Lease vs. Buy

[ronr64]

You're looking at this wrong. I've seen this said on other threads before but in my quick scan of comments on this post did not see this point of view so here goes. Lets assume for the sake of argument that the 2015 Volt is a redesign and has double the range and is fantastically more efficient then the current Volt. Your Volt is now obsolete, right? Maybe but what about all the typical ICE vehicles out there? The new Camaro is now available with a 580HP engine. Yet I don't see last years models sitting abandoned on the roadside with keys and signed title on the front seat for who ever would be humble enough to take one... It would take an unbelievable quantum leap to render existing vehicles obsolete and the replacement cycle would still take years. In the meantime some would be forced to drive that old Camaro with only 400 hp or that old Volt with only 40 miles range. If anything rapid improvements in the Volt would help mainstream its acceptance which would only add value to a used one regardless of how it stacked up to a new one. $40K or even 20K or 10K is a whole lot of $$ for some to spend on a car so no matter how good the new one is there will always be a market for the used "inferior" old one.

So don't worry about some future Volt killing your used Volts value when it would do a whole lot more damage to the rest of the 99.9% of used cars your used Volt would be competing with!

[garymunson]

In our case, the residual was calculated by Ally as 29K which I think is highly optimistic. Most things I read indicates further erosion of battery pack prices as well as increased capacity. I don't know GM's overall strategy regarding batteries but suspect that being able to fully recharge overnight at 120 volts was a consideration. I also expect that very shortly it will become common (maybe even code) for all new home garages to have dedicated 220 volt car charging outlets. This will help make a 2X range Volt easier to charge. We'll see what scenario comes to pass. As for us, having just retired, 12K miles per year has become what we drive since there is no longer a commute to factor in. Our 09 Avalanche had 66K on it (from multiple trips to and from Florida as we moved to NV) and now that we'd transitioned to 12K a year, in 3 years we'd be looking at a truck with 100K and a value around 11K if past prices are a valid guide. If gas makes another run up, maybe much less. Just looked safe to in effect trade it for 3 years of lease use and bank the fuel savings for our next extended range hybrid.

[RedneckRoyalty]

You can always lease the car, then buy it. At the end of the lease, you will then be able to make an intelligent decision on whether the car still meets your needs, if its a lemon, and if there is a new gee wiz technology that you just HAVE to have.

Think of it as a three year test drive!

[sinnombre]

I envy your state credit. How could people not be buying these cars in states with rebates on top of the Fed's? Here in NJ, with Republican darling Chris Christy as governor, there is no chance we'll see any government progress on promoting electric vehicles and charging infrastructure.

Anyway, I have a friend looking to get a Volt soon so I've been looking at lease vs. buy with him. IMO, the clearly better deal right now, even without a state credit, is to buy and get the 0% for 72 months. I suggested he put down the same $7500 he'll get back on taxes (essentially making it no money down), and as long as resale value doesn't tank he should be ahead of the game when he goes to trade up in 3 years. I calculated that if he can sell the Volt for 25K at that time, which may be optimistic, his effective monthly payment including all taxes and fees would be around $320. And while it could be argued that leasing lowers downside risk (like if gas goes to $1 a gallon and you can't give EV's away), it also increases your risk in terms of flexibility, like if you lost your job and needed to dump your car. In a lease that's difficult to impossible.

I totally disagree with your logic . Especially , the 3 year "trade up " scenario . My 3 year lease has a residual value of $25k because they added the $7500 tax incentive on the back end of the residual , but it is way too high at a subsidized 75% . I leased for $360 with zero down , except tax and license . If you buy , you will only benefit the tax incentive if you have a federal tax liability of $7500 or more and won't see the benefit until you file.

The lease is the only way to go if you drive 15,000 miles or less and want to trade in 3 years.

[shrink]

As others have mentioned, the whole lease vs. buy debate is dependent on so many individual factors. You have to determine what is best for yourself given your situation.

Personally, the one thing I typically don't like about leasing is after say 36 months of $350 payments, you've spent $12,600 and have nothing at the end. If you still need a car lease end, you'll need to revisit the decision. I personally don't like having to pay for a car, a depreciating asset, for years on end. I typically pay off cars in 3 years or less and then enjoy the car for 8-10 years total. Life is better without a car payment. It's actually probably smartest financially to buy a 1 to 3-year old used car and let someone else take the initial depreciation hit.

Alternatively, it can also be much smarter to lease a car and invest the money that would have gone towards purchase into something that will appreciate, rather than depreciate, and yield a return.

[DonC]

I've seen this said on other threads before but in my quick scan of comments on this post did not see this point of view so here goes.
...
So don't worry about some future Volt killing your used Volts value when it would do a whole lot more damage to the rest of the 99.9% of used cars your used Volt would be competing with!

Actually I was trying to say exactly this. A five year old used Volt doesn't compete with a new Volt it competes with a five year old used Camaro and a five year old Prius. I'd add that it's likely the better MPG that the Volt gets becomes more important in the used than in the new market. Expect Volts to hold their value much better than just about any other car on the planet.

You can always lease the car, then buy it. At the end of the lease, you will then be able to make an intelligent decision on whether the car still meets your needs, if its a lemon, and if there is a new gee wiz technology that you just HAVE to have.

Normally this is correct and all you pay for the option of the very long test drive is the $795 acquisition fee (yes the test drive will cost you something). However, in the case of the Volt the $7500 tax credit is added to the residual, which means that if you buy at the end of the lease you're paying $7500 more than if you bought it. Paying $8300 for an extended test drive just doesn't make sense. The high residual means you have to decide up front if you're likely to keep it.

It's actually probably smartest financially to buy a 1 to 3-year old used car and let someone else take the initial depreciation hit.

The problem is that the used car market is broken. People with lemons put their cars on the market. People with great problem free cars look at their trade-in value and, while some may do a trade, many keep the cars. As a buyer you have no idea which cars are which so you're only willing to pay for a lousy copy, which is what you're likely to get. You can get around this if you know the owner or something but generally speaking one of the reasons used cars are so much less expensive is that buyers have to assume they're bad copies.

[Henry_FL]

Normally this is correct and all you pay for the option of the very long test drive is the $795 acquisition fee (yes the test drive will cost you something). However, in the case of the Volt the $7500 tax credit is added to the residual, which means that if you buy at the end of the lease you're paying $7500 more than if you bought it. Paying $8300 for an extended test drive just doesn't make sense. The high residual means you have to decide up front if you're likely to keep it.

I don't believe this is true, while it is correct your paying more at time of "purchase" at the end of the lease term, you also got use of the vehicle at a substantially reduced payments for 3 years. If one looks at the Ally lease as an example, your saving over 100 month over purchase, if not more. That's 3600 and the residual isn't bumped up the full 7500, its about half that, so I'm pretty sure if you look at the total ownership cost, its a wash lease vs buy on the Ally lease so it is in fact a 3 year test drive, which the cost of is lower for the first three years and then the same for the remainder of ownership if lease is bought out ( recouping that savings during the lease term)

Bonus is you never have to deal with the government and ta returns to get the value of the 7500 credit, even if you purchase at the end of the term

[DonC]

I don't believe this is true, while it is correct your paying more at time of "purchase" at the end of the lease term, you also got use of the vehicle at a substantially reduced payments for 3 years. If one looks at the Ally lease as an example, your saving over 100 month over purchase, if not more. That's 3600 and the residual isn't bumped up the full 7500, its about half that, so I'm pretty sure if you look at the total ownership cost, its a wash lease vs buy on the Ally lease so it is in fact a 3 year test drive

The whole $7500 gets added to the residual. The reason you're thinking it's only about half is the "lease cash" which ends up being $3000 or $4000. I didn't go down the path of exploring lease cash because the lease cash is more or less washed out by 0% financing for 72 months. In fact if you add the acquisition fee and the disposition fee to the 1.5% financing we're seeing on the Ally deal it's a wash over three years and the 0% financing gives you the benefit of six years. Run the numbers. If you lease you have the additional cost of the $800 acquisition fee, you have to pay $1500 in interest over three years or $3000 (or more) over six years, and you lose the $7500 tax credit. Your plus is that you get $3000 - $4000 in lease cash. If you buy you miss out on the lease cash but you save $4000 in interest, you don't have to pay the $800 acquisition fee and the $500 disposition fee, and you get a $7500 credit. Basically the question boils down to whether $7500 is > or < $3500 (lease cash) - $3000 (interest) - $800 (acquisition fee) - $500 (disposition fee).

If you buy your TCO will ultimately depend on resale value. This isn't much of an issue for me because I intend to keep my Volt for a long time, but even if I intended to keep it a shorter time I'd still think that it's a good bet that resale values will be high and that buying would be more financially better than leasing (this is BTW the bet Ally and US Bank are making). Note I'm not opposed to leasing. I leased the Leaf because, given the terms of the Leaf lease (tax credit used a cap reduction) and the technology used there (no TMS and a very limited range to begin with), leasing seemed like a much better deal.

[12V]

If you still need a car lease end, you'll need to revisit the decision.

That's exactly why I ended up buying rather than leasing. Both are great deals right now. But if I leased, I would be forced into purchasing at a specific time or becoming a serial leaser. After fretting over what improvements there may be 3 years from now, I realized today's Volt is perfect for me. I have a family of 4 and a daily commute < 20 miles RT. If the 2015 Volt turns out to be too good to pass up, I can always trade mine in for it AT MY CONVENIENCE.

[sinnombre]

I read my contract again today . here are the details if anyone is interested :

My lease is through U.S. Bank . MSRP of $41,885 with destination . However , they took $3,000 off and used $38,885 as a sales price . They also used another $2,900 in lease cash . There is a rent charge of $1638, I guess this is the interest portion and the acquisition fee . I paid tax and license and $1,200 down. My payments are $336 for 36 months . . They used a residual value of $25,510 ($7,500 tax credit added ). The termination fee is $395 if I don't purchase the vehicle .