R1S Lease vs. Buy - I did the math

[meshugy]

With the EV credit, the lease w/early buyout option is clearly the best scenario if you’re trying to minimize overall cost. Whether or not strictly leasing will ultimately allow you to earn more In the markets comes to down to discipline and a fair amount of luck, but I agree it can be an effective strategy for some.

However, if you’re strictly trying to get the best deal possible you’re far better off getting a slightly used, low mileage vehicle. For example, this 2022 Quad has just 2K miles for $71K.

https://www.carmax.com/car/26612721

You could pay cash or finance at 5.5%, drive it three years (30K miles) and probably easily sell it for $55K. So it would only cost you $5K a year to own, maybe $7K with interest. Leasing a similar new car would cost at least $15K a year.

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[TM1]

BTW, this is my first lease EVER and I am in my 60’s.

Same here. One other option is to consider buying with cash and then selling after 3 yrs vs the 3 yr lease and not buying it out. The uncertainty of the actual money I'd get if I sold it on my own after 3 yrs is more than I want to handle. If I'm not going to keep it, I think the lease with the 7500 credit is the way to go.

BTW, being in our 60s means that if we keep the cars 10 yrs (like my current 2015 model S), then that means only 2 more cars between now and being in our mid 80s. I think I'd like to experience more than 2 cars between now and then.

 

[Kidentist]

 

[TM1]

A day without math is like a day without sunshine.

 

[DD4ST]

BTW, being in our 60s means that if we keep the cars 10 yrs (like my current 2015 model S), then that means only 2 more cars between now and being in our mid 80s. I think I'd like to experience more than 2 cars between now and then.

Now that’s a sobering thought…..

Another reason I liked the lease in this case is the uncertainty in the R1T value in three years, or God forbid, the existence of Rivian. I don’t like it because I am reluctant to sink a lot of money into it in case I let it go.

 

[tjrivian]

With the EV credit, the lease w/early buyout option is clearly the best scenario if you’re trying to minimize overall cost. Whether or not strictly leasing will ultimately allow you to earn more In the markets comes to down to discipline and a fair amount of luck, but I agree it can be an effective strategy for some.

However, if you’re strictly trying to get the best deal possible you’re far better off getting a slightly used, low mileage vehicle. For example, this 2022 Quad has just 2K miles for $71K.

https://www.carmax.com/car/26612721

You could pay cash or finance at 5.5%, drive it three years (30K miles) and probably easily sell it for $55K. So it would only cost you $5K a year to own, maybe $7K with interest. Leasing a similar new car would cost at least $15K a year.

In 3 years from now, the market price for a car with 32k miles could also be $40k instead of $55k. That's the beauty of leasing, you potential downside is limited.

 

[meshugy]

In 3 years from now, the market price for a car with 32k miles could also be $40k instead of $55k. That's the beauty of leasing, you potential downside is limited.

absolutely, could even be as low as $20K. So many variables (I.e. advances in technology, Rivian remaining solvent, EV demand, general economy, etc) which could effect the price.

However, right now a Gen 1 Quad with 30kmi is $62-$67K

https://www.cars.com/vehicledetail/78e1e06d-4261-4c4f-9560-14fe36ba88c3/

Even if the value sunk to $40K, leasing would generally be more expensive than buying a low mileage used vehicle. A current model with an MSRP of around $95K is about $1K a month plus $7K down. At the end of the lease the buyer has paid pre tax $43K. If you purchase a low mileage used vehicle for around $70K and sell it three years later for $40k you’re only out $30K.

of course, if you got one of the heavily subsidized lease deals (which I think you did, congrats!) the difference is smaller. Probably more like $700 a month with a total after three years of $32K.

if you go back to my original calculation:

1) Lease a new Rivian R1S for $1Kmo

VS

2) buy a used low mileage R1S for $70K and sell/trade it three years later for $55K

the difference is pretty huge as the leaser has paid $43K over 3 years and the used buyer has paid $15K over three years. That’s a huge savings for the buyer and if things did go wrong, the value of the used R1S would have drop by more than 50% just to equal the loss of the leaser.

 

[DD4ST]

Used vs new is a different analysis than what this thread is about. Used will (almost) always avoid the steepest depreciation. However new gets you longer warranty from purchase date, option/color choices, and absolutely known condition. For instance, for EV’s I would want to know how the previous owner charged the battery. Some nudnik that consistently charged to 100% likely shortened the battery life and range.

 

[TM1]

absolutely, could even be as low as $20K. So many variables (I.e. advances in technology, Rivian remaining solvent, EV demand, general economy, etc) which could effect the price.

However, right now a Gen 1 Quad with 30kmi is $62-$67K

https://www.cars.com/vehicledetail/78e1e06d-4261-4c4f-9560-14fe36ba88c3/

Even if the value sunk to $40K, leasing would generally be more expensive than buying a low mileage used vehicle. A current model with an MSRP of around $95K is about $1K a month plus $7K down. At the end of the lease the buyer has paid pre tax $43K. If you purchase a low mileage used vehicle for around $70K and sell it three years later for $40k you’re only out $30K.

of course, if you got one of the heavily subsidized lease deals (which I think you did, congrats!) the difference is smaller. Probably more like $700 a month with a total after three years of $32K.

if you go back to my original calculation:

1) Lease a new Rivian R1S for $1Kmo

VS

2) buy a used low mileage R1S for $70K and sell/trade it three years later for $55K

the difference is pretty huge as the leaser has paid $43K over 3 years and the used buyer has paid $15K over three years. That’s a huge savings for the buyer and if things did go wrong, the value of the used R1S would have drop by more than 50% just to equal the loss of the leaser.

I'd only consider a used Gen 2, but not many of them depreciated enough now to be widely available.

 

[meshugy]

Used vs new is a different analysis than what this thread is about. Used will (almost) always avoid the steepest depreciation. However new gets you longer warranty from purchase date, option/color choices, and absolutely known condition. For instance, for EV’s I would want to know how the previous owner charged the battery. Some nudnik that consistently charged to 100% likely shortened the battery life and range.

for sure, used typically does mean little or no warranty and dubious history. However, there is a constant stream of Rivian lease returns at CarMax with just a few hundred miles and nearly full warranties (and the Gen 1 has a 5 year comprehensive warranty so often the used ones have longer warranties than new Gen 2s.) I was really just focusing on these low mileage lease returns as an alternative to leasing. Like this one

https://www.carmax.com/car/26612742

Just 629mi and warranty started April 2024, so still over 4 years left.

 

[meshugy]

I'd only consider a used Gen 2, but not many of them depreciated enough now to be widely available.

Personally I didn’t find the updates to Gen 2 worth paying $30K or more for what is otherwise the same car. If ADAS or better cameras are important to you then it has to be Gen 2. The suspension upgrades and other structural improvements seem to have been slowly introduced into late model Gen 1s which makes them a really nice deal.

 

[tjrivian]

for sure, used typically does mean little or no warranty and dubious history. However, there is a constant stream of Rivian lease returns at CarMax with just a few hundred miles and nearly full warranties (and the Gen 1 has a 5 year comprehensive warranty so often the used ones have longer warranties than new Gen 2s.) I was really just focusing on these low mileage lease returns as an alternative to leasing. Like this one

https://www.carmax.com/car/26612742

Just 629mi and warranty started April 2024, so still over 4 years left.

Who's returning a lease after only a few hundred miles? That makes no sense to me. I have no evidence, but I'd be suspicious that this is how Rivian is getting rid of the lemon buybacks.

 

[meshugy]

Who's returning a lease after only a few hundred miles? That makes no sense to me. I have no evidence, but I'd be suspicious that this is how Rivian is getting rid of the lemon buybacks.

Sure, but if that were the case you’d see any service they had to do to make it salable in the CarFax report. Everyone of these low mileage Rivians I’ve seen at CarMax has had a completely clean report. The one I bought is near perfect, with the only issues being the slightly sunken hood, door bulge a B pillar, and passenger wind noise, typical quirks that most Rivians seem to have. After reading your post I got paranoid and checked the windshield washer as I’d never used it, fortunately no problems there.

Rivian probably leased over 30K R1Ss over the last several years. Makes sense that several hundred buyers will return them after a month due to any number of reasons including buyers remorse, sudden life change, financial problems, etc. Here in WA one of the biggest reasons is you can’t even do a demo drive as the dealer’s association prohibits Rivian from offering them. So people are buying a $100K car they’ve never driven which is certainly going to result in at least a few quick returns.

 

[TM1]

Does anyone know how they calculate line "ell" L in section 9?
Also, my lease ends on the day I sign this +3 yrs. They want me to sign it 3 days before I take delivery. I plan to sign it on the day I take delivery - don't want to give up 3 free days for nothing.
Then down in section 10 they say terms are negotiable. Are they really? If so, how does one do this?

 

[tjrivian]

Does anyone know how they calculate line "ell" L in section 9?

I can't say with 100% certainty, but I think it's mostly the sales tax on your "a)Capitalized Cost Reduction". What is the sales tax rate where you live, and does that math out approximately correct?

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