Can you double check my math? - Lease or Buy in Colorado

[eatsleafsandshoots]

So I think I've decided on going with a 2013 Leaf SV (no further options besides floor mats). The one thing that I can't decide is whether to lease or buy, given the tax situation in Colorado that gives a much bigger credit to buyers rather than lessees.

A dealer up here has quoted me $223/mo with $1,999 due at signing via email. I'm assuming this isn't with the state tax credit rolled in - though as I type this, now I realize it may be rolled in after all. If it isn't, the state tax credit should be roughly $2,000, enough to pay for my signing amount, and I'll be on the road for nothing but $223/mo+tax.

Then there's the buying option. The vehicle I'm looking at costs roughly $32,000, plus tax. Minus the federal $7,500 credit, that comes to $24,500. My calculations give me a ~$5,800 tax credit in this scenario, bringing the purchase price down to $18,700. Assuming the Leaf maintains 35% of its value ($32,000 * .35 = $11,200) in 3 years, the payment should be an effective $208/mo. If I decide to keep the vehicle for longer, then buying becomes even cheaper, in a relative sense.

Have I worked this out correctly? I know everyone says to lease a Leaf, but it seems like Colorado is willing to pick up the tab for the money that would have been saved. Plus, with the 8 year warranty on the Leaf battery, even if it's at 70% in 8 years the car will still probably be worth a few thousand bucks.

 

[RonDawg]

I can't help you with how the state rebates are figured in. But, as far as the warranty, the 8 year warranty is for defects only. Battery capacity degradation is specifically excluded from that warranty, and is covered by a separate warranty good for 5 years/60k miles.

 

[WMTribe90]

I live in Colorado and applied similar logic to purchase a S Leaf in April of this year. Like you said, if you are committed to long term ownership (6 - 8 yrs) and can meet your needs with 70 percent battery capacity, then I think buying is a good option.

By my math, my purchase price of 30,000 will drop to roughly $17,000 after state and federal tax credits. Then factor in a modest $1,000/yr in fuel savings and after seven years, I'm into the car for less than $10,000. So, even if the car is only worth a couple thousand at that point and a cheap battery replacement isn't an option, I figured I basically paid $1,200/ yr to own/drive the car over that time.

Form the record, I'm averaging 5 mile/kWh and have an effective range (mixed hwy and city) close to 100 miles. So, the performance has exceeded my expectations and the EPA estimated range.

 

[avalanch00]

Can I ask which dealership? I've e-mailed every dealer around me, and haven't gotten that good of deal. Is it 24 months?

 

[goaliepride]

So I think I've decided on going with a 2013 Leaf SV (no further options besides floor mats). The one thing that I can't decide is whether to lease or buy, given the tax situation in Colorado that gives a much bigger credit to buyers rather than lessees.

A dealer up here has quoted me $223/mo with $1,999 due at signing via email. I'm assuming this isn't with the state tax credit rolled in - though as I type this, now I realize it may be rolled in after all. If it isn't, the state tax credit should be roughly $2,000, enough to pay for my signing amount, and I'll be on the road for nothing but $223/mo+tax.

Then there's the buying option. The vehicle I'm looking at costs roughly $32,000, plus tax. Minus the federal $7,500 credit, that comes to $24,500. My calculations give me a ~$5,800 tax credit in this scenario, bringing the purchase price down to $18,700. Assuming the Leaf maintains 35% of its value ($32,000 * .35 = $11,200) in 3 years, the payment should be an effective $208/mo. If I decide to keep the vehicle for longer, then buying becomes even cheaper, in a relative sense.

Have I worked this out correctly? I know everyone says to lease a Leaf, but it seems like Colorado is willing to pick up the tab for the money that would have been saved. Plus, with the 8 year warranty on the Leaf battery, even if it's at 70% in 8 years the car will still probably be worth a few thousand bucks.

Other important math:
Electricity Installation: Seems to me about $500-$1000 depending on permits/house-config
L2 Charger: About $800-$1000. You can do other things (EVSEUpgrade, but that's 20amp, not 30amp).
tax on the purchase price before rebates: So they give you rebates, in CA that's 10k, but I still had to pay tax on the 10k while purchasing, so about $800. 10k-$800 = 9.2k, the true value of a 10k rebate.

Time: You now plug in daily/every-other

Fuel: Figure out your electricity rate, and what it'll cost to go the miles you will drive, compare it to gas, do that over the life of the car. HUGE savings there. The assumed number for 100 miles is about 34kWh, or 100,000 for 34,000 kWh. I pay about 12c per kWh, 100,000 miles = $4,080. Current CA gas price is about 3.80, For a 50mpg car (ideal) it's run on 2000 gallons, or $7600 (Savings= $3520). For a 25mpg car that's 15,200 (Savings = $11,120). This is assuming gas increases will keep pace with elec increases, more or less. I think it's been shown (no citation to give) that elec increases are a lot slower than gas increases.

Check truecar.com, edmunds.com, kbb.com, and see what a fair purchase price is for your car BEFORE going in. I also used autonationdirect.com to price a car without add-ons, and used it as my reference for getting the price I wanted. That site had an SV w/charge& headlights for 31.8k (-10k in rebates), which I used to get that same price on a car with that + protection pkg, floor mats, mud flaps, etc. I bought mine, but 75% of leaf owners do not. I think this is generally due to "oh crap what if the 200 mile leaf comes out in 3-4 years". It's a valid concern, but for what I use mine for this years model is fine. I will be sad when the 200+ leaf comes out (whenever that is).

 

[eatsleafsandshoots]

I'm only going to be charging L1 at home since it's a rental. My commute is about 10 miles round trip, we have a second car, and the garage I park at usually has a free L2 charger available. Optimal? No, but I think it will work for our needs.

Thanks for the clarification about the battery warranty. It's not as great as I thought, but should still be pretty good considering my mileage will likely be limited.

I'm eligible for the Nissan VPP through my work, so the $32,090 SV should end up costing around ~$30,500 after all. Bonus! Apparently I should be able to negotiate this through TrueCar as well, but I'd rather go through VPP than TrueCar if all's the same since it's easier to go to a Nissan site and point at a car, saying "see, Nissan says you should charge me this much".

Thank you for all the responses about leasing vs. buying. I understand that buying will always make more sense for those that are willing to commit to their cars. The odd thing about the Colorado situation is that, even if you're only looking to keep the vehicle for three years, it's actually LESS expensive to buy by my math due to the increased tax credit. Has anyone else encountered this? Obviously this doesn't happen on nearly any other car for sale due to the odd tax situation with the Leaf.

 

[cgaydos]

So I think I've decided on going with a 2013 Leaf SV (no further options besides floor mats). The one thing that I can't decide is whether to lease or buy, given the tax situation in Colorado that gives a much bigger credit to buyers rather than lessees.

A dealer up here has quoted me $223/mo with $1,999 due at signing via email. I'm assuming this isn't with the state tax credit rolled in - though as I type this, now I realize it may be rolled in after all. If it isn't, the state tax credit should be roughly $2,000, enough to pay for my signing amount, and I'll be on the road for nothing but $223/mo+tax.

Then there's the buying option. The vehicle I'm looking at costs roughly $32,000, plus tax. Minus the federal $7,500 credit, that comes to $24,500. My calculations give me a ~$5,800 tax credit in this scenario, bringing the purchase price down to $18,700. Assuming the Leaf maintains 35% of its value ($32,000 * .35 = $11,200) in 3 years, the payment should be an effective $208/mo. If I decide to keep the vehicle for longer, then buying becomes even cheaper, in a relative sense.

Have I worked this out correctly? I know everyone says to lease a Leaf, but it seems like Colorado is willing to pick up the tab for the money that would have been saved. Plus, with the 8 year warranty on the Leaf battery, even if it's at 70% in 8 years the car will still probably be worth a few thousand bucks.

Buying:

Starting with the $5,800 you calculate for the Colorado tax credit for purchasing: I and others have read tax publication 67 and we believe that this limits you to claiming a credit for the MSRP of the base model - the S in this case. So the tax credit comes to about $5100.

Now, factor in that you won't get the tax credit dollars until you file your 2013 taxes next year and get your return. (You can recover some of it over time by reducing your withholding.) Thus you'll need to have the cash upfront if you buy.

Also note that the Federal tax credit is "up to $7500". You have to actually owe that much in taxes on your 1040/1040A for you to get all of the credit. This is not true of the state credit - you get all of it regardless when you file the tax return.

Another factor is that if you claim the federal credit the $7500 is not subject to AMT but it does affect your other deductions and credits which are subject to AMT. As an example, for 99.99% of people you won't be able to claim the $7500 EV credit and the 30% EVSE credit in the same year - the EVSE credit will get wiped out by the AMT adjustment.

Leasing:

The federal tax credit is incorporated into your lease but the state credit is not. As I posted on another threat, for LEAFs leased in tax year 2013 you can use either the old or new methods of calculating your tax credit - the old method is almost certain to be higher for you. It may be as high as $2k as you suggest - it depends on what the lease lists as the car value and the residual value. As with the purchase you'll get that credit when you file your 2013 state taxes.

If you lease you don't bother with claiming the $7500 federal credit. This means you get the value of the credit immediately in terms of lower payments. It also means that you don't have the AMT situation described above - you will probably be able (depending on your tax situation) to claim all of the 30% credit for a home EVSE.

Conclusion:

The lease is simpler in terms of tax credits but that by itself doesn't make it a better deal. I have one leased LEAF and one purchased LEAF - both deals were unusually good at the time but neither option is superior.

Points in favor of leasing: I find it a pain that I don't get the tax credits back on the purchased one until I file taxes next year - but if you are purchasing now (near the end of the year) it's less of a problem. There is also less risk of you are concerned about whether the LEAF will be right for you or about battery degradation (although that isn't a major factor in Colorado). If you like getting a new car every 2-3 years a lease makes sense - especially if you are willing to stay in the Nissan-Infiniti family as manufacturers tend to offer big incentives at lease end for new leases.

Points in favor of buying: the mileage limit can surprise some people. This is especially true on LEAFs since a lot of us plan on driving X miles/month, then after we get it find that we use it a lot more often because it is so cool and cheap to drive. Part of why we got the second LEAF is that we were way over the 15k mile/year pace on our lease. And while the end of the lease is fun for some people as they get to move into a new car, for others it is a big annoyance. There is a time limit and you have to stop whatever you are doing and make arrangements for a replacement car, and if you choose not to go with the same manufacturer you may experience lease-end hassles over charges regarding the condition of the car, etc. Buying out the lease may be an option if your residual value is reasonable - mine is much higher than the market price of used LEAFs and the manufacturers for whatever reason aren't flexible on residuals so although I'd actually like to buy my car at lease end I almost certainly will not.

 

[eatsleafsandshoots]

cgaydos - THANK YOU so much for that comprehensive post. Knowing the power of this community is at my back makes me a lot more comfortable about my decision.

It sounds like, given the below assumptions:

-I'm fortunate to earn enough to pay over $7,500 in federal income tax. I also am a very simple tax situation as a single guy that rents his house, so that sounds like it helps the situation. I also don't plan to claim an EVSE credit as my landlord won't install 220/240v to my garage.
-I'm OK with delaying the tax credits for a few months, as I plan to file in January.
-I just might drive over 12,000mi/yr, but probably won't.
-But, the hassle of getting a new lease/car isn't a big deal to me.
-As you mentioned - I live and plan to live in a climate where thermal battery degradation will be minimal-to-moderate.

I should probably buy, right?

 

[cgaydos]

cgaydos - THANK YOU so much for that comprehensive post. Knowing the power of this community is at my back makes me a lot more comfortable about my decision.

It sounds like, given the below assumptions:

-I'm fortunate to earn enough to pay over $7,500 in federal income tax. I also am a very simple tax situation as a single guy that rents his house, so that sounds like it helps the situation. I also don't plan to claim an EVSE credit as my landlord won't install 220/240v to my garage.
-I'm OK with delaying the tax credits for a few months, as I plan to file in January.
-I just might drive over 12,000mi/yr, but probably won't.
-But, the hassle of getting a new lease/car isn't a big deal to me.
-As you mentioned - I live and plan to live in a climate where thermal battery degradation will be minimal-to-moderate.

I should probably buy, right?

Well, you don't appear to be affected by any of the downsides of buying so I can see buying making sense for you. Also, although I haven't been following the market closely it doesn't sound like leases are getting incredible subsidies like they were last November-December - that's why I leased then (at the time there was a big glut of LEAFs at dealerships - certainly not the case now). Finally, with over $3k MORE of a state tax credit for a purchase than a lease it's hard to make the math work in favor of the lease.

One additional note: whether buying or leasing there is a risk that the dealer will try to add stuff on to the agreed price when you show up at their dealership. As leases are more complex you have to be more watchful with the lease. I recommend starting with email with dealers, as you did, then have them email you a scan of the sales or lease contract just before you go in to head this off.

Oh, and I strongly suggest sticking with the SV decision because of the heat pump. The heater in the 2011/2012 and in the 2013 S model really robs the car of range when it gets cold, as I was reminded again last night returning home with the outside temp at 26F.

 

[smkettner]

Forget the math, lease it.

 

[dgpcolorado]

...-As you mentioned - I live and plan to live in a climate where thermal battery degradation will be minimal-to-moderate.

I should probably buy, right?

Battery degradation seems to be happening fairly quickly even in moderate climates. I'm down about 12% in 22 months (13,750 miles) for example. And I may live in a cooler area than you do (I'm at 7670 feet).

 

[eatsleafsandshoots]

Forget the math, lease it.

Why do you say that? Do you think the residual value will be even lower than 35% at 3 years? Or that the battery will be worthless after 3-5 years?

 

[smkettner]

You will probably want/need a new battery in three years. I want a new battery and more range now at 2.5 years and 40k miles in semi coastal So Cal.
Even with the extra rebate you cannot currently buy a battery so you are looking at trading cars to get a new battery.
IMO better to wait and see what battery improvements are in place in three years and purchase then.
It might be close either way as to value so I would lean toward having an easy exit plan.
But I understand if you only get state credit for buying.... not near as bad a deal as many of us.
The car will depreciate from your net cost.... not the list price.

 

[Viktor]

Lease it - and treat yourself with upcoming Tesla C by the end of your lease. U can thank me later ))

 

[goaliepride]

You will probably want/need a new battery in three years. I want a new battery and more range now at 2.5 years and 40k miles in semi coastal So Cal.
Even with the extra rebate you cannot currently buy a battery so you are looking at trading cars to get a new battery.
IMO better to wait and see what battery improvements are in place in three years and purchase then.
It might be close either way as to value so I would lean toward having an easy exit plan.
But I understand if you only get state credit for buying.... not near as bad a deal as many of us.
The car will depreciate from your net cost.... not the list price.

You live in CO. In Denver (example), you're predicted to have about 87% of your battery capacity left, 83% in five, 73.6% in ten. (http://www.mynissanleaf.com/wiki/index.php?title=Battery_Capacity_Loss" onclick="window.open(this.href);return false. So "want/need a new battery in 3" sounds like a bit much.

"looking at trading cars to get a new battery" is wrong, Nissan released their battery replacement idea. They're saying WHEN you want to swap it, you can get one for $100/month. I'm not sure it's for a new one or what, but that said who knows if they'll keep to that when your need arises. It's not a wonderful replacement idea, but, they do have one.

As for the "wait three years" thing. I mean there is some validity, technology changes pace pretty quickly. I think of it like a video game system. I often am like "oooh PS3's are getting cheap, I should get one! Oh but the new version must be coming out soon, so best to wait. Oh the new one is out, but it's hugely expensive! Ah I'll wait until something better and cheaper comes out..." See the pattern? At some point you have to just jump, for me that was this year, for a lot of people they'll lease and hypothesize about future technologies (200-300 mile batteries in economy electric cars) and future prices (25-35k).

 

[RonDawg]

You live in CO. In Denver (example), you're predicted to have about 87% of your battery capacity left, 83% in five, 73.6% in ten. (http://www.mynissanleaf.com/wiki/index.php?title=Battery_Capacity_Loss" onclick="window.open(this.href);return false. So "want/need a new battery in 3" sounds a bit much.

Plus, even when capacity does drop to 70%, that is not necessarily "end of life" as Nissan claims. That's still about 50 miles or so of range if you go by the EPA's estimate. For many Leafers that is still sufficient for their daily commute needs.

It's not like the battery suddenly self-destructs the moment it loses that 4th bar.

 

[dgpcolorado]

You live in CO. In Denver (example), you're predicted to have about 87% of your battery capacity left, 83% in five, 73.6% in ten. (http://www.mynissanleaf.com/wiki/index.php?title=Battery_Capacity_Loss" onclick="window.open(this.href);return false. So "want/need a new battery in 3" sounds like a bit much...

Is that the old model or Stoaty's new one? Those numbers are optimistic in my experience. I'm at 58.68 Ah in 22 months, down about 11.4% of the often presumed 66.25 Ah starting capacity. I'll be well below 87% long before three years. And I am in a much cooler climate than Denver and also a low mileage driver, so not a lot of cycles. On the other side, I do a lot of steep hills and high kW climbing and regen, which is not usually the case for Denver metro area drivers unless they live in the foothills and commute down.

Furthermore, my impression from my own experience and reports from others is that the capacity degradation is a lot closer to linear than the model suggests. If it is linear, I could be looking at 81% in three years and 69% in five years. I suppose the real numbers could be somewhere in between linear and the slowing rate predicted by the model, but that remains to be seen.

The the 2013 battery might be longer lasting than the 2011/2012 version; if so that would change things. But if the 2013 battery tracks the 2011/2012 batteries, 87% at three years and 83% at five years in Denver does not seem credible to me.

 

[goaliepride]

It was current as of my posting date, but appears to have changed to the downwards huh?