Is a Chevrolet Volt lease through Ally Financial “too affordable” not to pass up?
For certain consumers, this may be the case, and it’s one reason why GM expects to sell 20,000 units this year, offers Motley Fool writer, Chris Baines.
“Despite Fox News’ protests, perhaps the Chevy Volt is not a completely overpriced hunk of metal after all,” says Baines.
How so? By a confluence of factors, including that the $369 with zero-down starting lease price for a $40,000 Volt is only $80 per month more than a zero-down lease for an also-economical $22,095 entry level Toyota Camry.
Minimizing the fact that the Camry is a mid-size car and a five-seater, the compact but spacious four-seater Volt is a way cooler ride, costs nearly twice to purchase, but its lease price is not nearly so much more, meaning leasing a Volt is a screaming deal.
Further – goes the napkin sketch approach to personal finance punditry – operating costs for the Volt using only electricity assuming under 40 miles a day could mean total outlay would be cheaper for the Volt compared to a Camry that only runs on gasoline.
Of course consumers will want to take a closer look at their actual considerations, but the realities for Chevrolet’s uniquely situated Volt could mean one theoretically beats the system – or at least one could wind up feeling that way.
A unique factor for the Volt’s lease is that Ally was faced with pinning a residual value on the new technology car – which some have reported as too low – but Baines suspects the residual may prove too high – thus it helps reduce the monthly lease payment.
Not quite explicitly explained in the article is a leasing company is entitled to collect the full $7,500 federal tax credit and so the Volt’s effective base selling price is cut to $31,645.
Thinking like an investor, the investment advice writer opines that leasing further makes sense for the Volt as lease makers are hedging their bets as to where the technology – and potentially used Volt values – will go.
In one extreme example, if GM comes up with a substantially improved next-generation Volt, a leased first-gen example could see its resale value crash and burn – not unlike any other piece of outdated consumer electronics. But if that happens, no problem, just turn it in, and let Ally absorb that loss, says Baines.
Or, goes the possibility thinker, the Volt could be a total flop and GM stops making them, in which case clean used examples could even have collector’s value. Under this scenario, one could buy the Volt at the fixed end-of-lease buyout price, and have made a wise purchase below market value.
Baines says he suspects GM has also effectively hedged its bets at – taxpayer expense. Not only is it effectively capitalizing on the federal tax credit to offer a pain-free discount on its new technology, it only owns 9.9 percent of Ally, so guess who loses if the Volt loses?
Right, you the taxpayer do, or rather the federal government does not to put too fine a point on it. Ally is 73.8 percent-owned by the U.S. Treasury, so as it bets on the winds of the future, less predictable risk could work either against it – or in its favor – and only time will tell.
This entry was posted on Tuesday, June 26th, 2012 at 5:55 am and is filed under General. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
+13
Jun 26th, 2012 (6:27 am)The way thing are looking right now , as a 1 month owner of a volt, I’d say Ally and the tax payers have a pretty safe bet. The chances of GM making radical improvements on the Volt as opposed to incremental improvements, are slim, and even if they did the demand for off lease first generation Volts coming on the preowned market to compete against available used ICE powered cars and conventional hybrids would be no contest. A secondary remanufacturing company could easily scoop up these used volts, stretch the chassis about 6 inches and they would be the bomb as NYC cabs complete with inductive charging stations at cab stands. As for those who bought rather than lease, I think the running sentiment is you can have their Volts when you pry them out of their cold dead hands. I think GM has a winner here, look for iPhone like adoption in the future.
+13
Jun 26th, 2012 (7:22 am)Fun stuff.
This morning, Kelley Blue Book places the “Fair Purchase Price” of a 2012 Volt that had an MSRP of $39,995.00 at $38,355.00 (or 95.9%).
Kelley Blue Book places the “Fair Purchase Price” of a 2011 Volt that had a Dealer Invoice of $39,389.00 at $37,597.00 (or 95.4%).
The National Automobile Dealers Association places the 1-year retention value of the Volt at 90%.
Automotive Lease Guide places the Volt’s 3-year residual value at $16,797.00, but this is unsupported by data and remains speculative.
+2
Jun 26th, 2012 (7:45 am)Happy to have the support of The Fool’s writer. Will not be following this author’s financial advice, except by chance as with the prior purchase of my Volt.
+4
Jun 26th, 2012 (8:35 am)After all the taxes & fees & mumbo-jumbo, the Volt lease monthly payment is more like $500. I think I’d rather buy it for 0% financing for 72months. That’s only $465/month and I own it after 6 years, which is $0/month.
+3
Jun 26th, 2012 (9:19 am)Lets suppose that the 2015 Volt is $10K less and goes 60 miles. Sure in a vacuum that impacts the used Volt price but what does it do to the used Accord, Camry or Impala? Everyone would want to jump on the electric bandwagon but there is only so much supply. What was it again I learned about supply and demand…?
Jun 26th, 2012 (10:26 am)I agree with this article. The lease deal was the way I finally decided to go for the reasons listed in the article. but remember, the final payment with tax and license and custom wheels and interior will push your payment closer to 500$.
If you are thinking about doing the lease you can see the spreadsheet for it at the link below:
http://gm-volt.com/2012/06/05/a-long-journey-george-s-finally-brings-home-his-new-volt/
Jun 26th, 2012 (10:30 am)It’s more like 673$/ mo for the 72 month 0% isn’t it. My lease pmt is 500/mo. 48500 out the door sticker.
+2
Jun 26th, 2012 (10:32 am)James McQuaid,
So could I buy a new volt every year take the $7500 and the ILL $2000 credit and make a profit and all ways have a new one ?
Tom
Jun 26th, 2012 (10:40 am)Another consideration is if you want to upgrade to a new Volt prior to the 3 yr lease end. Looks like you owe the full lease term agreement per the contract, but never having leased before there may be options I’m not aware of.
Any lease experts out there??
Where’s Static??
+3
Jun 26th, 2012 (10:46 am)Article is written by someone who is very uninformed. Unbelievably uninformed. The big miss is that the $7500 tax credit is ADDED to the residual. That’s why the residual is so high. Too high in fact. Now this has NO impact on the monthly payments. Cost – $7500 – FMV Residual = Cost – (FMV Residual + $7500). In both cases the depreciation is the same. However, it makes a huge difference if you want the option to buy the car at the end of the lease. In one case you can buy it at Fair Market Value. In the other at FMV + $7500.
Basically if you buy the car at the end of the lease you completely lose the $7500 credit. Which is of course why Ally and US Bank are more than happy to write these leases. (People always mention Ally and talk about taxpayer credits but US Bank is doing a very similar lease and it has no connection to GM and it’s most definitely not owned by the government — it never had an issue). To minimize the risk you’re essentially giving up the $7500 tax credit plus paying an $800 acquisition fee and then a $400 disposition fee. $8700 is a heck of an amount to minimize the downside. You are getting $3000 – $4000 of lease cash (not mentioned in the article) but the 0% financing is worth the same amount.
As mentioned by Ron the idea that the Volt will have a low resale value seems like a horrible bet. Not only do you have the current unbelievably high — not sustainable — residuals mentioned by James, but history seems to suggest this will continue at a lower rate. Used car prices are driven by two factors: reliability and gas mileage. This is why cars like the Accord and Civic do so well relative to other used cars. How does the Volt fair on these? Well it gets the highest reliability rating of any GM vehicle by Consumer Reports and the median driver on Voltstats gets something like 175 MPG. No other car comes close.
-1
Jun 26th, 2012 (11:09 am)George S. Bower,
Most leases allow you to find someone to assume the lease provided that person is agreeable to the bank.
+6
Jun 26th, 2012 (11:19 am)1
You got that right. +1
Jun 26th, 2012 (11:23 am)#4
As the late Len Frank so famously said (with apologies to CorvetteGuy, LOL), “The guy with the plaid sportcoat and the white shoes and belt didn’t quit the dealership, he just moved to the leasing office”
I drive over 20K miles a year, so the charge for the excess miles would just kill me.
Short version – I agree. +1
+7
Jun 26th, 2012 (11:36 am)Leasing the Volt at such a low price is part of a long term plan to get people to try the Volt (try ANY electric car but specifically the Volt) for an extended period of time without too much of a commitment.
GM seems to understand that the best way to get word of how good the Volt is… is to get people to drive it. I can’t tell you how many people ask me about my Volt and I am in Silicon Valley. This is where a large percentage of US electric cars are purchased. Imagine the impact in other locations.
The math works out (as shown above) but really, this is about changing peoples perceptions.
+2
Jun 26th, 2012 (11:38 am)NOTE: For those thinking about buying or leasing now, GM is giving dealers which hit their sales targets an extra discount of $2500 per car. That means invoice is now invoice – $2500. In the forums we’ve seen offers of Volts at $2500 under invoice.
The discount will probably not be there on MY 2013 Volts. So your choice is 3 more miles of range or $2500.
+2
Jun 26th, 2012 (11:46 am)If you can’t take advantage of the $7500 tax credit, this is a fantastic way to get in on the fun. Lease or Purchase. I purchased. Love the car.
+3
Jun 26th, 2012 (11:49 am)I agree with this article. Leasing is probably the most affordable way for the majority of people to get into a Volt. The $7500 tax credit is irrelevant to those who can not qualify. And if the 2014 or 2015 Volt makes the current model look like a slug, you are not stuck with the additional 4-6 years of payments.
As usual, your mileage may vary.
+2
Jun 26th, 2012 (11:49 am)The truth will out.
Take that You Know Who.
+1
Jun 26th, 2012 (11:54 am)I took MSRP = $39,145, add 6% tax = $41,494, add $850 destination charge and subtract $7500 tax credit = $34,844.
Divide this number by 72 months = $484/month.
(I forgot about tax in my first post, but it’s still less than the lease payment)
Using the out-the-door price of your car that would be $48,500 – $7500 (since the buyer gets this) = $41,000, divide by 72 months = $569/month
+3
Jun 26th, 2012 (12:16 pm)I like to own my vehicles for a few years with no payments before I move on, but I briefly flirted with the lease idea for the Volt until… For some reason your ~$500. becomes a ~$900 a month payment just 10 miles north of the 49th parallel. This conversation with the salesman caused me to become slightly rude and most definitely a jerk.., but I still gave him some money to hold a spot for their next allocation. After almost 7 weeks of waiting, we ordered a red 2013 Volt on Saturday.
Now just 10 -12 more weeks to wait… And with a trade & a few $$ down, I’ll take a $650 a month payment for 5 years and call it mine. (I mean ours)
Jun 26th, 2012 (12:31 pm)Kevin from Canada,
I’m in the same boat. What kind of financing did you get? I still haven’t been able to find out if the 0% is available for MY2013.
+5
Jun 26th, 2012 (12:37 pm)When commenting on “taxpayer” credit… remember ALL foreign companies are basically started by their government including continual huge subsities.. .that is our competition… while they also put VAT taxes on our products then come here and we let them build plants and PAY NO US TAXES… effectively we are subsidizing TOYOTA HONDA VOLKSWAGEN HYUNDAI etc way more than we ever helped our own FORD and GM.
+3
Jun 26th, 2012 (12:41 pm)OT: GM must be selling more Volts because today was a record for the most daily miles. 891,300 total miles today and 588,101 EV miles!
Jun 26th, 2012 (2:12 pm)Kdawg
I have yet to apply for a loan. I asked about 0% financing, but with only a trickle of Volts crossing the border, dealers have no problem moving what they can bring in. I was told it’d be unlikely to see it up here. I may just put it on a line of credit if I can’t catch any break on the interest rate. Of course I’ll be testing my relationship with the dealer by putting as much on my credit card first to take advantage of points.
Jun 26th, 2012 (2:13 pm)I wish folks wouldn’t put tax in their price quotes. This is a national/intnl forum. What do I care what a CA resident versus a NH resident pays (~7.25% vs 0%). Can we keep it to pre-tax, please?
Interesting that my “spreadsheet”, which assumes low 10k 4yr depreciation, for many of the same reasons, works out to $375 a month in ownership cost (fuel cost savings, etc). With no money down, it could be my first lease. I hate, no dread, unloading used cars.
Having never leased, what gets it above $369 w/o tax? Even at 41k w/lthr, how does monthly cost go anywhere near $500?
+3
Jun 26th, 2012 (3:27 pm)My payment is $600.00 per month with nothing down with 0% for 72 months. Here in Illinois I get $4,000.00 back from the state and according to my tax accountant $6,000.00 from the federal government. I will save approximately $3,000.00 per year in gasoline costs. This number goes up and down depending on the cost of fuel. The way I did the numbers was simple. I took the gasoline savings forward to three years which totaled $9,000.00 and added the money back $10,000.00 to equal $19,000.00. I then divided the $19,000.00 by my monthly payment $600.00 and found out that my purchase of the 2012 Volt gave me 31 months of payments for free. I simply could not find another vehicle new or used that returned to me 31 months worth of payments.
Jun 26th, 2012 (3:36 pm)#23
Awesome! +1
Jun 26th, 2012 (5:09 pm)DonC,
“quote”
“However, it makes a huge difference if you want the option to buy the car at the end of the lease.”
Don and everyone else,
If you want to buy the car then don’t lease it.
It’s that simple.
Jun 26th, 2012 (5:12 pm)kdawg,
You forgot license and doc fee. You are comparing to a sign and drive lease.
Jun 26th, 2012 (5:38 pm)CogWheeler,
Taxes, options, HOV variant, tags.
Jun 26th, 2012 (6:39 pm)screaming deal,
Nasaman,
get your ass down there and get your car!!
Jun 26th, 2012 (6:44 pm)George’s article earlier this month explains it.
http://gm-volt.com/2012/06/05/a-long-journey-george-s-finally-brings-home-his-new-volt/
Jun 26th, 2012 (6:47 pm)Confuscius say: “Leased car soon become driveway dressing.”
Jun 26th, 2012 (8:56 pm)Good one as usual Eco:
I think I know what you mean but please explain.
—like worried about dinging it up cuz it’s not your car??
Jun 26th, 2012 (9:41 pm)kdawg,
Thanks, Kdawg. If leasing is inseparable from doc fees, acquisition fees and actually financing? tax liabilities, I think I’ll just buy. I just can’t believe 16k will be the 4 year residual on a Volt, and the higher you predict (at your peril), the less the Ally lease looks attractive. The moving parts of this stuff intimidate me, and I do cash flow analysis all day.
Jun 26th, 2012 (10:23 pm)This, x2!
I love my Volt so far, which I leased and got a great payment deal. But I knew the day I got it, I wouldn’t be buying it out at the end. I would be screwing myself to the tune of about $10k vs. buying it on day one.
Now if three years goes by, and the bank decides to offer me an alternate deal that’s sweet enough, it might be another story. But no way am I gonna be holding my breath.
Jun 26th, 2012 (10:25 pm)Word of truth! I’m shocked he hasn’t already.
Jun 26th, 2012 (11:25 pm)I’m certainly tempted, guys! But I’d have to trade the only vehicle I own that can tow my boat &/or launch it into my riverfront (which a Volt can’t do), so I’m still holding out for a Voltec CUV that can.
Jun 27th, 2012 (1:38 am)Hi,
Recently I came across some great articles on your site. The other day, I was discussing ( http://gm-volt.com/2012/06/26/motley-fool-says-volt-lease-is-a-great-deal/) with my colleagues and they suggested I submit an article of my own. Your site is just perfect for what I have written! Would it be ok to submit the article? It is free of charge, of course!
Let me know what you think
Contact me at contactatprivatefleet@gmail.com
Regards,
Audrianna Parker
Jun 27th, 2012 (1:41 am)http://www.autonews.com/apps/pbcs.dll/article?AID=/20120625/RETAIL07/306259986/-1/honda-finance-arm-is-a-leasing-powerhouse
Interesting how Honda keeps its lease customers, a strategy GM cud use for Volt to drive sales..
+1
Jun 27th, 2012 (3:24 am)leased my non hov 2012 volt this past April. 0 down. 0 drive off. 0% financing. 0 first month. DVD nav. Leather trim. Camera. Polished wheels. For 461.00 tax included. I think I got a pretty good deal. GM also sent me a new volt owner package that came with a hardcover book about the Chevy Volt. And a QR code decal that I am currently displaying on my Volt.
I leased for the reasons mentioned in this article. If your on the fence about leasing or buying this car….. Make the jump and get this car.