LUCID Gravity Lease vs Finance

[hjelmn]

Reasons I see to lease a gravity (and what is influencing my decision to do so-- though I may change my mind):

- The $7500 off if I can get it. At this point it looks hopeless unless they can deliver the spec I want. They have offered me the "opportunity" to buy a DE but I can not justify the extra $20k over the way I have the vehicle specced. If the $7500 goes away before I can accept delivery then I will likely revisit and may just opt to wait until there are better loan deals.

- The unknown depreciation rate. If the depreciation is really high I have a chance to walk at the end of the lease and buy a used one at a discount. Or, I can move on to a new one with a better idea of depreciation. I bought my 2023 Model X based on what I saw in terms of depreciation and the lack of a lease buy-out option. Then Elon goes nuts and the value is lower than what I predicted. Should have leased....

- Even in this market I think my money can do better invested than saving me interest on a car loan.

 

[Ironhorse]

Leases are considered bad, but all depends on your situation. Are you investing your money? Because of USD getting weaker the stocks are growing pretty fast. So $7,500 + lower per month payments can be more beneficial over 3 years than just buying or a loan even with lower APR.

Btw. what tax rate is in your area? Trying to check something in my spreadsheet. I estimated 6.249% but I might have made a mistake.

If you assume 10% annual gains per year from investments, you invest all of the money you "kept in your pocket" by going with lease, and just withdraw the amount necessary for monthly payment you, tax of 6.249%, and after 3 years you decide to buy a car (residual + tax) you should end up with $17,801.18 more money in your account than just buying the car outright. By just buying the car you lose $7,5k and opportunity cost of investing this money over the lease term.

Edit: My estimates assume that it would cost you around $128,439.38 to buy it outright. The higher this number the more $ you keep in your account from investments over lease term.

Yes the tax rate is 6.25%.
I understand your math about saving by investing.

 

[VeryPowerful]

Yes the tax rate is 6.25%.
I understand your math about saving by investing.

Thanks for confirmation. Based on the numbers you provided (and assuming I didn't make a mistake in my calculations) I got this.

If you're not planning to invest the best option is of course buying with cash (assuming that you need to pay back EV tax credit for early lease buyouts).
If you still prefer to finance and not invest then leasing is the best. $7.5k even with pretty bad money factor gets you far.
If you're investing then after 72 months your 5.25%-5.5% loans are the best options. Monthly payments are only $154.66 - $169.85 higher than lease payments, but you keep more money over 72 months period to grow in your investments.

Buying outright
~$131,109.38

Lease $0 down / 36 months / 10k miles / 0.00299 MF / $70,671 residual + buyout at the end [monthly payment around $1,955.86]
Not investing total cost: $145,498.03
With investing (10% annually) after 36 months (total cost - investment gains): $113,308.2
With investing (10% annually) after 72 months (total cost - investment gains): $107,110.16

Loan $1k down (deposit) / 72 months at 5.25% [monthly payment around $2,110.52]
Not investing total cost: $151,957.75
With investing (10% annually) after 72 months (total cost - investment gains): $101,689.62

Loan $1k down (deposit) / 72 months at 5.5% [monthly payment around $2,125.71]
Not investing total cost: $153,051.29
With investing (10% annually) after 72 months (total cost - investment gains): $103,179.75

 

[Ironhorse]

Thanks for confirmation. Based on the numbers you provided (and assuming I didn't make a mistake in my calculations) I got this.

If you're not planning to invest the best option is of course buying with cash (assuming that you need to pay back EV tax credit for early lease buyouts).
If you still prefer to finance and not invest then leasing is the best. $7.5k even with pretty bad money factor gets you far.
If you're investing then after 72 months your 5.25%-5.5% loans are the best options. Monthly payments are only $154.66 - $169.85 higher than lease payments, but you keep more money over 72 months period to grow in your investments.

Buying outright
~$131,109.38

Lease $0 down / 36 months / 10k miles / 0.00299 MF / $70,671 residual + buyout at the end [monthly payment around $1,955.86]
Not investing total cost: $145,498.03
With investing (10% annually) after 36 months (total cost - investment gains): $113,308.2
With investing (10% annually) after 72 months (total cost - investment gains): $107,110.16

Loan $1k down (deposit) / 72 months at 5.25% [monthly payment around $2,110.52]
Not investing total cost: $151,957.75
With investing (10% annually) after 72 months (total cost - investment gains): $101,689.62

Loan $1k down (deposit) / 72 months at 5.5% [monthly payment around $2,125.71]
Not investing total cost: $153,051.29
With investing (10% annually) after 72 months (total cost - investment gains): $103,179.75

My friend, this is so incredibly helpful.

Based on my use case and ability to invest, looks like taking a loan is the better way to go.

I sincerely appreciate this. Absolutely outstanding !

 

[VeryPowerful]

My friend, this is so incredibly helpful.

Based on my use case and ability to invest, looks like taking a loan is the better way to go.

I sincerely appreciate this. Absolutely outstanding !

I'm not a financial expert. I'm just a guy with Excel who is waiting for Gravity and paperwork to compare all of my options. I recommend to check your numbers on your own if you have option to do that. Don't trust a random guy on internet. I don't believe I have any major issues in my calculations, but everything is possible.

 

[Ron_Burgundy]

Thanks for confirmation. Based on the numbers you provided (and assuming I didn't make a mistake in my calculations) I got this.

If you're not planning to invest the best option is of course buying with cash (assuming that you need to pay back EV tax credit for early lease buyouts).
If you still prefer to finance and not invest then leasing is the best. $7.5k even with pretty bad money factor gets you far.
If you're investing then after 72 months your 5.25%-5.5% loans are the best options. Monthly payments are only $154.66 - $169.85 higher than lease payments, but you keep more money over 72 months period to grow in your investments.

Buying outright
~$131,109.38

Lease $0 down / 36 months / 10k miles / 0.00299 MF / $70,671 residual + buyout at the end [monthly payment around $1,955.86]
Not investing total cost: $145,498.03
With investing (10% annually) after 36 months (total cost - investment gains): $113,308.2
With investing (10% annually) after 72 months (total cost - investment gains): $107,110.16

Loan $1k down (deposit) / 72 months at 5.25% [monthly payment around $2,110.52]
Not investing total cost: $151,957.75
With investing (10% annually) after 72 months (total cost - investment gains): $101,689.62

Loan $1k down (deposit) / 72 months at 5.5% [monthly payment around $2,125.71]
Not investing total cost: $153,051.29
With investing (10% annually) after 72 months (total cost - investment gains): $103,179.75

How much are you investing over and above the car payments each month in these scenarios? I was suggesting investing the “savings” between lower monthly payments and higher monthly payments. In the second loan scenario, though, there is no higher scenario, so there isn’t money “left over to save”. But it appears your analysis is investing $500/month for 6 years at a 10% return to get your net number of $103,179.75 - so the “real” monthly payment is $2,125.71 + $500 or $2,625.71, as an example…

Not suggesting any calcs are wrong, but what I don’t follow is how much is invested each month with each scenario?

 

[VeryPowerful]

How much are you investing over and above the car payments each month in these scenarios? I was suggesting investing the “savings” between lower monthly payments and higher monthly payments. In the second loan scenario, though, there is no higher scenario, so there isn’t money “left over to save”. But it appears your analysis is investing $500/month for 6 years at a 10% return to get your net number of $103,179.75 - so the “real” monthly payment is $2,125.71 + $500 or $2,625.71, as an example…

Not suggesting any calcs are wrong, but what I don’t follow is how much is invested each month with each scenario?

I compare everything to buying the car with cash. You have $131,109.38 on hand and you decide what to do with it. You can buy the car right now, but you're left with $0 for investments. Or you can get a loan and invest this money instead.

In that case instead of dropping full $131,109.38 we take this money and invest. Every month we just withdraw money for loan/lease payments.

If we take [Loan $1k down (deposit) / 72 months at 5.5%] example from my previous post after first month:
We withdraw $2,125.71 for monthly payment and we are left with $127,983.67 + investment gains after this month.
With 10% annual gains after first month our investment account will be left with ~$129,067.91.

After 2 months: ~$128,017.77
After 3 months: ~$126,958.87
After 12 months: ~$117,022.75
After 36 months: ~$86,594.97
After 72 months: ~$27,929.63 and we paid our car in full

Does it make sense?

 

[Ron_Burgundy]

I compare everything to buying the car with cash. You have $131,109.38 on hand and you decide what to do with it. You can buy the car right now, but you're left with $0 for investments. Or you can get a loan and invest this money instead.

In that case instead of dropping full $131,109.38 we take this money and invest. Every month we just withdraw money for loan/lease payments.

If we take [Loan $1k down (deposit) / 72 months at 5.5%] example from my previous post after first month:
We withdraw $2,125.71 for monthly payment and we are left with $128,983.67 + investment gains after this month.
With 10% annual gains after first month our investment account will be left with ~$129,067.91.

After 2 months: ~$128,017.77
After 3 months: ~$126,958.87
After 12 months: ~$117,022.75
After 36 months: ~$86,594.97
After 72 months: ~$27,929.63 and we paid our car in full

Does it make sense?

Totally makes sense. I was thinking someone wouldn’t have all that cash today, but if you have $0 day one and, say, $2,000 to invest per month, where would it get you because the post was looking at $0 down. Your analysis is a good one though and I appreciate it.

If you DO have that cash today, you’re most certainly better off levering some of the price and investing it elsewhere given depreciation and the fact you can likely earn more (as you’ve shown) on an investment. Of course, you’d have to tax effective an investment, but I still think you’d come out ahead with some sort of loan. Personal decision and some just like peace of mind of no financing at all.

 

[zer0t0115]

Can you lease the car to get the tax credit and buyout during the 1st month? I know the finance rate will be 50 bps higher most likely. Seriously considering this on a MXP that I ordered.

 

[Ironhorse]

Can you lease the car to get the tax credit and buyout during the 1st month? I know the finance rate will be 50 bps higher most likely. Seriously considering this on a MXP that I ordered.

The SA mentioned this on email

"Please note: if you choose to pay off the lease early, you would be required to repay the $7,500 EV Savings Credit to the government. For that reason, I typically recommend considering payoff closer to the end of your lease term."

 

[denverlucid11]

The SA mentioned this on email

I was told the opposite - no need to repay the credit.

 

[hjelmn]

I was told the opposite - no need to repay the credit.

I think the confusion is due to the IRS. They were considering a provision to recapture the credit (requiring you pay it back) if the lease period is shorter than 18 month. I do not know if that change was actually made. The basic idea is to prevent people from leasing to get the credit then immediately buying it out.

 

[DS9]

I think the confusion is due to the IRS. They were considering a provision to recapture the credit (requiring you pay it back) if the lease period is shorter than 18 month. I do not know if that change was actually made. The basic idea is to prevent people from leasing to get the credit then immediately buying it out.

There was a public hearing for the changes to 45W scheduled for April, which was subsequently canceled. So far there is nothing in the federal register which indicates that the changes were made.

 

[Ron_Burgundy]

There was a public hearing for the changes to 45W scheduled for April, which was subsequently canceled. So far there is nothing in the federal register which indicates that the changes were made.

Oddly, there’s no real lease agreement in all the docs I just signed. The doc titled “lease agreement” is just a one pager showing configuration.

I guess there will be a real agreement when I take delivery. I will read and see what it says…

 

[L-Dude]

IME, getting info out of Lucid FS is like getting blood from a stone.

Very interesting and helpful analysis VeryPowerful!

 

[Ron_Burgundy]

Oddly, there’s no real lease agreement in all the docs I just signed. The doc titled “lease agreement” is just a one pager showing configuration.

I guess there will be a real agreement when I take delivery. I will read and see what it says…

IME, getting info out of Lucid FS is like getting blood from a stone.

Very interesting and helpful analysis VeryPowerful!

Lucid FS is VERY communicative and responsive when it comes time to sign and pay!

 

[DS9]

Oddly, there’s no real lease agreement in all the docs I just signed. The doc titled “lease agreement” is just a one pager showing configuration.

I guess there will be a real agreement when I take delivery. I will read and see what it says…

The actual 'lease agreement' shows up within 2 days of your delivery date.

 

[AnthonySF]

Guys, it’s literally in black and white on the website. It’s not that hard to find. Buying out lease 18 months or less the IRS claws back the EV credit.

 

[hjelmn]

Guys, it’s literally in black and white on the website. It’s not that hard to find. Buying out lease 18 months or less the IRS claws back the EV credit.

Indeed it is. The issue is the wishy-washy language that you "may" have to pay it back. I think that is to cover themselves if the IRS had gone ahead with the credit recovery language (which is where the 18 months comes from). I don't personally care as I plan to wait at least that long before I consider buying it out.

 

[Ron_Burgundy]

Thanks for pointing that out. Well, worst case is buying it out in month 19 and still getting the discount.