It's Not a Car, It's an iPhone! Leasing is the way to go...

[papatonyinsd]

Here's an article that I wrote for my technology newsletter. It started out as a "Lease versus Buy" topic, and then veered off into more philosophical areas:

Dennis and I are supposed to finally get our all-electric Nissan Leaf car on Friday. In June, I will have pursuing this car for two years!

We were debating whether to buy or lease, but I now know that the choice is clear. We will be leasing. The finances look quite good, and the paradigms have swiveled around in a radical new way.

Here's why:

We can't keep thinking of the upcoming wave of electric cars as being like any other kind of car. We have to think of our next big purchase as if it were an iPhone or iPad.

There haven't been many BIG changes in petroleum-driven tech, since the technology and infrastructure have been around for well over a century. Cars have gotten faster, quieter, cleaner, easier to own and drive, safer and so forth, but you can still drive a 1911 car into your local gas-station and get the oil, gas and radiator fluids handled just fine. You can't with an all-electric car, so the field is wide-open to innovation on a massive scale.

Battery, charging and electric motor technology are progressing rapidly, with a LOT of money being thrown at them. Electric-car tech is going to replace fully-amortized oil tech, so everybody wants to get in on the ground floor. Patents are going to be auctioned off for big bucks, and year-by-year competition is going to put a lot of pressure on every manufacturer.

I mean, really - The Ford Focus electric is already being promoted as "Charging in half the time of the Nissan Leaf!" Just think how much more pressure will be on Nissan in just one year, when everybody else (BMW, Toyota, Ford and many more) come shoving their way into the market with sharp elbows. Nissan is in a very good position due to Carlos Ghosn's vision, but the road forward is all uphill.

Imagine being forced to hang onto an iPhone 1.0 in 2011 (with improved software but the same hardware), while everybody else is using vastly improved competitors, and Apple itself is pumping out the iPhone 5 in a few months.

I'm pretty certain that there will be big hardware changes nearly every year. Not just software. They'll HAVE to do it that way. The market is already demanding a new charger to replace the weak one behind the Nissan Leaf's back seat. A new one would allow full charging from zero in four hours at home, not eight.

Imagine Nissan someday being able to say "Now, with newer batteries that allow you 200 miles of range!" That day is already coming, but nobody can say when.

There is still plenty of room for improvement, just as Apple did with the MacBook Air, iPad and iPhone's battery structure and form. They were willing to do away with a hard-shell casing for their batteries and use the surrounding structure as the actual casing, which makes their batteries fill more space and last much longer than the competition's, without changing the chemical structure in the least.

Nanotech batteries are starting to come online, allowing even more densely-packed energy storage. I'd sure hate to miss out on that.

All-electric traction tech isn't just a supplement to old dinosaur-juice tech like the hybrid was, it's the whole Megillah… New infrastructure, new consumer demands that never had to be dealt with before in such quantities, new biases that have to be overcome. New, enforced habits are coming for consumers that they will NOT adore, so the industry will have to adapt. Consumers sure won't be willing to.

All of these problems will provide new possibilities for innovators to move to the front of the pack, and for more consumers to get comfortable with making the switch to all-electric transportation.

Being the first on the market with a mass-produced electric car, Nissan has a good chance to be the 900-pound gorilla of the entire worldwide market. They want to fight for this, and the only way that they can is to constantly innovate and upgrade, just like Apple does with the iPhone and iPad each year.

At the rate that things are changing, we'd be fools to buy (versus lease) and expect to use the same car for a decade or so, with only software upgrades.

 

[AmarilloLeaf]

Unless you are in Texas.

Texas leases essentially collect the tax on the FULL MSRP, then factors that into the lease cost. Then when you buy the car, you pay the tax again on the residual value. If you don't buy the car, the next buyer pays tax on the sales price. So in essence Texas collects tax money on the residual value twice, once at the original leasing time, and again when the lease is up.

The only reason to lease in Texas would be if you didn't have enough tax liability to need the $7500 tax credit.

Or, failing that, gasoline goes back to $1.49.

 

[cdub]

Unless you don't want to have a car payment forever.

I still have my original Droid and have no need to upgrading anytime soon.

 

[nader]

I agree on the upgrade cycles and the year over year improvements that are all but guaranteed to come. With that said I am choosing to purchase the car. When it's all said and done I will be in the car just over $20,000. That's only a few grand more than the lease option, and I can modify/upgrade the car as I see fit.

I am also banking on the fact that there will be legacy support for this vehicle in the form of uprated battery packs (150-200 miles range), either from Nissan or the aftermarket industry as time passes. I can see battery manufacturers that can't get in as an OEM supplier or have more exotic battery technology (higher energy density, lighter weight, etc) going for aftermarket sales that will be sure to come in the next few years as packs degrade. The racing world will soon adopt EV's and there battery needs will be totally different than that of the consumer. They are not concerned with a 10 year pack life. They will want light weight, high energy density batteries that can take a massive hit of juice in a narrow time frame (minutes not hours).

 

[lonndoggie]

Unless you don't want to have a car payment forever.
I still have my original Droid and have no need to upgrading anytime soon.

Same here...and running Gingerbread, thanks to cyanogenmod. Very few Android phones are running GB straight out of the store.

So the cellphone/ev comparison appears to cut both ways.

 

[smkettner]

Someday I might get an iphone. Right now I am buying a Leaf.

 

[Coffee_Slurry]

I can tell you why I'm leasing -- I simply can not predict the 5-year resale value of this car.

It has the *potential* to have an unusually low resale value if it is quickly eclipsed by better offerings or demonstrates early deterioration.
I'd rather pay the extra cost to lease, and have the option to "not buy" in three years.

It also has the potential to have a high resale value if supplies remain constrained, incentives expire, and gasoline continues to climb in price.

Too many factors.

As much as the powertrain is new, and higher risk than ICE valuations, I also worry about the interior. The hot California sun could make quick work of anything remotely degradable.
I'm counting on there being something I would MUCH rather have than the LEAF in three years.

So yeah, it's like an iPhone.

 

[Herm]

For many people the car is fine as is, perhaps in 10-15 years the battery will require replacement when the range drops to 60 miles, perhaps they will update it if the rest of the car is not in pieces. Hard to say, its just a car but it has the potential of getting you to work when gasoline gets rationed to 4 gallons a week.. if Obama gets a second term. Note that inflation will not hurt you if you purchase instead of leasing.. and inflation is going up.

 

[cdub]

Hard to say, its just a car but it has the potential of getting you to work when gasoline gets rationed to 4 gallons a week.. if Obama gets a second term. Note that inflation will not hurt you if you purchase instead of leasing.. and inflation is going up.

Really? I thought we agreed to keep politics out of here.

(that's ludicrous btw)

 

[Navin]

I've thought about leasing too, but after watching "Who Killed The Electric Car" about 20 times I don't want any car company taking my car from me and crushing it. I want to own it. Yes, maybe Ford and all the others will make electric cars soon, but it must be tougher to make these things than everybody thought because many of us are still waiting for our Leaf about a year after reserving it. And besides the Volt, which uses gas, and Tesla's ultra expensive roadster there still really isn't any other electric option. Everyone keeps promising, but not delivering.

 

[LTLFTcomposite]

It's easy to forget too that when you lease you do not preclude buying, since you can buy it at the end of the lease for some predetermined amount (the residual value?). Am I correct on that? It's just that leasing then buying will cost more than buying to begin with. Sounds like that "indecision penalty" may vary from state to state.

If/when my time to make a final decision comes up I'll try to calculate how much that penalty is and decide from there. It may be worth, say $1500, to have the option to give the car back in three years if it has either been problematic, there are much better choices available, or some combination of the two.

 

[Jimmydreams]

It's easy to forget too that when you lease you do not preclude buying, since you can buy it at the end of the lease for some predetermined amount (the residual value?). Am I correct on that? It's just that leasing then buying will cost more than buying to begin with. Sounds like that "indecision penalty" may vary from state to state.

My lease says that. I'll have to check it to see if it says that I "may" have the option to buy at residual price...does anyone know what the EV1 lease said re; residual pricing for purchase? Since they were ALL leases, was there any language in there about purchasing????

I don't believe Nissan can refuse to sell me the car at the residual price if I want to buy it. I'll go read the fine print.....

 

[LTLFTcomposite]

JD, I'd be interested to hear. This is interesting but of course who knows if it specifically applies:

http://en.wikipedia.org/wiki/Closed-end_leasing

So you went with the lease, what is your thinking about what you do in three years? Get something else if they have made strides in the technology or possibly buy out the lease?

Something else about leasing, I assume if you buy out the lease all questions about that dent in the door, stain on the upholstery, bald tires, or 4k miles you went over all become moot. Or do they?

 

[TomT]

Nor would they want to since it is much easier and cheaper for them to do so...

I don't believe Nissan can refuse to sell me the car at the residual price if I want to buy it. I'll go read the fine print.....

 

[IBELEAF]

Lease vs Buy is nothing new and applies to any new car purchase. You buy something today and it's guaranteed that it will not be the latest and the greatest 2-3 years down the road. Now, if you do enjoy throwing money away and getting the latest tech without the hassle of selling it then leasing makes sense. However, if you intend to save money and keep the car for a long time then buying is the only wise choice here.

 

[davewill]

I've thought about leasing too, but after watching "Who Killed The Electric Car" about 20 times I don't want any car company taking my car from me and crushing it. I want to own it. Yes, maybe Ford and all the others will make electric cars soon, but it must be tougher to make these things than everybody thought because many of us are still waiting for our Leaf about a year after reserving it. And besides the Volt, which uses gas, and Tesla's ultra expensive roadster there still really isn't any other electric option. Everyone keeps promising, but not delivering.

There's a residual value. They CAN'T stop you from buying it if you want to. Besides they have to support and service all those other ones they sold...what's the motivation for them to crush returned leases?

 

[LTLFTcomposite]

Hard to say, its just a car but it has the potential of getting you to work when gasoline gets rationed to 4 gallons a week.. if Obama gets a second term. Note that inflation will not hurt you if you purchase instead of leasing.. and inflation is going up.

Really? I thought we agreed to keep politics out of here.

(that's ludicrous btw)

Funny when I read that I was trying to discern the intent; whether an Obama second term is a necessary and sufficient condition to gas rationing being instituted, 4 gallons per week vs none at all, or just retaining your employment :lol:

Inflation may be going up, or it may not be. Experience has shown what's obvious to everyone is obviously wrong.

In any event, leasing would protect you from an increase in the price of the vehicle if the terms provided the option to buy at a specified price.

 

[LEAFfan]

However, if you intend to save money and keep the car for a long time then buying is the only wise choice here.

It's a wise choice to buy IF the buyer can receive the full $7500, otherwise the wise choice with more savings is to lease.

 

[planet4ever]

However, if you intend to save money and keep the car for a long time then buying is the only wise choice here.

It's a wise choice to buy IF the buyer can receive the full $7500, otherwise the wise choice with more savings is to lease.

Putting all this together and looking at it from the other side:

• If you are not sure how long you will want to keep the car,
• Or you are not sure how much it is likely to be worth in three years,
• Or you can't take advantage of the full $7500 tax credit,
• Or your short term financial situation makes a lower monthly payment advisable,
• Then you may find the lease to be the wiser choice.

Ray

 

[IBELEAF]

However, if you intend to save money and keep the car for a long time then buying is the only wise choice here.

It's a wise choice to buy IF the buyer can receive the full $7500, otherwise the wise choice with more savings is to lease.

That's not true, I would've purchased the car even if I couldn't get the full $7500, it's still a lot of savings if you buy it and keep it for as long as possible. Leasing has never been about saving money...