, nissan,, mitsubishi. etc are 200K mile cars that depreciate far less than a chevy, I think you need to reevaluate whether you want one of these volts (or any electric) at all. After 5 years you may have to pay someone to take it off your hands. If you really want to drive green don’t buy a new car every few years. keep yours 20 and demand the automaker build them to last. That means less manufacturing costs, less rare earth use, and far less wasted money that you could use to do something novel like paying off your home. Of course if the volt is a toy to you. go for it. Someone out there may be interested in a low serial number. But for me it would be like having Yugo #1. I swore off GM after my olds cutlass diesel in 1079 GM – Never again.


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    Jay

     

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    Dec 31st, 2010 (12:54 am)

    LeoK:
    As for leasing, I am a BIG proponent of leasing.However, I completely concur with Lyle’s decision to buy.I too am troubled by US Bank’s treatment of the $7,500 tax credit – the consumer who is giving their business to GM should be the ultimate beneficiary of this credit – not the leasing company.The $7,500 should be shown as a cap cost reduction on the lease – essentially pre-paying a portion of the depreciation.As it stands now, the ONLY people who should consider leasing are those who will definitely only drive the car for 3 years with predictable annual mileage.Anyone who may want to consider buying the car out at the end of their lease should simply buy it upfront.You can always trade or sell your VOLT after 3 years – and you will have gotten the benefit of the $7,500 tax credit.JMHO.    

    Yes, it’s true that you can buy and then sell after three years. But for how much? Cars depreciate the most in the early years. The Volt depreciates $7500 on the day you take title because the next buyer won’t get the tax credit.

    The lease estimates the real residual at 43% of MSRP with 15K miles per year. They penalize the lessee the $7500 credit should he use the option to buy. This is stupid in my opinion. The true cost of a new Volt is $33,500 after tax credit. Do they really think they’ll get $26K for a three-year-old car with 45K miles? No way. The lessee isn’t going to pay that much. The used market won’t either. They’ll likely get about $19K which is still an OK deal for them as they’ll have gotten the tax credit up front. It’s a gamble but by leasing you’re making the leasing bank take the risk.

    Technology improvements plus competition in EVs are going to drive down the used-car value of the Volt more than other cars in my opinion. This is the first generation, so any bugs or flaws in the design that are ironed out over the next three model years will drive it down more.

    Lyle’s case is different. His low VIN will have collector value. His annual mileage negates the lease idea.


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    EricLG

     

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    Dec 31st, 2010 (9:20 am)

    Why is 15k miles being used for the example ?
    I thought the “$350/month” offer is based on 12k miles/year


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    Dec 31st, 2010 (9:37 am)

    Looked at from the leasing company viewpoint:
    It pays $41k for the car to GM, and over 3 years collects
    $7500 tax credit
    $2500 upfront money (plus any loan origination fees)
    $350*36 from the lessee
    Some amount selling the car in the secondary market
    While forgoing about 4% apr in opportunity interest.

    In order to break even, they have to sell the car for
    41k(1.04)^3 – [2500+7500+12600] = ~ $23,500

    This is not quite right because the lending company will offset some of its lost interest in earlier collection of monies, but it is pretty obvious that the lender is nuts.
    Lyle’s VIN and high mileage use lead to his conclusion; for everybody else who stay within the 12k annual mileage allowance an outright purchase seems like a *very* poor choice.


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    Fred Forster

     

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    Jan 2nd, 2011 (4:24 pm)

    Mark Z,

    I enjoyed meeting you as your new Volt was delivered to you. Not sure about the car, but you were fully charged! How’s it going?

    Fredvolt


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    Ronnie Reagan

     

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    Jan 3rd, 2011 (3:44 pm)

    Jay: Yes, it’s true that you can buy and then sell after three years. But for how much? Cars depreciate the most in the early years. The Volt depreciates $7500 on the day you take title because the next buyer won’t get the tax credit.

    Actually, you’re assuming that the 7500 tax credit will still be around in 3-4 years or whenever the original owner decides to sell. For example, if the tax credit expires in year 3, and I sell in year 4, then the theory goes that the car value will get a bump of $7500 minus depreciation on that $7500.

    As someone in the forum said – best case scenario is to buy when the tax credit is available, and sell after it expires.


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    Jan 7th, 2011 (7:48 pm)

    Lyle, thanks for this and your other article on the lease terms. It helped my dealer get real about the lease offer. They never did get it to $350 ($359 was as close as their calculator got using your numbers), but in the end it seemed fair. I leased my Volt for $394 including taxes that they financed (I also got the $695 back-up camera) in N. California. So far, I love it!


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    Jan 20th, 2011 (2:28 am)

    I think the issue of applying the tax credit to the residual is criminal… I had volt #200 and decided to let go. This is a big bank effectively stealing the tax credit individuals… and GM is complicit. 43 percent residual is way low ball, too. add to this not being able to use GM card points, and I’m officially over it. I wanted to be an early adopted, but I refuse to be a sucker. US bank… your operating under EAAP…. Enron Accepted Accounting Principals. You should be thrown in jail.


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    Remund

     

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    Jan 23rd, 2011 (12:07 pm)

    In New York you should be paying tax on the Sum of the lease payments upfront not the total sale price..

    My fiqures are:
    Down Payment $2500
    Tax on viehicle {350 * 36 = $12600} * .08125 = $1024
    So if you pay $3524 down your lease should around $400/month with the additional fee’s such as the $695 Dist Change, Accuistion fee, and DMV Fee’s….etc. I maybe missing somthing but will find out this week.

    If you can roll the additional fees into the payments using the Low Money factor of 0.00025 or .06 APR then I’ll take the nearly free money.

    *************************************************************************************************************************************************************************************
    From: Lease Guide.com
    In some states, such as Ohio, you pay sales tax up front on the capitalized lease cost. In other states, such as Illinois and Texas (see Texas Auto Leasing), you actually pay sales tax on the full value of the leased car, not just the leased value, just as if you were buying it. In Illinois, you can also pay monthly taxes. In a few states, such as New Jersey, you have a choice of paying up-front taxes on either the full purchase price or the total of lease payments. In New York, you pay tax up-front on the sum of lease payments. Some states tax fees; others don’t. Most states tax the lease acquisition fee; a few don’t. Some states, have a cap on the total amount of taxes paid. Some allow a tax credit for trade-in vehicles, others do not.
    ************************************************************************************************************************************************************************************