Lease Deals are INSANELY GREAT

[westofboston]

My thought process is simple. I try to get a good upfront prices for cap cost reduction due to upfront taxes in Texas. After my 3 year lease, I will compare my buyout prices against the market and make a decision if I plan to keep the vehicle or not. My last lease buyout was my Lexus and if I would have turned around and sold it the next day to CarMax, I would have walked away with $6k, so it made sense to just buy it versus returning it. I will do the same with my air after 3 years and make a call.

A lease de-risk my purchase and give me a second shot at buying the car at the lease end based on prevailing market conditions and it had worked out to my advantage in the past.

But was that 6k profit during the car shortage? Will we see that again?

 

[BS8899]

Morning. Just a quick note to anyone “on the fence” about jumping into an Air right now…the Lease Deals are insane.

I usually purchase my cars outright and keep them for 6-9 years. However, between the $7500 EV Credit only available on leases, the Lucid Air Credits in place right now ($5k, $7.5k and $10k IIRC, depending on model) AND the very low Money Factor being used in leases, it makes no sense to do anything other than lease — even if you want to buy the car.

The total lease related fees that I am paying on a fully loaded Air GT for the optionality of handing the car back in 36 months (i.e., the costs above a cash deal) are:

$995 Acquisition Fee
$225 Processing Fee
$450 Lease Return OR Purchase Fee
$245.61 Rent Charge

Total is $1,915.61 more than a cash deal, BUT, the $7500 EV Credit completely wipes this out and leaves you significantly better off (in my case almost $5600 better off) than buying in cash!

Why do you think the Lucid AGTs lease deals are getting so attractive? Is there a lot of inventory? Potential AGT glut as Gravity GT ramps?

 

[rfc805]

Does the residual really have much to do with the cost of buying the car at the end of the lease? I thought the lessor owns the car at the end of the lease, and is free to sell it for whatever market value it actually has.

No, you have an option to buy it out at the residual, otherwise you return the car to them.

 

[DeaneG]

Why do you think the Lucid AGTs lease deals are getting so attractive? Is there a lot of inventory? Potential AGT glut as Gravity GT ramps?

It's a way of selling a lot of cars without reducing their list price and the market positioning it implies. Very common.

 

[momo3605]

It's a way of selling a lot of cars without reducing their list price and the market positioning it implies. Very common.

They are hedging their bets that with low money factor, and a reasonably low residual, that people will feel comfortable buying their cars off lease for $40-$50k in a couple years and that the market won’t crush the resale values. If that does end up happening, lucid will be stuck with a lot of lease returns.

It’s a risk for Lucid because the buyer can walk away if the market conditions are poor. But if market conditions are good, you can buy out and/or flip your car to someone else for a profit.

It’s a little different from other manufacturers that use much higher money factor/interest rates that are actually making good money off the leases.

 

[tonybot]

But was that 6k profit during the car shortage? Will we see that again?

It was and also Lexus ICE vehicles tend to hold value well. But my point is getting a choice to keep the car or return it. Buyout for my 2024 Air Pure after 3 years (standard sound, dd premium and massage seats) is about $38,500. At the end of the lease, I will get to decide if I want to buy it out for that price or not. Considering I can’t predict the future, I love to retain the choice.

 

[tonybot]

Why do you think the Lucid AGTs lease deals are getting so attractive? Is there a lot of inventory? Potential AGT glut as Gravity GT ramps?

Not just AGT - deals are available on all trims. I suspect they are selling well. We will know for a fact once Lucid releases the Q4 numbers.

 

[Leftlane]

Leases are so complicated

No kidding - even the terminology seems designed to confuse the heck out of people. I always feel like I am at a huge disadvantage on the front end with a lease and that they just play with the shells to hide the numbers.

 

[Blue Lectroid]

Congrats on great deal!

Leasing is good only if you want to change your car every 3 years, get that latest updates. Over the long run- buying is always cheaper if you keep the car >5 years. If you want to buy another Lucid in 3 years, you would be behind, unless they have as good lease deals at the time.

I would have leased, only reason I didn't was I like to tint and clearbra my car, and always a headache with lease returns when their minor damage- curb rash, door dents etc. More at peace owning the car.

Actually, the point of my post is that at this moment in time if you want to BUY a Lucid and keep it…which I plan on doing, you are actually financially better off leasing. This has everything to do with the $7,500 EV credit on these cars that only applies to leased cars.

 

[Blue Lectroid]

Blue Lectroid and West of Boston:

Like others, I'm very keyed into the Residual that you'd pay if you decide to keep it. I expect to keep my Pure more than 3 years, as I don't really expect the next gen batteries to be fully deployed til a bit later; that 2nd car will be my "forever" Lucid (hopefully paid for with gains on low-basis LCID shares!) I'd only be likely to lease if the incentives made it cheaper (or only marginally more) to pay the residual, than buying it outright. BlueLectroid, you implied it was clearly cheaper (with the EV credit), but didn't include that Residual payment for us to see...! (did you figure in that you'd be paying sales tax on the residual balance if you bought it? That may not be enough to tip the scales, but it is a factor, since the full sales tax is included in the cash price calculation)

Especially interested in Residuals on recent leases, since it likely represents what I"ll be presented with in Feb/Mar when my car's ready. (and yes I realize the incentives then may well differ than now)

Not including a Residual is the gaping hole in the online Lease Calculator; apparently that figure isn't shared until you get actual leasing paperwork....which I'll be prepared to turn down in favor of cash purchase.

The reason I didn’t share my specific residual is because it’s tied to the price of the fully optioned car, number of miles per year on the lease, etc. which will vary based on each person’s chosen car and options.

That said, the inside sales folks will readily tell you the residual so that you can do the easy math and the math, at present, is that it is over $5,000 CHEAPER for me to lease (and execute the purchase option at lease end) than buy the car outright. This is a unique moment in time as leasing has NEVER been cheaper than buying…BUT with Lucid’s incredibly low current finance rates AND the $7500 EV credit, it is right now.

 

[Blue Lectroid]

Leases are so complicated

Borski, this may be the first of your posts that I disagree with. The Lucid lease paperwork and associated numbers are extremely easy to follow and straightforward…

 

[Blue Lectroid]

Does the residual really have much to do with the cost of buying the car at the end of the lease? I thought the lessor owns the car at the end of the lease, and is free to sell it for whatever market value it actually has.

No, in the Lucid lease, I have the absolute right to buy the car for the stated residual plus the $450 purchase fee.

 

[Blue Lectroid]

Why do you think the Lucid AGTs lease deals are getting so attractive? Is there a lot of inventory? Potential AGT glut as Gravity GT ramps?

Simple…

Everyone knows Lucid is not going to be profitable until the midsized car comes in late 2026, meaning first realistic shot at profitability is likely 2027.

In the meantime, they want to show both quarter over quarter and year over year top line sales growth AND get cars out in the streets so folks start seeing and hearing about them. These two needs together is why I believe they are offering huge incentives.

I am pretty darn sure that NO incentives will be offered on Gravity for at least a year after it’s released. In fact, if they are offered that would be a very bad sign.

I imagine there will be no “Air Credit” on Gravity, the money factor for leasing may be MUCH higher AND we may no longer have the $7500 EV credit by the time Gravity ships in quantity.

All of this is to say:

1. If you are on the fence about an Air, there may never be a better time to acquire one (and if you do, Lease it!).

2. If you are on the fence between an Air and a Gravity, take the plunge on the Air now because it’s likely that an Air with an MSRP today of $125,000 and a Gravity with an identical $125,000 MSRP, could easily be more than $20,000 different in the actual price you pay (assuming a leased air this year vs. taking delivery of a Gravity next year).

 

[borski]

Borski, this may be the first of your posts that I disagree with. The Lucid lease paperwork and associated numbers are extremely easy to follow and straightforward…

Okay, fine - explain it to me like I’m 5?

 

[momo3605]

Okay, fine - explain it to me like I’m 5?

You have an MSRP, you have a Cap Cost after discounts, you have a residual value/resale value based off the msrp that the car is expected to be worth at the end of the lease, and you have an interest rate.

Same as buying a car, except think of it as buying a car with a guaranteed buyback. Or you can buy it out for that price if you choose.

Of course this can be a good deal or a bad deal depending on the interest rate and expected resale value. But generally leasing has been positive for customers on EVs due to plummeting real world market values.

 

[Blue Lectroid]

Okay, fine - explain it to me like I’m 5?

momo3605 did a very good job! I will try to make it even a bit more granular:

MSRP
-Any Down Payment you decide to place ("Cap Cost Reduction")
-Air Credits ("Cap Cost Reduction" offered by Lucid)
-$7500 EV Credit ("Cap Cost Reduction" offered by USA)
-Referral Credit ("Cap Cost Reduction" offered by Lucid)
-Onsite Discount (if your Lucid is in stock at the Showroom)
+Taxes (varies by State)
+Registration Fee (varies by State and vehicle)
+Acquisition Fee (currently $995 from Lucid)
+Processing Fee (currently $225 from Lucid)
-----------------------------------
Doing the math on all of the above is your total "Capitalized Cost"

+"Rent" (based on interest you are paying the leasing company -- varies hugely depending on deals)
+Residual Value

=Total Cost to acquire the vehicle if you buy the car at the end of the leas term.

 

[WeighingGravity]

It's not necessarily a guarantee that leasing is better if you intend to buy the car.

It is true that you get a $7500 price reduction because the leasing company gets the benefit of the EV tax credit and will apply it to the cost of the vehicle, and you do not as an individual. So there is a $7500 savings. BUT

The overall value depends a little bit on your personal financial situation and interest rates. You'll be buying the "rest of the car" (the residual value) as a used car. Used car interest rates are usually higher than the typically generous interest rates given by manufacturers to move new cars. If you plan to pay cash at the end of the lease, then undoubtedly you've saved a lot. But if you need to finance most of the purchase price, and right now used car interest rates (according to google, I'm not a banker) are over 7% for super-prime buyers. So depending on trim level and what car you bought and what the actual residual dollar value is, you could end up paying more than $7500 in interest on the used car loan. If they're offering crazy low new car interest rates, you could make up the difference.

$7500 is still a big head start though.

 

[Wolfman]

The issue with direct sales models like Tesla and Lucid is that the lease deals are take it or leave it deals. They are either good or not but not negotiable. With other brands with dealers involved, the numbers become leverage to work better numbers via discounts and knowing and then reducing the dealer markups.
The MF aka interest rate is typically marked up and distributed via a profit charing model between automaker and dealer. Same with financing.

The lucid calculator is not great IMO as it hides essential data. Examples of a great lease calculator is the one on leasehackr. Leases are a great hedge against depreciation but only if the numbers make sense. For that, the residual is the key element. It tells you if you paid too much for the lease or got an awesome deal. For that you need to compare it to the ACV of a car (actual cash value at the end of the lease deal).

At a glance, the only way that Lucid can offer a low lease rate is to artificially inflate the residual rate and then take a financial hit at the end unless the car depreciated less than anticipated. BMW does that also to push sales but they have their own bank to deal with the loss in different ways
Let's say the residual is 75% for 18 months at 10k miles a year. That means after the lease return, when the car is sold at auction or via its website for less than 75% of the new car price, that loss goes against the bottom line of Lucid and the loss for every car produced.

Btw. most people talk about a great deal when financing because they got a low interest rate but one only knows the value of the deal when the car is being sold, not before. The selling price will tell the story of depreciation plus paid interest rates. I personally can see no situation where a Lucid purchase is ever financially advantageous over a lease.

I think that a short-term lease on the Lucid is the best possible option. You can get into the latest model and tech (even if incremental like heat pump, quieter drive via new motor mount and better processor) and depreciation is not on you (if the residual > ACV which it always is)

 

[WeighingGravity]

Residual values are often expressed as a %age of the purchase price of the car. The leasing company is buying the car for $X dollars. At the end of the lease, the leasing company is setting a value $Y dollars that everyone is agreeing the car will be worth. In a lease, you are essentially paying X - Y over the course of some period of time, with interest, plus whatever taxes and fees might apply.

Manufacturers can incentivize leases and make them better deals for consumers by using a high residual %age. If the residual is 70%, you're paying for 30% of the car's value over the lease term. If it's 60% for the same lease, you're paying 40%, so the monthly payment is higher (and there's more interest). (Manufacturers can also incentivize leases with low interest rates on leases too.)

Residuals are a BIG DEAL because they can significantly change what you're paying for. Someone on here in another thread showed their lease paperwork which suggested they were being given an 85% residual. That is an insane deal - he's only paying for 15% of the car! And getting the EV credit!

Personally I think that's a sad thing to see if you're a Lucid fan because there's no way the car is worth 85% of its original price even in 18 months. I believe Lucid is the financing company and thus will own the used car at the end of the lease. It won't make sense for the customer to buy the car at that residual, so Lucid will be stuck with the car. They'll have to figure out how to unload it, almost certainly for a lot less than 85% of the original price, and they'll have to take some financial write-off at that time. Which will be more grist for the stock price discussion.

All car manufacturers do things to move cars and kick the can down the road a little, but I personally find it worrisome that they're having to go to 85% residuals. I leased a BMW some years ago at what I think was a 60% residual (36 month lease), which I think is more typical of a traditional lease residual.

 

[JGard18]

I leased my 24 AGT two months ago, originally MSRP was over $90k. But my monthly payments are less than the lease on my wife’s XC40 Recharge, and that car’s MSRP was below $60k. So, yes, good deals are aplenty right now. I’m still undecided if I’ll buy it at the end. I don’t typically keep cars more than 2-3 years, but I really do love this car. I just need it to stay reliable. I’d still have that Rivian right now if it wasn’t a total disaster to own