Lease versus finance versus cash

Bobby

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I am just about to complete my transaction and wanted to get some advice from the group about leasing versus financing versus purchasing outright. I was prepared to simply purchase the vehicle in cash, but with electric vehicle technology moving so quickly forward and with the economic uncertainty over the next few years, leasing has become more attractive to me. For example, my Jaguar I-Pace was pretty much the only thing available besides Teslas and an Audi E Tron when I got it in 2018. Now, it has depreciated far more than I thought it would and it is not even close to the latest in today’s technology, less than four years later. So, I kinda wish I had leased and could just give it back.

Question to discuss: Is there a downside to simply paying out the entire lease as a down payment? I understand there’s other ways to invest the money but these days, who knows? Playing with the calculator on the Lucid site, it saves me about $15,000 over four years as opposed to making monthly payments for that same period. Is that a silly idea? Thanks I’m advance for your thoughts.
 
The only way I could find to do that was to make a down payment close to the purchase price. When I did, it seemed that the total was very close to the purchase price so unless the depreciation leaves the car substantially less than 25%, it doesn't seem to make sense to me. I have been wondering the same thing as you so...am I missing something in the calculator?
 
The only concern with prepaying a lease is that if the car is ever a total loss, you likely would not get any refund.

Instead, you could put the money in a 2% or 3% liquid bank account and negate that much interest.
 
I was going to buy my Lucid for cash, but a few things made me reconsider. One factor are a few hardware design decisions that no amount of OTA updates can fix, like too small cup holders and too small phone charger slots.

The other consideration is technology. I’ve leased cars for years now because I haven’t wanted to be holding a car that’s 5-7 years old, chock full of rapidly outdated tech components. It’s nice to get a new car every 3 years, and it is always under warranty.

And given how much tech is at the heart of a Lucid, I’ve decided definitely to lease mine.

I’m only hoping that when the lease is up, I can still afford a new Touring edition.
 
I was going to buy my Lucid for cash, but a few things made me reconsider. One factor are a few hardware design decisions that no amount of OTA updates can fix, like too small cup holders and too small phone charger slots.

The other consideration is technology. I’ve leased cars for years now because I haven’t wanted to be holding a car that’s 5-7 years old, chock full of rapidly outdated tech components. It’s nice to get a new car every 3 years, and it is always under warranty.

And given how much tech is at the heart of a Lucid, I’ve decided definitely to lease mine.

I’m only hoping that when the lease is up, I can still afford a new Touring edition.
Im leaning toward lease as well, but the residual values are not looking great.. causing a heavy lease payment. I had another thread with what I calculated as an RV

Lucid Financing Calculator - WTH are these Leasing quotes?
 
Lease numbers for this car are not good and a lot of it has to do with the fact that its a new car, new company, and there is no precedence for what it'll be worth in 3-4 years. All those factors make leasing less attractive. The bank (BofA) is playing very conservative with their lease numbers. To me it only makes sense if it helps out for business deductions.
 
What sort of premium do you pay if you buy the car at the end of the lease compared to just paying cash up front? Haven't seen anything on what I have to pay to buy the car at the end of the lease. Never leased before so maybe a stupid question.
 
What sort of premium do you pay if you buy the car at the end of the lease compared to just paying cash up front? Haven't seen anything on what I have to pay to buy the car at the end of the lease. Never leased before so maybe a stupid question.
That's the "residual value". There is no premium, the only catch is you don't own the vehicle and either turn it in or purchase it for that residual value.

A lease payment is the MSRP minus the Residual Value at the end of the lease term, divided by the # of months leased, plus interest.

RV is determined at time of signing.
 
That's the "residual value". There is no premium, the only catch is you don't own the vehicle and either turn it in or purchase it for that residual value.

A lease payment is the MSRP minus the Residual Value at the end of the lease term, divided by the # of months leased, plus interest.

RV is determined at time of signing.
So if the residual value is low, that means it'll be cheaper to buy it out at the end of the lease, correct? But mostly because you've been paying so much while you've been leasing?

I have leased before, and I still can't always wrap my head around how it works.

Basically, a low residual doesn't hurt much if you buy at the end. But if you don't, you paid more than you should have for the privilege of driving it for three years?

The thing I like about leasing is having that option to buy, but not the obligation. If I still want the car, I just buy it. And I only paid a slight premium for that option. If I don't want it, I can walk away without having to deal with selling, trade-ins, whatever.

I'd never be able to credibly justify a car as a business expense, so that benefit is out.

I've been leaning towards just buying, given so many here have said the leasing deal doesn't seem to be good. But I know myself well enough to know I'll want something more technologically advanced in three or four years.
 
Another downside to leasing, of course, is that it's not your car. So if you want to apply PPF, tint, or other mods, they have to be removed before turning it back in. I generally don't mod my cars much, so this isn't really a concern for me.
 
I was going to buy my Lucid for cash, but a few things made me reconsider. One factor are a few hardware design decisions that no amount of OTA updates can fix, like too small cup holders and too small phone charger slots.

The other consideration is technology. I’ve leased cars for years now because I haven’t wanted to be holding a car that’s 5-7 years old, chock full of rapidly outdated tech components. It’s nice to get a new car every 3 years, and it is always under warranty.

And given how much tech is at the heart of a Lucid, I’ve decided definitely to lease mine.

I’m only hoping that when the lease is up, I can still afford a new Touring edition.
You stated that you would not want to buy and hold a 5-7 year old car that is outdated, so you would prefer to lease a new car every 3 years. How can you compare 3 years value to 5-7 years value?

How about buying a Lucid, then selling it every 3 years instead of a 3 year lease. Now its comparing 3 years to 3 years.
 
So if the residual value is low, that means it'll be cheaper to buy it out at the end of the lease, correct? But mostly because you've been paying so much while you've been leasing?
Right. People typically want a high residual value so that the delta between MSRP and RV is smaller, therefore smaller lease payments.

A low RV is good if you intend on buying at the end of the term, but you might as well finance if that's the goal. But at least this way you retain the option of walking away after X years.
 
You stated that you would not want to buy and hold a 5-7 year old car that is outdated, so you would prefer to lease a new car every 3 years. How can you compare 3 years value to 5-7 years value?

How about buying a Lucid, then selling it every 3 years instead of a 3 year lease. Now its comparing 3 years to 3 years.
One of the issues with buying and selling is that you are subject to the whims of the market at the time of the sale. With a lease, the RV is set at the time of signing, so no matter what happens, you get to buy the car for your original agreed price.

If you buy, then plan to sell in three years, you have no idea what used cars will be going for at that time. You might make out like a bandit if the market turns up. If it turns down, though, you take a bath.

Tons of people who were leasing over the past few years have enjoyed buying their used EV for far less than it is currently worth, thanks to the market having shot up during the pandemic. Then they can turn around and sell it for a profit. But that's not likely to last.
 
Thanks Ksa23. If I understand correctly, if someone were concerned that Lucid wouldn't be around in 3 years time and wanted to hedge their bets leasing could be a way of doing that. In that case the RV at the end of the lease might be lower than the calculated RV at the beginning of the lease so walking away from the car would make sense. On the other hand, if Lucid is figuring on low residual values for purposes of the lease and in three years time they soar to glory the actual residual value at the end of the lease would be higher so buying the car would make sense and all you've done is delay the purchase decision. Is this a reasonable analysis?
 
One of the issues with buying and selling is that you are subject to the whims of the market at the time of the sale. With a lease, the RV is set at the time of signing, so no matter what happens, you get to buy the car for your original agreed price.

If you buy, then plan to sell in three years, you have no idea what used cars will be going for at that time. You might make out like a bandit if the market turns up. If it turns down, though, you take a bath.

Tons of people who were leasing over the past few years have enjoyed buying their used EV for far less than it is currently worth, thanks to the market having shot up during the pandemic. Then they can turn around and sell it for a profit. But that's not likely to last.
I guess it matters if you are willing to take a chance and what the maximum and minimum overall cost differences will be.
 
Thanks Ksa23. If I understand correctly, if someone were concerned that Lucid wouldn't be around in 3 years time and wanted to hedge their bets leasing could be a way of doing that. In that case the RV at the end of the lease might be lower than the calculated RV at the beginning of the lease so walking away from the car would make sense. On the other hand, if Lucid is figuring on low residual values for purposes of the lease and in three years time they soar to glory the actual residual value at the end of the lease would be higher so buying the car would make sense and all you've done is delay the purchase decision. Is this a reasonable analysis?
The RV cant be changed by either party after signing and it's the price you have the right to purchase it at the end of the term. You can also prepay all outstanding lease payments + residual to purchase the car at any time. Dealers typically don't negotiate the RV and I doubt Lucid would. But yes, leasing would protect us from Lucid going bankrupt after the term ends.

What can change is the actual market value of the vehicle, so you may be able to purchase it for less or more than what its actually worth at the end of your lease. An RV is just a best guess.
 
You stated that you would not want to buy and hold a 5-7 year old car that is outdated, so you would prefer to lease a new car every 3 years. How can you compare 3 years value to 5-7 years value?

How about buying a Lucid, then selling it every 3 years instead of a 3 year lease. Now its comparing 3 years to 3 years.
Sure, but then I am stuck with the hassle of trying to either sell the car every 3 years, or trade in. And at this point, I have no idea what trading in a Lucid would be like, whether at Lucid or some other brand. And private selling, in my experience, has been more trouble than whatever lease payments I might have to make.

I still have more math to do about this one, of course, and since it’s a Touring, plenty of time till I have to commit.
 
Thanks Ksa23. If I understand correctly, if someone were concerned that Lucid wouldn't be around in 3 years time and wanted to hedge their bets leasing could be a way of doing that. In that case the RV at the end of the lease might be lower than the calculated RV at the beginning of the lease so walking away from the car would make sense. On the other hand, if Lucid is figuring on low residual values for purposes of the lease and in three years time they soar to glory the actual residual value at the end of the lease would be higher so buying the car would make sense and all you've done is delay the purchase decision. Is this a reasonable analysis?
The lease will give you some protection if Lucid is a failure and the car is worthless in 3 years since you only paid for part of the car. Looking at the lease calculator it looks like the RV is very low so it seems like that is baked into the number. I decided to buy it outright thinking I'm willing to bet that the car will be worth at least the RV value and this is money would otherwise be in a good paying bank or treasuries and after paying taxes on that income I would be earning way less then what I would be paying on interest on the lease. If the residual was higher I would considered a lease. Also has anyone figured out if they are getting the benefit of the 7,500 tax credit or are we when we lease.
 
Also has anyone figured out if they are getting the benefit of the 7,500 tax credit or are we when we lease.
Lucid will continue to apply it as a cap cost reduction for 2022 deliveries.
 
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