Leaf - Lease vs Buy : A purely financial comparison

[evnow]

But what is they want 20k for the car after the lease?
...
That's a good question, I've never leased before, but do they give you a "price to buy at the end of the lease" amount when you sign the lease?

Yes, they have to give you the residual (or buy price) upfront. See the fed link I gave earlier - they have sample lease numbers. And any residual, let alone 20K, higher than what I've calculated would make buy better than lease.

ps : We are not talking about leases where they don't let you buy at the end (like Mini-E).

 

[IBELEAF]

my predictions are that Leaf will be a hot seller (in low quantities initially), so if you buy one early and have financial problems within first year you'll be able to sell it off without loosing money and possibly even make some. Where with lease you'll most definitely lose money.

 

[LEAFfan]

Buying a car and keeping it long terms always pays off, where with lease you'll be loosing money when you give the car back.

That is just a cliche - since you can buy the car at the end of the lease. Lease really is another way of financing the car.[/quote]

IBELEAF's rule of thumb holds true in general because when you lease you are forced into this pattern of getting a new car every three years... which is far costlier that buying a (good quality) car and keeping it for 10 or more years.[/quote]

I guess it all varies on each situation (residual value, depreciation, car costs etc...) but specific to Leaf and without doing any extensive number crunching I would say buying and keeping it long term is more cost effective then leasing it for 3 years... especially with battery warranty[/quote]

With all these lease vs. buy discussions, you seem to forget a 'minor' detail. Buying MAY be a better deal IF the person can take the full $7500 fed tax credit, BUT leasing is definitely a better deal otherwise.

 

[LEAFer]

With all these lease vs. buy discussions, you seem to forget a 'minor' detail. Buying MAY be a better deal IF the person can take the full $7500 fed tax credit, BUT leasing is definitely a better deal otherwise.

Good point ... it needs to be pointed out as a reminder that the analysis assumes that the BUYER does indeed have the ability to take full advantage of the $7,500 benefit (delayed until tax filing time), as opposed to losing all or a portion of the credit due to low taxable income.

 

[LTLFTcomposite]

my predictions are that Leaf will be a hot seller (in low quantities initially), so if you buy one early and have financial problems within first year you'll be able to sell it off without loosing money and possibly even make some. Where with lease you'll most definitely lose money.

The idea that you can buy any new car and sell it within the first year without taking a bath is putting a heck of a lot a faith in the market's sustained fascination with EV's that "it will be different this time". You're playing with matches there.

&susieorman on
If you aren't pretty darn secure in your financial position, you've got no business spending $25k for a new car, electric or otherwise.
&susieorman off

 

[LEAFfan]

my predictions are that Leaf will be a hot seller (in low quantities initially), so if you buy one early and have financial problems within first year you'll be able to sell it off without loosing money and possibly even make some. Where with lease you'll most definitely lose money.

Not necessarily...depends on the 'residual' price after the lease plus with leasing you are guaranteed the $7500 fed tax credit which reduces the monthly payment. So say the lease monthly payment (SL) is $400/mo. X 36 (first payment included with the $2000 down) which is $14,400 + $1600 = $16K after 3 years. The residual will definitely be less than $20K because Nissan has already collected the $7500 fed tax credit. How much less is anyone's guess, but it could be a great deal!

 

[evnow]

The idea that you can buy any new car and sell it within the first year without taking a bath is putting a heck of a lot a faith in the market's sustained fascination with EV's that "it will be different this time". You're playing with matches there.

I agree - unless the gas price goes through the roof, chances of not being able to easily get a new Leaf a year from now is low. May be 15 or 30 days wait, at most.

 

[planet4ever]

One factor you seem not to have accounted for, evnow, is the value of your own money. For starters, very few people will get their Leaf in December this year, so let's assume you buy, and get the car in Jan 2011. You will have to pay or finance the $7500 up front, and you probably won't get it back for at least 14 months. If you have that money in stocks or a 401k account, "borrowing" it from there could easily cost you as much as $500.

That part you may be able to get around by adjusting payroll deductions, but look at the monthly payments for the "Sell Off" cases. $349 vs. $723 means you are putting out $374 extra per month to buy. Without going into compounding calculations, you are going to be down an average of $6734 for the three years. There goes another $1000 or more earnings due to lost investment opportunities.

I think a more fair comparison would be to set the purchase loan up so the monthly payment matched the lease payment. To accomplish that you would probably have to go to an 84 month jumbo loan. So, for the "Sell Off" case, then sell the car at the end of three years and use what you get for it to pay off the loan.

By the way, I think you should also think of the residual as a "high book" value, and the price you could get selling the car as a "low book" value, so they shouldn't be the same.

 

[Gavin]

I've somewhat gone back and forth on this...but likely it will come down to this:

If I put in my order and come December the dealership tells me the car is in and ready to be picked up, I will buy it.

If the dealership calls me in january or feb or later (gah!), I will likely lease...especially if the terms let me buy the car at the end of the lease at a fair price.

Gavin

Mileage isn't a concern...I live and work in the city...and will still bike in the summer and such...I'll be surprised if I put 5k miles a year on it....so after 3 years my leaf will have been garage kept at home and work and have 15k or less miles...

 

[evnow]

That part you may be able to get around by adjusting payroll deductions, but look at the monthly payments for the "Sell Off" cases. $349 vs. $723 means you are putting out $374 extra per month to buy. Without going into compounding calculations, you are going to be down an average of $6734 for the three years. There goes another $1000 or more earnings due to lost investment opportunities.

Fair point.

I actually have fairly complex calculations on these in my sheet - but decided to use simple ones here. For eg., take all your future cash flows because of the car and get the NPV of the cash flow. That would be one way to compare.

 

[LEAFer]

Mileage isn't a concern...I live and work in the city...and will still bike in the summer and such...I'll be surprised if I put 5k miles a year on it....so after 3 years my leaf will have been garage kept at home and work and have 15k or less miles...

In that case, and if you decide to lease, DEFINITELY haggle with the dealer for a lower annual mileage and thus lower depreciation and thus lower monthly lease payment.

 

[evnow]

Time to revisit. Buying is better by some $750 compared to leasing, in case you want to buy the car after lease.

If you want to sell off after 3 years, lease & release would be $1,700 worse than buy & sell. Ofcourse, in this case we are assuming you can sell the car for the same price as the residual ....

 

[lne937s]

Time to revisit. Buying is better by some $750 compared to leasing, in case you want to buy the car after lease.

If you want to sell off after 3 years, lease & release would be $1,700 worse than buy & sell. Ofcourse, in this case we are assuming you can sell the car for the same price as the residual ....

Just did a quick interest calculation, if you financed $20,000 (approx price after discounts, California rebate and Federal credits, and ~$1650 down) with a 6% loan comes to ~$1900 in interest payments over a 36 month loan.... so if you are financing, then the lease may end up being a better deal (depending on the interest rate you can get).

http://autos.msn.com/loancalc/newloan.aspx

 

[evnow]

Just did a quick interest calculation, if you financed $20,000 (approx price after discounts, California rebate and Federal credits, and ~$1650 down) with a 6% loan comes to ~$1900 in interest payments over a 36 month loan.... so if you are financing, then the lease may end up being a better deal (depending on the interest rate you can get).

http://autos.msn.com/loancalc/newloan.aspx

See the first post - the calculation I do is not so simplistic.

 

[JPC2822]

Thank you all for your comments and input. Buying versus Leasing the LEAF has become a big choice for me.
I wanted to ask all your thoughts on which will be my issue. I live in Los Angeles- my order month is September and I assume I will not get my LEAF until January 2011. If I can only afford a smaller down payment like $1,000 or $1,500 max which is better- Buying or Leasing? I am able to afford a higher monthly payment like $700 or $800 but of course I would like a small monthly payment.

Thank you for your thoughts! You all are great!

 

[evnow]

If I can only afford a smaller down payment like $1,000 or $1,500 max which is better- Buying or Leasing? I am able to afford a higher monthly payment like $700 or $800 but of course I would like a small monthly payment.

Little confused. You can't afford even 3 months of payments as downpayment ? Are you paying a large monthly payment now that will get replaced with the Leaf payment ?

Anyway, as for lease vs buy, are you planning to buy back the car after 3 years ?

Lease is attractive mostly for non-financial reasons ... if want to get a new car in 3 years, when you will have more options, possibly better range etc.

 

[LEAFfan]

Time to revisit. Buying is better by some $750 compared to leasing, in case you want to buy the car after lease.

If you want to sell off after 3 years, lease & release would be $1,700 worse than buy & sell. Ofcourse, in this case we are assuming you can sell the car for the same price as the residual ....

Buying is better IF the person can receive the full $7500 fed tax credit. THAT'S a huge factor.

 

[Boomer23]

If you want to sell off after 3 years, lease & release would be $1,700 worse than buy & sell. Ofcourse, in this case we are assuming you can sell the car for the same price as the residual ....

I don't know how anyone, including Nissan, can think that they know what the resale value will be of a first generation Leaf three years from January. There is no track record for such a car. All of us are enthusiastic about EVs and excited about the Leaf, so there is a tendency to think that this is a hot product for many people and there is a ready market of resale buyers. Maybe not so.

Since there is no track record for this car in real world use, we have no idea if there will be issues with it. And we can be sure that if there are, they will be widely publicized in the press. If there are more than a few negative reports, early production defects, photos of careless owners stuck by the side of the road due to forgetting to charge or not understanding the range limitations, etc, public opinion will affect the resale value in the same way that public opinion of Toyota has dropped. It won't matter that public opinion will be based on inadequate or incorrect information.

We already know that the battery range will be reduced by 20% to 30% after three years of charging, and more if L3 charging is frequently applied. Will resale buyers be satisfied with a range of 70 miles under optimum conditions?

For knowledgeable EV enthusiasts, the 3.3 kW L2 charger and a possible lack of L3 charging on early models may also be deterrents to buy a used first generation Leaf.

I'm not willing to rely on an estimate of this car's resale value to compare a lease with a buy/sell scenario.

And lastly, in California, we pay the full sales tax on a purchase, but only the tax on a portion of the lease payment. That adds over $1,000 to the cost of the buy/sell scenario.

I'm leasing.