I am curious, what will Lucid do with the '22 - '24 lease returns? My '24 AGT has a residual value of $93k, due Jan 2026. No sane person will buy it used for that amount. So what gives? How will they absorb the loss?
I would hope they won't need that many loaner cars.Maybe they'll use them as loaner cars for people getting repairs.
Unlike typical leases from other makes, I think there is more involvement from Lucid with the BofA lease programs. I don't think the bank would jump into offering lease programs with so much risk involved with used EV resale prices. A main reason for BofA involvement is to grab federal tax credit which they can pass as lease incentive. At the same time, I see that the leases go through strict approval process unlike others. I saw some stories of folks getting rejected even though they had great credit score and had leasing history too. I am not sure whether that's done by Lucid or the Bank. It seems the lease approvals are easier for a mature customer base, compared to younger folks. May be, they are taking into account the financial ability of a customer to purchase it at the end of the lease, and the likelihood of such buyout. I believe there is some understanding between Lucid and BofA to deal with the losses.I thought that the owner of the car after a lease would be the leasing company, Bank of America for Lucid?. Wouldn't the bank have paid Lucid for the car at the start of the lease (so the income to Lucid was all at the start) and then at the end the lease, if the customer does not exercise the option to purchase, then the bank would dispose of the car the same way it does with other brands (auction? selling to used car dealerships?)? If that is correct (a big "if") then Lucid has no role in this process.
This is the normal process. We don't know if Lucid negotiated some sharing of liability with B of A.I thought that the owner of the car after a lease would be the leasing company, Bank of America for Lucid?. Wouldn't the bank have paid Lucid for the car at the start of the lease (so the income to Lucid was all at the start) and then at the end the lease, if the customer does not exercise the option to purchase, then the bank would dispose of the car the same way it does with other brands (auction? selling to used car dealerships?)? If that is correct (a big "if") then Lucid has no role in this process.
Spread out all the returns over all the service centers and I suspect it won't be too many.I would hope they won't need that many loaner cars.
Correct. Given Lucid's sales numbers with Air, we're not talking about that many cars. Making them loaners / company cars and writing them off at a loss is not a huge deal in the scheme of things.Spread out all the returns over all the service centers and I suspect it won't be too many.
It's for all luxury resales, not just EVs.Just so nobody’s in shock. 2 year old low mile 2022’s GT’s are bringing about 68K on resales. The luxury EV resale market for all makes is…….
My nephew GM at luxury hiline store reportsIt's for all luxury resales, not just EVs.
I had this issue with a car once. I wanted to keep it but the residual was significantly higher than the actual value. I offered to pay them cash for the value of the car and they refused. When I asked why, they said that the loss is the bank’s, not theirs, and the bank is insured for the gap. Not sure if that’s true but they seemed pretty sure of it.I too wondered how that is going to work. My 24 GT residual is about $87k. As others have stated, the true market value of these cars are not nearly that much. I was wondering if the Bank of America would cut me a killer deal at the end of the lease. There’s no way I’m paying $87k for it though. Time will tell I suppose…
Lucid is sharing the expected loss with BoA. Here's what I found in their 2023 10KThis is the normal process. We don't know if Lucid negotiated some sharing of liability with B of A.
Looks like the finance lease liabilities they're reserving were "only" roughly $86m at the end of 2023.I am sure they are already reserving for that loss. GAAP would require accruals to be booked to capture that loss as it is incurred.
I am also not sure how LUCID negotiated with Bank of America. They are the actual lease holders. So maybe they share the loss or maybe Lucid agreed to cover all such depreciation losses.