sjfotos
Well-known member
I copy below the best recent posting I found on the topic of leasing. The poster is WK4P over at the GM Volt forum. I also posted the forum reference below as well. Might be helpful as you make decisions.
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As one who spent 18 years as a finance manager in a GM dealership maybe I can clear up a couple of things about Nissan’s Leaf lease, and leasing myths in general.
First, unless the lease is an open end lease, which is seriously doubt, then the customer will NOT be responsible for any variation in actual depreciation vs. residual value. In a closed end lease, which the vast majority (>98%) of all leases are, the leasing company (NMaC) will set the residual and be on the hook for any actual variation in value at lease end. It’s actually a great deal for the consumer, especially for a vehicle whose depreciation is questionable. The advantage for the customer is if the Leaf’s end of lease value in 3 years is less they simply hand over the keys and walk away, if it’s more than Nissan a smart customer can buy the vehicle at the end of the lease for the predetermined price and could actually pay a lower lease payment AND end up with equity at the end of 3 years. I’ve seen it happen folks.
Secondly since the term of the lease is less than a typical finance contract (36 months vs 60 or 72 months), the $7500 tax credit/rebate will have roughly twice the effect on the lease payment that it would a purchase payment. 7500 divided by 36 means a $208/month reduction in the depreciation part of the payment, whereas in a 60 month purchase the principal part of the payment would only be reduced by $125/month and only $104/month over a 72 month term. BTW, either way you look at it the tax credit/rebate is going to the person leasing the car in the form of a reduced payment spread out over 3 years. Nissan is just the middle man in the process.
Thirdly, the payment is most likely based on what is known as an “ultra low mileage lease”, probably 10,000 miles/year. I wouldn’t be surprised if the per mile charge after 30k miles is upwards of $.20/mile. Of course most people will be hard pressed to put over 10,000 miles/year on a car they can’t drive over 80-100 miles in any one day, no long road trips here. With the Volt we can put unlimited daily mileage on the car, thus an ultra low lease may not be quite as attractive.
Besides the residual factor we also don’t know what the lease’s money factor (often incorrectly called APR) will be. The money factor also plays a bigger role in a lease, as it is multiplied by both the capitalized cost and the residual to get the monthly finance charge. If Nissan tweaks the money factor a bit it can make a large difference in the lease payment.
Personally I feel a lease on a gen 1 new technology car, be it a Leaf, Volt, or whatever, would be a great idea, as long as you can stay within the mileage limits of the contract. The leasing company will take all the risks in depreciation, not the consumer. Remember, you can negotiate those mileage limits. If the advertised lease calls for 10,000 mpy and you need 15,000 simply have the dealer change the contract mileage. It will cost you more per month, but you won’t be stuck with a huge mileage charge at lease end, and you can buy the car at a cheaper price at lease end if you choose to do so.
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Taken from:
http://gm-volt.com/2010/04/08/how-nissan-can-lease-the-leaf-ev-for-349-per-month/
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As one who spent 18 years as a finance manager in a GM dealership maybe I can clear up a couple of things about Nissan’s Leaf lease, and leasing myths in general.
First, unless the lease is an open end lease, which is seriously doubt, then the customer will NOT be responsible for any variation in actual depreciation vs. residual value. In a closed end lease, which the vast majority (>98%) of all leases are, the leasing company (NMaC) will set the residual and be on the hook for any actual variation in value at lease end. It’s actually a great deal for the consumer, especially for a vehicle whose depreciation is questionable. The advantage for the customer is if the Leaf’s end of lease value in 3 years is less they simply hand over the keys and walk away, if it’s more than Nissan a smart customer can buy the vehicle at the end of the lease for the predetermined price and could actually pay a lower lease payment AND end up with equity at the end of 3 years. I’ve seen it happen folks.
Secondly since the term of the lease is less than a typical finance contract (36 months vs 60 or 72 months), the $7500 tax credit/rebate will have roughly twice the effect on the lease payment that it would a purchase payment. 7500 divided by 36 means a $208/month reduction in the depreciation part of the payment, whereas in a 60 month purchase the principal part of the payment would only be reduced by $125/month and only $104/month over a 72 month term. BTW, either way you look at it the tax credit/rebate is going to the person leasing the car in the form of a reduced payment spread out over 3 years. Nissan is just the middle man in the process.
Thirdly, the payment is most likely based on what is known as an “ultra low mileage lease”, probably 10,000 miles/year. I wouldn’t be surprised if the per mile charge after 30k miles is upwards of $.20/mile. Of course most people will be hard pressed to put over 10,000 miles/year on a car they can’t drive over 80-100 miles in any one day, no long road trips here. With the Volt we can put unlimited daily mileage on the car, thus an ultra low lease may not be quite as attractive.
Besides the residual factor we also don’t know what the lease’s money factor (often incorrectly called APR) will be. The money factor also plays a bigger role in a lease, as it is multiplied by both the capitalized cost and the residual to get the monthly finance charge. If Nissan tweaks the money factor a bit it can make a large difference in the lease payment.
Personally I feel a lease on a gen 1 new technology car, be it a Leaf, Volt, or whatever, would be a great idea, as long as you can stay within the mileage limits of the contract. The leasing company will take all the risks in depreciation, not the consumer. Remember, you can negotiate those mileage limits. If the advertised lease calls for 10,000 mpy and you need 15,000 simply have the dealer change the contract mileage. It will cost you more per month, but you won’t be stuck with a huge mileage charge at lease end, and you can buy the car at a cheaper price at lease end if you choose to do so.
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Taken from:
http://gm-volt.com/2010/04/08/how-nissan-can-lease-the-leaf-ev-for-349-per-month/