Lease with immediate buyout?

[jjswan33]

Not the senator that proposed the limits on income and manufacturing source. Instead an administration happy to spend limitless money (the projections are now $800 billion vs the originally $300 billion in part due to the uncapped nature of the EV credit with this loophole).

This is sounding awfully political. EV Lease loop hole is having 0 effect on the federal budget/deficit, seriously it's peanuts.

If it gets a few more EVs on the road I am all for it... finally a tax loop hole I was able to manipulate.

I would go into the reasons that the federal budget is the way it is but lets not go down that political rabbit hole but also lets be realistic none of the recent administrations are without blame.

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[jjswan33]

Huh? The President does not introduce legislation.

Congress passed the law and the current administration decided how to implement it.

The loop hole is that since a leasing company is buying the car it's considered a commercial transaction which were not subject to income, MSRP or production requirements.

 

[jjswan33]

Hi Joshua,

I just ordered from the shop (my custom build was taking too long).

I have a few questions about the $7,500 lease credit at Rivian. Does that lower the sticker price or is that applied elsewhere? For example, if my R1S is priced at 90,000, the $7,500 lease credit will be applied to the capital cost and the adjusted cap cost should be 90k-7.5k = 82.5k? It should be 82.5K but I have no idea how Rivian is finagling their numbers and fear they may play tricks.

If you buy outright a 90K R1S and decide to finance with zero down, you're borrowing 90K subject to interest (let's ignore taxes for now). But if you lease it, how is it applied and how does it benefit folks who plan to buy in three months time? Is it no more than 82.5K after three months of time? I assume a certain percentage of the each monthly payment will go towards bringing down the buy-out value?

You kinda have it right.

Lets use your $90k example and assume/guess a $55k residual.

So for your lease your capitalized vehicle cost will be $35k

That would make your total lease (Capitalized cost) costs $35k - $7500 (Tax Credit) + Fees + TTL + Rent Charge. Your lease payment is then that number minus your down payment divided by the term will give you your payment.

So the amount of money you save if you buy in three months would be $7500 - 1/12 of the rent charge - Acquisition fee - Any other TTL related fees. Probably nets you ~$5k.

 

[Hereforthesnacks]

Congress passed the law and the current administration decided how to implement it.

The loop hole is that since a leasing company is buying the car it's considered a commercial transaction which were not subject to income, MSRP or production requirements.

Sure. But the leasing “loophole” is a Congressional decision.

In any case, Congress put it on the books. If people want to spend more and avoid what they view as ill conceived policy, they should do so!

 

[jjswan33]

Sure. But the leasing “loophole” is a Congressional decision.

In any case, Congress put it on the books. If people want to spend more and avoid what they view as ill conceived policy, they should do so!

I am just pointing out the historical fact of this. Congress passed a law and the administration interpreted how to implement it, the next administration could redo that rule making process and change how the law is implemented.

 

[dcmackintosh]

Not a fan of people trying to circumvent the IRA by leasing rather than purchasing. It is a loophole that should never have existed.

That's helpful information.

 

[Wispitgood]

You clearly have no idea what you are talking about or didn't understand what I said.

Leases are very simple. You have a rent charge that is equally divided by every payment (your paying interest every month). You don't have to pay interest any longer than you have an outstanding balance. There is no nonsense there at all.

I literally just did this like I said. FACTS. I paid 3 months worth of rent charges and not a penny more and I owned the car got the title in the mail a month later.

So MSRP was around $60k then 7500 tax credit allowance then TTL of about $1k, $3k down payment. My payoff (residual plus cap costs) was ~$51k after 3 months worth of payments. So total I paid $51k + 2100 (3 monthly payments) + $3k down or ~$56k of which around $1200 was from 3 months worth of rent payments.

Edit: And to your point I think the bank did fine. several months worth of rent charges plus the acquisition fee they charge amounted to ~$2k.

Certainly confusing with various answers to OP question. I.ordered a R1T 2025 few days ago and trying.to decide.on lease then payoff, or buy outright and risk not getting incentive, even though MSRP is less then 80k.

I asked AI Gemini the question about payoff of a lease and this is what it says, which makes me think you do pay remaining lease payments plus residual (the mystery number) of the vehicle plus fees.

I also came across this advice, to add more confusion and thinking!

Purchasing out your leased vehicle can be a great option if its current market value exceeds its buyout price.

Gemini: Do you have to pay all remaining lease payments in paying off a lease?

Yes, you must pay all remaining lease payments to close out the lease if you buy it out. The total amount you need to pay to buy out a lease is called the lease payoff amount, and it includes the remaining lease payments plus the buyout price. The buyout price is typically the residual value of the car, which is the estimated value of the car at the end of the lease.




It's generally recommended to wait until the end of the lease term to buy out your car, as you'll usually pay more if you buy out early. You'll also have more bargaining power if you wait for the leaseholder to contact you about a buyout option.


When buying out a lease, you'll also need to pay other fees, such as:

• Sales tax
  
  
  
• Registration and administrative costs
  
  
  
• Vehicle protection coverage, like GAP insurance or Vehicle Service Contracts (VSC)

 

[Wispitgood]

So I asked my wife who is a CPA and who paid off a lease on an Audi 6 recently what makes up the residual value for a leased car when you pay it off. The mystery number to me.

Her answer was the amount left on the leaseholders amortization schedule. She says you might request a copy of that schedule at buyout, but depending on bank, you may or may not get that schedule.

 

[atheurer]

https://www.chase.com/personal/auto-loans/rivian/leasefaqs

"If you purchase your lease before the end of the lease term, you will pay the adjusted lease balance, plus any past due monthly payments, unpaid late charges, and any other amounts due under the lease."

I do not interpret this as "paying all the monthly payments, including interest", but more like paying off a loan with a current balance.

Also, the last place I would rely on an answer is an AI chat bot

 

[DuoRivian]

Huh? The President does not introduce legislation.

No he just signs it! Or vetos

 

[Hereforthesnacks]

No he just signs it! Or vetos

Yep!

 

[Dave Cundiff]

No he just signs it! Or vetos

Or she?

 

[Br0mega]

These are all good points. One thing I have not seen mentioned is that used car loan rates might be less favorable than new ones. I guess this would not matter if you are paying cash.

 

[xssm]

Since there is a lot of false information in this thread, will provide real numbers for a R1S purchased in March 2024 that was bought out in July 2024 with the $7500 EV credit applied. Will simplify using only real money from my bank account and subtract out any fees that exists no matter what (registration, etc.)

MSRP / Purchase Price: $109,950
Cash at delivery: $18,354 (includes the following fees and taxes). Subtracting all except the acquisition fee because the rest of the taxes and fees would be paid on a purchase. This will make it apples to apples comparison) = $15357

4 months of lease payments: $3844 ($961 x 4)
Cash to buy out lease: $85,652

Total apples to apples cost vs. buying: $104,853 on a purchase price of $109,950.

Total savings from leasing to buy out vs. buying outright: $5097

(Note that the total of 36 months of payments + and buy out at the end of the lease is $114,387 so no rent charge is paid on the early buy out). Note that the earnings on the $85,652 in a high yield savings account is about equal to the savings here so not a huge advantage to early buy out but there definitely IS a huge advantage to leasing to take advantage of the $7,500 credit.

 

[mmcool]

I actually explored this option, I think the difference is very little. Biggest risk is before you buy out , if your car gets totalled you get 0.

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