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Leasing: mileage vs residual

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TahoeMichael

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I'm considering leasing my soon-to-be-delivered GGT. My SA gave me these residual values over the weekend:
  • 36 months / 10K miles: $67,378.50
  • 36 months / 15K miles: $64,601.25
  • 48 months / 10K miles: $54,373.73
  • 48 months / 15K miles: $50,666.70

My average annual mileage over the last 7 years is ~16,500/year, but I'm about to make some big changes that could change my typical mileage unpredictably. So I'm trying to think about the pros/cons of different mileage allowances in the lease. I see that the residual value change per mile for the 3 year lease is 18.515¢/mile, while the the 4 year lease is 18.535¢/mile. So basically the same. As the mileage overage charge is 25¢/mile, the "break even" point for driving past the allowance on the 10K lease is ~3700 extra miles a year. As the residual value decrease of going up to 15K mileage is a bit less than $1000/year (pretty nominal cost considering the overall vehicle expense), it seems pretty clear to me that the 15K lease is a better choice for me.

But, I've never actually leased a car before, and so this is my first attempt at thinking it through. I'm curious whether the more experienced leasers here might reason about mileage selection in a different way?
 
I've leased lots of cars, usually its a good idea to get close to your intended mileage. Having said that, you can only buy more miles, you cannot refund unused miles.
 
TahoeMichael said:
I'm considering leasing my soon-to-be-delivered GGT. My SA gave me these residual values over the weekend:
  • 36 months / 10K miles: $67,378.50
  • 36 months / 15K miles: $64,601.25
  • 48 months / 10K miles: $54,373.73
  • 48 months / 15K miles: $50,666.70

My average annual mileage over the last 7 years is ~16,500/year, but I'm about to make some big changes that could change my typical mileage unpredictably. So I'm trying to think about the pros/cons of different mileage allowances in the lease. I see that the residual value change per mile for the 3 year lease is 18.515¢/mile, while the the 4 year lease is 18.535¢/mile. So basically the same. As the mileage overage charge is 25¢/mile, the "break even" point for driving past the allowance on the 10K lease is ~3700 extra miles a year. As the residual value decrease of going up to 15K mileage is a bit less than $1000/year (pretty nominal cost considering the overall vehicle expense), it seems pretty clear to me that the 15K lease is a better choice for me.

But, I've never actually leased a car before, and so this is my first attempt at thinking it through. I'm curious whether the more experienced leasers here might reason about mileage selection in a different way?
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I didn't know the residual would go down with the mileage. That'd make sense.
I haven't leased before either, but I agree with the choice for 15K
What is the money factor the SA gave you?
 
Definitely target the number of miles you think you'll need. Anything that you don't use, you're out that value. Can always either buy more, or turn in early (if necessary). Part of the reason why leases don't make sense if you don't drive a lot (say 5-6k miles per year) or drive an amount above typical leases (more than 15k per year). If you're somewhere in the middle, there are a number of personal factors that each person needs to evaluate. Has been addressed on other threads.

Your residual will definitely go down with more miles, since your monthly payment will be higher. You're paying for the miles, whether you use them or not.
 
EVCar said:
I didn't know the residual would go down with the mileage. That'd make sense.
I haven't leased before either, but I agree with the choice for 15K
What is the money factor the SA gave you?
Click to expand...
The didn't provide a money factor. But if I'm doing the calculation correctly, for the 15K lease, it's 0.00253 for 36 months and 0.00313 for 48 months. Not so good, as I think that's 6.07% and 7.52% equivalent. The main reason I wouldn't take the attractive finance rate instead is to protect myself against Lucid failing to launch the mid-market vehicle successfully, and going under.
 
If I consider the $7500 incentive to be a interest rate incentive instead of a purchase price incentive, it's a net increase of $6505 in the net capitalized cost (7500 - 995 "acquisition fee"), and that lowers the effective 4 year interest rate to 5.34%. Better, but still a far cry from the 2.99% Lucid is offer for a conventional auto loan.
 
TahoeMichael said:
The didn't provide a money factor. But if I'm doing the calculation correctly, for the 15K lease, it's 0.00253 for 36 months and 0.00313 for 48 months. Not so good, as I think that's 6.07% and 7.52% equivalent. The main reason I wouldn't take the attractive finance rate instead is to protect myself against Lucid failing to launch the mid-market vehicle successfully, and going under.
Click to expand...
You should go back and ask them for it. Ultimately, the money factor is impacted by your credit score (among other factors), but my money factor was 0.00227 for 36 months. Took delivery about 2.5 weeks ago.
 
TahoeMichael said:
If I consider the $7500 incentive to be a interest rate incentive instead of a purchase price incentive, it's a net increase of $6505 in the net capitalized cost (7500 - 995 "acquisition fee"), and that lowers the effective 4 year interest rate to 5.34%. Better, but still a far cry from the 2.99% Lucid is offer for a conventional auto loan.
Click to expand...
My SA told me that Lucid lowered the finance rate to 1.99% today which looks even better compared to leasing.
 
Adnillien said:
My SA told me that Lucid lowered the finance rate to 1.99% today which looks even better compared to leasing.
Click to expand...
Wow, that makes it harder to think about leasing instead of a purchase. I normally buy my cars. The only reason I'm thinking about leasing is to hedge against Lucid still being a startup with a fair bit of corporate risk to face. But it's hard to figure out what some insurance against that risk is worth.
 
Yep, my SA also told me about the 1.99% interest vs. current money factor of 0.00235, APR 5.64%.
Application needs to be submitted by the end of the month.
 
TahoeMichael said:
I'm considering leasing my soon-to-be-delivered GGT. My SA gave me these residual values over the weekend:
  • 36 months / 10K miles: $67,378.50
  • 36 months / 15K miles: $64,601.25
  • 48 months / 10K miles: $54,373.73
  • 48 months / 15K miles: $50,666.70

My average annual mileage over the last 7 years is ~16,500/year, but I'm about to make some big changes that could change my typical mileage unpredictably. So I'm trying to think about the pros/cons of different mileage allowances in the lease. I see that the residual value change per mile for the 3 year lease is 18.515¢/mile, while the the 4 year lease is 18.535¢/mile. So basically the same. As the mileage overage charge is 25¢/mile, the "break even" point for driving past the allowance on the 10K lease is ~3700 extra miles a year. As the residual value decrease of going up to 15K mileage is a bit less than $1000/year (pretty nominal cost considering the overall vehicle expense), it seems pretty clear to me that the 15K lease is a better choice for me.

But, I've never actually leased a car before, and so this is my first attempt at thinking it through. I'm curious whether the more experienced leasers here might reason about mileage selection in a different way?
Click to expand...

So if we take the base case that you drive 10k miles each year and your lease is 10k miles each year, for a 36 month lease.
Someone please check my math...

If you drive 10k miles each year on a 15k mile lease then you will end up paying about $2800 extra.
If you drive 15k miles on a 10k mile lease then you end up paying an extra $3750 at the end.
If you drive 15k miles on a 15k mile lease then you are back to paying about $2800 extra.

So if you end up driving 10k miles then you save $2800 by only doing a 10k lease.
If you end up driving 15k miles then you only save $950 by doing a 15k lease.

So if you are 50/50 as to whether you will use 10k miles or 15k miles then a 10k lease is much cheaper... and of course if you end up using 12.5k miles then as you mention the 10k lease is cheaper.

For the finance question... I'm rather interested as to how cheap the financing can get things as I don't like leasing in general. However if Lucid ever goes Fisker then I'd rather have the option to dispose the car after 3 years (effectively) for $67k. i.e. if you finance and the value drops then you lose, but with leasing you at least have the option to hand it back.
 
Impossible to rely on calculations to determine your comfort but it can help rationalize comfort. I leased my air because of very favorable rates and the [false] assumption that the company could be like Fisker.

Now we have an expensive lease. So insuring value collapse is most of the benefit of a lease. My experience with a model S was it lost 20-25% of value in first three months another lost >50% in 4.5 years ( both low mileage and great condition).

Now I believe Lucid vehicles are so good and made in company owned factories it with same or other owners will survive.

So can some business mathematician calculate the cost difference between a lease cost for four years (as specified in this thread vs the finance costs at 1.99%?)

I know it is an approximation but it could help.

My very simplistic approximation is just a wild guess But in any event I guess the spend against total loss of say 60k is about 10k.

For me what is the cost of the bother involved in selling the car. ( only complicated by the crappy end of lease stories still reported).
 
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