Finance vs. Lease

[Rolandphx]

Here are the numbers:

Car cost for lease before taxes: $142,995
Lease: 48 months, 15k miles, zero down, monthly payment $2,245, equals total payment of $107,760

Car cost for purchase before taxes: $142,000
Finance: 48 months, zero down (for comparison sake), interest 3.89%, payment $3,199; equals total payment of $153,552

The way I see it after 4 years if the car's residual value is more than $36,035 ($142,995 - $107,760), and the buyout amount (per lease agreement) is under about $65k, it makes sense to lease just to make sure the technology does not drop the value to zero (relatively speaking). Otherwise, it makes sense to buy.
The tax credit is given to buyers, not to leasors. Considering the $7,500 tax credit, it only makes sense to lease if we think the residual value of the car will be under $28k. And, since Lucid GT new now sells for closer to $160k, that is unlikely.

The research that I have done, shows that a typical Tesla depreciation of between 30-40% in the first 4 years. Some of the articles/reports that I read online indicate to expect a 50% depreciation of EVs in the first 4 years. Mercedes S class depreciates by about 55% in the first 4 years. So I expect the residual value of Lucid GT to be between $112,000 and $80,000 in 4 years.

I asked Lucid Finance about the residual value/buyout price but did not get an answer yet.

What do you guys think? Am I considering all the factors? Do my calculations make sense?
Buy or Lease?

 

[Tesla2.0]

If you have a LLC, lease via LLC can write off as business expenses is plus.

If you purchase for personal use, you are not stipulated 15k miles allowance in case you love to ride a lot.

It all depends on what suits your personal situation.

 

[whywar]

There are other threads on this topic

GT lease was 1998 including the 7500 credit as a cap cost reduction. That was in June and rates may have changed. Lucid passes the credit back to the customer.
Also reduce your payments in the loan example by the amount of the credit.
Report

 

[tkhan456]

I’m really torn. Especially leasing through my llc, it makes sense to lease but back in the day, I lease a Model S when they were new and I hated the car fairly quickly. I wanted out but was stuck for 3 years

 

[Ksa23]

I’m really torn. Especially leasing through my llc, it makes sense to lease but back in the day, I lease a Model S when they were new and I hated the car fairly quickly. I wanted out but was stuck for 3 years

swapalease.com

Transferred my old car in a week.

 

[Rolandphx]

I spoke with the finance today and was told that Lucid predicts a 65% depreciation over 48 months. Thus at the end of the lease, I could buy the car for $49,700.
So if I finance, I will spend $153,552, minus the 33% of the $7,500 tax credit ($2,500), (about $151,000), and minus whatever the car is worth at that time.

If I lease, I will spend $107,760 w/ option of buying the car at $49,700, if it's value is more or equal in the market... I emailed lucid finance to ask if I keep the tax credit if I lease. Will let you all know once I hear back.

 

[Impatient7536]

I spoke with the finance today and was told that Lucid predicts a 65% depreciation over 48 months. Thus at the end of the lease, I could buy the car for $49,700.
So if I finance, I will spend $153,552, minus the 33% of the $7,500 tax credit ($2,500), (about $151,000), and minus whatever the car is worth at that time.

If I lease, I will spend $107,760 w/ option of buying the car at $49,700, if it's value is more or equal in the market... I emailed lucid finance to ask if I keep the tax credit if I lease. Will let you all know once I hear back.

from my convo with them a while back, they deduct the 7.5k from the price, then base the lease off that. definitely makes things easier. hopefully that hasn't changed

 

[joec]

from my convo with them a while back, they deduct the 7.5k from the price, then base the lease off that. definitely makes things easier. hopefully that hasn't changed

This is an interesting point, given the new bill in congress. Will they still honor this 7.5k on a lease if that tax credit goes away? I assume they will drop that, since they can't claim that money themselves at that point.

 

[Ksa23]

This is an interesting point, given the new bill in congress. Will they still honor this 7.5k on a lease if that tax credit goes away? I assume they will drop that, since they can't claim that money themselves at that point.

I agree, not a chance that they would add the $7.5k tax credit as soon as the new bill takes effect

 

[Pragmatic]

Do they allow buy back at the end of lease. Most of the recent (post covid) big three leases do not allow buyout of the car. The car must be returned to the dealer.

 

[whywar]

I spoke with the finance today and was told that Lucid predicts a 65% depreciation over 48 months. Thus at the end of the lease, I could buy the car for $49,700.
So if I finance, I will spend $153,552, minus the 33% of the $7,500 tax credit ($2,500), (about $151,000), and minus whatever the car is worth at that time.

If I lease, I will spend $107,760 w/ option of buying the car at $49,700, if it's value is more or equal in the market... I emailed lucid finance to ask if I keep the tax credit if I lease. Will let you all know once I hear back.

Why only 33% of the tax credit? Don't you get the full $7500 no later then April 15?
Lessor (Lucid) gets the tax credit if you lease. They have indicated a cost reduction of the full amount so the lease price will be 7500 less than the cost of the financed vehicle.

 

[Rolandphx]

Why only 33% of the tax credit? Don't you get the full $7500 no later then April 15?
Lessor (Lucid) gets the tax credit if you lease. They have indicated a cost reduction of the full amount so the lease price will be 7500 less than the cost of the financed vehicle.

you are right; I thought it would decrease income thus saving you 33% of the federal tax burden, but I see now that it is a full tax credit! Lucid told me that they add the $7,500 to the down payment on the lease.

 

[Rolandphx]

Do they allow buy back at the end of lease. Most of the recent (post covid) big three leases do not allow buyout of the car. The car must be returned to the dealer.

I haven't gotten the actual contract yet, but the way they are leading me on believing that I will be able to.

 

[joec]

I haven't gotten the actual contract yet, but the way they are leading me on believing that I will be able to.

This is critical. Please do update us when you find out for sure. I am on the fence about leasing vs. purchase, and not being able to buy at the end of the lease would be a dealbreaker.

 

[Rolandphx]

This is critical. Please do update us when you find out for sure. I am on the fence about leasing vs. purchase, and not being able to buy at the end of the lease would be a dealbreaker.

oh for sure. They are depreciating the car by 65% on paper. Even the Mercedes S class does not drop that fast, and that car is the worst in depreciation. Considering that I am buying the car for 139, they increase the price to 160, inflation is at nearly 10% and there is a shortage of chips, I will be surprised that the car will be worth less than 60% of the original value (40% depreciation).

 

[rbbarry]

oh for sure. They are depreciating the car by 65% on paper. Even the Mercedes S class does not drop that fast, and that car is the worst in depreciation. Considering that I am buying the car for 139, they increase the price to 160, inflation is at nearly 10% and there is a shortage of chips, I will be surprised that the car will be worth less than 60% of the original value (40% depreciation).

So you are saying it is not worth leasing?

 

[Steveinarizona]

oh for sure. They are depreciating the car by 65% on paper. Even the Mercedes S class does not drop that fast, and that car is the worst in depreciation. Considering that I am buying the car for 139, they increase the price to 160, inflation is at nearly 10% and there is a shortage of chips, I will be surprised that the car will be worth less than 60% of the original value (40% depreciation).

I suspect that lessors are concerned about the impact of the rapidly developing and improving battery technology on an older leased car. What will be the value in three or four years if solid state batteries are available?