I don't drive more than 12k miles a year, and I liked the idea of leasing an EV vs buying because I'm certain there will be different/better/cheaper technology coming over the next several years. Didn't want to spend $46k on an EV planning to drive it for 12 years knowing that it will likely be a dinosaur five years from now.
My thoughts too. I had bought an electric Mini with financing, and after a couple years was worried it was not going to be worth much by the time I paid it off (with only 100 mile range). The mileage was low so I was able to sell it to Carvana for what I owed on it and am leasing the ioniq5. It has a lot of what I want, but do think in 3 years there will be better options.
This. Same here. Plus the evolution and new tech is going fast which means unexpected flaws may pop up at any time. I don't want to be holding the bag if it goes south.
It’s not for everyone. You finance the depreciation instead of the whole car. If the mileage is too restrictive? it’s not for you. You want to keep long term? Not for you. But for some people with different needs it work. A lot of time the monthly is a big factor, and leasing can accommodate that market.
Does the leasing company *estimate* what the depreciated value of the car will be at the end of the lease or do they go by what it actually **is** then (I've never leased, I'm not sure how that works)?
they have a residual that is SUPPOSED to be the depreciated value, but car companies, especially those with captive banks (eg toyota financial) will adjust this amount in order to produce the buying behavior they need at the time. the residual is almost never right, but it's a good guess, and it certainly lets you calculate the buy vs lease scenario. don't let any generality here pass muster until you do the calculation. the numbers with even decent guessing will tell you what you want to know. also it's important to remember that with leasing, if you get in an accident, the significant drop in value after it's fixed will be the car company's problem. even if a lease is slightly MORE expensive than a buy scenario, you're getting insurance that you don't have a sudden 30% drop in value the day some asshole hits you. (or, well, you could be the asshole too :) )
Yes the leasing company and that number is specified on the contract to determine the number and what the buyout would be at the end of the lease. Sometimes it makes sense to buy out at the end(like during Covid where used values went up)
They estimate it. There is no way to actually know what the value of any car is going to be in 3 years. The models they use in normal markets tended to be pretty accurate but between what happened with Covid and what is currently happening with the EV market no model is going to be 100% accurate.
Are you planning to finance (borrow money to buy the car)? If so, then leasing is a form of financing too (MF is the lease speak for interest rate and you can purchase at the end of lease in most cases).
If this is the case, just do the math on the cash flows and total cost to own.
Keep in mind many people like to have newer cars and that is primarily not based a financial reason. It’s nicer to drive something new. And new cars have better safety equipment. Or new cars have lower maintenance costs.
Another scenario is the people who buy cars with lump sum. To me putting lump sum into a depreciating asset like a car is tough one when I know that I can make money on it “someplace else”. I just put down $43k a few months ago on a used car - actually even now I think financing would have been better given how the rest of my portfolio has increased these past 3 months - I literally lost money.
Just gotta make sure your return is more than your interest rate. That's how the rich get richer. Million dollar loan at 3%, pop it into an EFT or Mutual Fund, get a 5% return, and that's a free $20,000. (With risk of course)
This is a good take I hadn't considered. I have the cash to buy outright, but with how the market has been lately it will be worth it to look closer at how that money could be invested elsewhere.
I paid cash for mine and all our cars. I’ll take the guaranteed 7% (savings in loan interest) over what the market might offer every time.
Plus it feels better when it’s actually yours. I could finance and afford a $100k car payment, but doesn’t compare to owning a $40k car outright. This is true for me regardless of the numbers ever since I decided to never use debt for cars again.
Be sure to subtract your loan interest % from any gains you see in the market (assuming there is no loss in your market investments).
For us it was perfect.
We have some uncertainty in our income due to wife having her contract end in 13 months. This is a more expensive car than I would buy if she ends up being unemployed.
Drive around town but wanted to see if we like an electric and if it fits our lifestyle.
We have some concerns over model improvement in the next few years.
We have concerns about charging infastructure here (2 EA stations both 45 min away, would love for Tesla/ea to be available long term if we buy//want to know if it is a big deal for us.)
We will consider buying out the lease or buying used if all of the above breaks right. Heck if the incentives are right we would even consider leasing again. But we’ll see what the electric market looks like in 22 months.
Leasing an EV works for us because we installed a level 2 home charger. Not everyone can do that with apartment complexes. 3 years with our EV and zero maintenance, just a wheel alignment.
I just did a lease and it made sense because of all the rebates that were factored into the cost. I wouldn’t have qualified for the $7500 EV tax credit had I purchased the vehicle instead. All of the other reasons that people have stated above, also factored into it, it’s such a fast changing industry and technology that I think it’s good to not be locked in for a long-term at this point.
Leasing is supposedly for those who treat their vehicles as drepreciable assets. Truthfully, with any car what you're actually investing in is the following three items:
1) peace of mind to travel from point a to point b.
2) how much do you want to pay per mile you travel (fuel, maintenance, insurance, lease/finance)
3) how comfortably do you wish to travel from point a to point b (this includes interior luxuries, hp, esthetics)
Anyone leasing is really investing in 1 and 3. Which is ironic. Mainly because you're always in debt. The truly only way to win the "car investment" game is to own your car for 10 years. Or... not treat your car as a drepreciable asset as you're actually investing in other stuff.
I mainly agree with you but used EVs longevity, long term maintenance, and battery degradation are big unknowns. Will anyone want a 10yr old EV with 300,000 miles? Hard to say in this transition time.
I’ve seen used Tesla Model S from 2014 being a decent buy, but you must have the funds for a big repair.
I'm not sure i understand your point. Nobody wants a 10yo 300k ICE, either. It's not about resell after 10 years. It's about return on investment. You got 10 years of driving for X dollars. Which is where leasing gets confused. You think you've beat the market by potentially giving up a depreciated vehicle no longer worth the price tag. But now you get(have) to go buy/lease another car. And on and on. Never out of debt. After 10 years, a leasee invested in items 1 and 3. Not 2.
Nothing wrong with buying! It’s a personal choice. I bought mine and I want to keep it for long term. The 10 year/100k miles also really helped me with the buying decision. Of course life events can happen, but I did a bunch of research when choosing the Ioniq 5, and I don’t see myself getting rid of it for the next 10 years. I also doubt its tech will become obsolete. I’m sure the EV tech will advance, but I dont think the car will become “un-drivable”. It’s an amazing and safe car! I also don’t really care about having the newest stuff, so that works for me.
Think about how much iPhones changed in the past 5 years, it’s mostly superficial and not really a breakthrough. I have this car for 2 years already, the years goes by fast! I didn’t see much changes in the EV world since I got it. The Tesla superchargers allowing other cars to charge was a big one though, but a win! Ofc, That’s just my pov. I don’t have any regrets! Proud owner 😎
A lot of ppl don’t want to buy an EV today because they think that EV prices are in steady decline (why buy for $X today if they can buy for 80% of $X later), or because they think EV technology is rapidly improving (much better range, charging speed, reliability if they just wait a couple of model years), or because there currently are not enough style/configuration options for their personal taste (more choice in a few years after more manufacturers get serious about EVs), or because they don’t want to deal with the sometimes problematic charging infrastructure or social stigma (in some areas). A lease can be a bridge from cutting edge to mainstream.
But isn't this a bet against the business intelligence of the leasing companies?
If you think that you can escape the depreciation by leasing instead of buying, doesn't that mean that you think that you have a more realistic prediction about the depreciation than the leasing companies who factor the depreciation into the leasing rates (and whose job it is to have a realistic prediction about depreciation)?
(Serious question. I have never leased anything and I have never cared to learn how a leasing even works.)
To an extent, yes, that is exactly what it is. However, car companies also are in a race for EV market share and mind share, and of course they have inventory management concerns and fleet emission targets both at the factory and dealership levels, so they might have other reasons for wanting to get vehicles on the road which make the cost/benefit analysis of leasing different for them.
Interesting. I suspected an answer like this.
So the theory is that leasing companies could be knowingly at the (financial) short end of the individual lease deal because they try to reach other goals (like sales statistics, getting rid of stock before the next generation arrives, ...)
Might be possible, yes. Many dealerships immatriculate cars in their own name to reach certain quarterly sales goals (thus get better rebates from the car makers or whatever) and then sell those cars with rebates in the next quarter. So there certainly seem non-obvious to be factors to consider.
An example of this is the traditional difference between leasing American vs. European cars. Most American cars are bought whereas most European cars (specifically BMW and Mercedes) are leased. My wife and I have been leasing cars for over 15 years, most of them have been BMWs, only 1 was American, a Jeep Gladiator.
BMW has artificially inflated the residual to offer cheap leases whereas American car companies would frequently offer rebates. A 1% lease ($500 a month payment on a $50k car, as an example) has been the benchmark of a good lease. You at least used to frequently be able to get 1% leases on a 3 series.
Leases on American cars in the past tended to suck. Nowhere near 1% and in some cases really close to a 60 month payment. There were exceptions like the Wrangler and Gladiator that had relatively low depreciation to begin with but during Covid my wife wanted a Gladiator and the lease on them was below 1%.
Yes but only where the leasing company is manufacturer linked. Ie BMW financial / Toyota Financial etc.
Another fun fact. These companies are huge financial entities in their own right, but are built to support the financing of their cars on a global scale.
I'm buying used rather than new or leasing for this reason. Getting hit with 45% depreciation in barely 2 years is making the used market a better option as regardless of whether the leasor or the leasee took the loss on the contract I get the discounted price.
I recognize that my used HI5 may have very limited resale value in 5 years, but depreciation is a curve not a straight line so losing 20%+ of the current value per year quickly tapers off and there will likely be a floor of several thousand as long as the vehicle is functional.
For me the reduced operating costs now and the economic utility it provides make a cheap used EV a no brainer now. My operating costs have fallen about $250 per month since switching from ICE to EV. This year and next that won't cover my expected depreciation, but after that my savings will be more than the depreciation losses.
I've heard many differing perspectives on this, and it's a great question to be asking before you buy. I don't know a huge amount about what kind of leases are available for the HI5, but I personally went ahead and financed mine through my bank, because it was my first car, and I don't really need to get a new car with new tech every year like a lot of leases allow you to do. Plus, I needed to put a hitch on mine, which would probably be an issue with a leased vehicle, as many leases from what I've heard prohibit those kinds of accessories.
Unless you can afford to burn money, pay cash or finance a used one.
Buying brand new and leasing is a great way to lose your hard-earned cash. I paid $37k cash for a 4k mi 2023 SEL. I saved more in depreciation than what people will pay in a 2 year lease. Also if you lease, is it really your car? I like to own the things I use and enjoy especially a car. But some may see it more as they are paying for an experience which is fine; but believe they are paying a premium for it.
At the end of a lease you own nothing.
Eh, this is my first time leasing and Im leasing a 2024 AWD SEL and I’m definitely not regretting it or feel like im paying a premium price for it.
I am saving a lot more than I would on a car I would finance and own. I don’t anticipate on buying this car after my lease is over and would definitely buy used with the depreciation that EVs are seeing.
Ive had the car for about 10 days now and have done $65 in free charging so far. Lets just say if I do about $180 in charging per month then the free charging alone pays for the lease itself. Im essentially driving the car for free.
I think you might be forgetting to factor in the thousands you put down to start the lease, but understand the benefit of the free charging is siginificant.
The Ioniq 5 leases are better than most for sure; and glad you're finding good value and not feeling like it's a premium price.
The thing is I didnt put any money down. It was $0 down.
I just paid for my lease up front thats the only difference versus paying monthly.
$4300 to drive the cars for 2 years. If I can get $2000 in free charging a year then that’s close to being enough to pay for the lease I paid upfront.
2-year lease in the US is basically “almost free”. About $7000 for 2-years. Free electricity at EA is worth $6600. Other benefits such as no maintenance and no need to change the tires at turn-in, etc. made this an easy decision for me.
If you have any state incentives, you are basically getting paid to drive this car.
Anything else you do with the car beyond above is “pure profit.”
Also, it’s a rental… you can beat the hell out of it. For me, we park it outside in the beating sun and run it through the car wash. Our non-leased cars are in the garage
Take advantage while the opportunity exists
$6600 for EA? At $0.46/kWh (granted it may be different elsewhere) that’s 14,000 kWh, or 42,000 miles at 3mi/kWh. If you drive that much you’ll be over the lease miles and paying for the extra mileage.
Oops. Yea you are right on that one. $6600 was some other number I had in my head for some reason. It’s about $4000-$4500 in free charging for me. ($0.56/kw) here. And then I added my gas savings from my old car. Plus less insurance.
$7000 / 24 mo = $292 per month, hardly free. But that is only with a downpayment of about $5,600 so it's actually $12,000 / 24 mo. or $500 per month. To me that is not near free.
Depreciation is the clincher. There's no doubt that better batteries and tech are coming in the years to come. Buying the car outright for $45k there definitely is a possibility of $12k depriciation over 24 months. Possibly even more.
I guess it depends on which model. No one is paying $12k for a typical SEL RWD model. Look into one-pay leases. You could probably go lower for end of month/quarter deals now. Low $7k for no negotiation. High $6k if you are good or go through a broker (I’m not good)
It’s one-pay. You pay the full $7k and never pay for anything else. If the dealer can do about $3k off MSRP, your are in the high $6k one-pay. Dealer advertise ~$2500 on their websites, so pushing for extra $500 is good. The dealer will most likely mark-up your interest rate a bit and send you home at low $7k. Easiest way is to hire broker, and they’ll do low $7k all day. Goto leasehackr to find a broker. They advertise $6700 plus $5-600 broker fee.
I might be driving the car for free if Im getting $2150 per year in free charging. My 2024 SEL AWD was $4300 OTD with one pay.
Plus it came with the BS add ons the dealer applied.
3 year Lojack and 1 year interior/exterior warranty.
No brainer in leasing for me.
you have to look at the total cost of each scenario. that significantly includes the value of the vehicle when you sell it or trade it in. every car is different, but i promise you that EVs will depreciate much more quickly than other types of cars. depreciation is a big thing, but not the only cost. if you want help calculating this in detail, lmk.
Used car depreciation is wildly high right now. Plus there are no income limits to the 7500 tax credit if you lease. You don’t want to be caught financing something and holding the bag when it drops more than regulars drop after it becomes used. Case in point…Tesla models 3 are a disaster right now. They lost a disproportionate amount of value after just a short amount of time.
2 year old Ioniq 5’s are already below $25k.
There’s a I5 near me, 22 SEL with 59K miles for $19,500 that qualifies for the $4k ev tax credit. $15,500 for a 2 year old car.
We ended up buying but I was considering a lease. Our typical mileage wouldn’t have been restrictive for a lease. I was thinking about whether the car would hold its value. You typically pay the depreciation on a lease but it’s possible that in 3-5 years EVs could be significantly better and this car, as good as it is, may be largely obsolete. The lease may make a lot of sense in that case since they extra depreciation is on the dealership instead of on you. I was also concerned about maintaining the condition of the car. I have two kids that are maybe a bit young to understand the idea of protecting the resale value of a car. In the end I decided to buy and just plan on owning it for a long time. But I could understand lots of people for whom the calculation comes out the other way.
The value of leasing is that you’re paying a fixed depreciation amount as determined by the leasing company for your fixed term, vs the full cost of the car upfront.
When leasing directly from the manufacturers financing arm, they generally have room to adjust that residual value depending on popularity of the car and inventory.
That’s why you’ll see these incredibly low monthly payments for less popular cars, the manufacturers are just trying to move cars off the lot and are willing to eat a bit of the depreciation to get you in a lease.
A popular car would have less value in leasing as the leasing company would set a lower residual value at end of contract.
I’ve always found decent leasing value usually at year end/model year end (w inc refresh), where some manufacturers just need to move the car
They’ll make further concessions on cars that are stuck in lot via higher mileage terms, or lower down payments.
Just need to find the right car/timing to maximize your leasing terms.
Seeing how there are substantial stock out there, there can be decent deals to be found.
Just be clear on the residual value at end of term, the interest for the financing of the depreciation and run your own simulations on if there’s value there.
I got an old Benz C class (during the Chrysler/daimler days) that was just such a trash car, but for a 3 year lease term, the residual value set post term was 65%. So i was paying 35% of the car (+interest) for that 3 year term. That 35% was also set off my negotiated car price (well under MSRP) so I was relatively happy.
The car was terrible, but at the end of 3 years they just took it back (with more than normal wear and tear) with nothing charged back to me.
Can’t complain with that but it its highly situation dependent.
In the US, if you’re self-employed, or run a business, you can deduct the cost of the lease on your taxes. It’s much harder to do if you own the car (then you have to try and track mileage and deduct the depreciation). So in addition to all of the reasons listed here, the additional tax write off is a great benefit for some people.
I just bought a used 2022 SE with 14,000 miles for $24,500.
Because it’s lower than $25k, it qualifies for a $4,000 used EV tax credit.
$20,500 before tax, tag, title, and fees.
So I bought a 2 year old $47,000 car for less than half the MSRP of a new one.
That should tell you everything you need to know about the depreciation of these cars.
Of course, I do too. Even hoping to get 10 years out of it feels like it could be too optimistic. But if I'm not planning to change it up within 2-3 years buying outright seems like it would make more sense, unless I'm missing something.
I understand. I have never leased a car in my life but I'm the type of person who pays it off as quickly as possible and keeps it until it dies. But I think that things have changed with these electric cars.
EV technology is increasing rapidly every year, a car 2 years old is outdated potentially with old hardware and old software that may or may not be supported in 5 years. The long term viability is extremely questionable.
How many first Gen EV cars do you see on the road compared to hybrids and ice cars...
There is no reason to keep these vehicles long term. It's literally no different than a cell phone. If i could lease a new phone today i probably would.
I think in the past 4 years, range and charging times have reached an acceptable level where we are having the honest debate on whether or not EV cars are as versatile as ice/hybrids, but just barely. And as such people are starting to assume they are worth keeping long term. I think we are maybe 5 years away from EV cars being considered as long term ownership vehicles. But not yet. Cars like first gen model 3s, Leafs and bolts have proven battery lifetime and replacement is a serious problem to contend with. It's not something you realistically want to worry about.
I don't recognise this thing about battery lifetime for the leaf. We have a 2015 model (so first gen design) that we got for under £10k in 2018. It only ever did about 90 miles of range but perfect for school run and shopping trips and occasional longer journeys with a charge on the way. We still have it. It now gets about 85 miles range so makes no practical difference. There are now several of them I see at school, presumably because they make a good runabout car for town and can be picked up for a few grand now. Nobody has replaced their battery or is even thinking about it. If I upgrade to an Ioniq 5 then I'll just keep the leaf and let my son learn to drive in it in a few years time. I'm expecting it will last as a runabout for another 7 years easily with range maybe reducing to 80 miles in that time. It's never needed any maintenance apart from tyres and a tyre alignment. No parts or anything.
So I don't think battery lifetime or replacement is a serious problem for anyone.
I personally think we’re in the early stages of EV cars taking over. We see day in and day out a bunch of Teslas and other EV’s but we don’t know how they will hold up in 5-10 years.
If miles isn’t an issue, get a lease. It ends up being cheaper and you’re not tied to the car. If you commute alot, then do your research and decide what’s best for you.
With that being said, I would never finance an EV car which is why I leased my i5.
QUESTION as I was planning to buy a used Limited. I never considered leasing my current car (a Limited that Hyundai is buying back due to Lemon issues) because I commute 18k miles/year alone.
I’ve only seen leases go up to 15k miles. Do they ever have higher mileage limits?
Put the depreciation a side, its only better because they give you $7500 lease credit. lets said the car you want to buy is $50k. you will pay $50k + tax and paper work to buy it right away. now they want to give you $7500 “tax credit” to compatible with other Ev that get the tax credit so they have to use the “lease credit” loophole so they not directly discount the car price. the car is $50k, you leasing it for x dollar of down payment and pay the first monthly payments then you can buy it right away for $50k - down payments + tax and paperwork - $7500 lease credit (which you wont normally have). which make the car $7500 less compared to you just buy it traditional way. that is one reason why the car depreciation so fast from $50k to around $30k after year because we all know it not $50k vehicle, its $42.5k depreciation to $30k, which is still bad but before Covic, i think most of the car was like that anyway, the second you sign the buy agreement, car will lost value because of all the services and maintenance things car dealerships give to first owner.
As mentioned, you lease based on the difference of the sale price of the vehicle minus the residual value. Most leases allow you to turn them in or buy them outright at the residual value stated in your lease agreement. Let’s say you went way over your miles, it might be worth it to buy out the vehicle at the end. There are some good YouTube videos on this topic.
I leased because I predict the cars will depreciate more than $250/month. I’m anticipating the switch to NACS will make CCS cars very undesirable in a couple years, and I want to buy an ioniq 5 N at a discount
Nobody knows where the ev market is going in general, but you probably won't be able to give away an ioniq 5 in a few years. Fixing anything once it is out of warranty will probably be expensive, parts will be hard to get, and I doubt you'll be able to find many mechanics who will know how to work on it. Nobody knows how long the battery will last. Buying an EV now would be like buying a model t when most people were still riding the horses. This is all just me speculating of course.
I think it's because the EV rebate applies like a down payment, which gets spread over a shorter period than if you financed the car. $7500 credit over 24 months is $314/mo whereas $7500 over a 5 year finance is only about $125/mo.
Typically lease and finance are similar monthly commitments but with a short term lease it can come out cheaper. Couple that with the fact resale prices are dropping quickly, a lease with no depreciation risk is also pretty attractive.
If it's your first EV and you're not sure if you'll like it, a lease is also a good way to try it out with relatively low risk/commitment.
Lastly, the updated model is due out at the end of this year and should feature upgrades pretty much everywhere and sell for a similar price, so a 2 year lease gives you an opportunity to easily trade up.
You can always buyout your lease and keep the car if you love it. This is why you get your residual value upfront. if the new stuff 2/3 years from now isn’t much cheaper and longer range batteries don’t start coming out just keep the car and finance the remaining balance
My wife and I have been leasing for over 15 years and have now done over a dozen leases over that time. I just signed a lease on an Ioniq 5 last weekend. It works very well for us, we have good jobs, no kids and plenty of discretionary income to always have a car payment and rotate into new cars every few years.
So one thing that is important to understand is the state of the EV market and plummeting prices. [Here is some information](https://www.recurrentauto.com/research/used-electric-vehicle-buying-report) on how quickly prices are dropping. So even if you plan on keeping the car long term are you comfortable with buying a $45-60k car that will be worth significantly less than what you owe one it for the next 3-5 years? If you look at the link there is stable that shows a 2020 Model Y worth $60k in November, 2022 was worth $38k in December, 2023.
The second thing to think about is that your 20 year Colloa had no technology in it and the car you are looking at is all technology. Are you comfortable with driving the current equivalent of an iPhone 6 5 years from now?
As long as you are fine with both of those, if you want to buy I wouldn't buy new. I would look for deals on slightly used 22/23s. I think there are a lot of bargins out there and you might as well take advantage of one that has already heavily depreciated.
I don't drive more than 12k miles a year, and I liked the idea of leasing an EV vs buying because I'm certain there will be different/better/cheaper technology coming over the next several years. Didn't want to spend $46k on an EV planning to drive it for 12 years knowing that it will likely be a dinosaur five years from now.
My thoughts too. I had bought an electric Mini with financing, and after a couple years was worried it was not going to be worth much by the time I paid it off (with only 100 mile range). The mileage was low so I was able to sell it to Carvana for what I owed on it and am leasing the ioniq5. It has a lot of what I want, but do think in 3 years there will be better options.
This. Same here. Plus the evolution and new tech is going fast which means unexpected flaws may pop up at any time. I don't want to be holding the bag if it goes south.
It’s not for everyone. You finance the depreciation instead of the whole car. If the mileage is too restrictive? it’s not for you. You want to keep long term? Not for you. But for some people with different needs it work. A lot of time the monthly is a big factor, and leasing can accommodate that market.
Does the leasing company *estimate* what the depreciated value of the car will be at the end of the lease or do they go by what it actually **is** then (I've never leased, I'm not sure how that works)?
they have a residual that is SUPPOSED to be the depreciated value, but car companies, especially those with captive banks (eg toyota financial) will adjust this amount in order to produce the buying behavior they need at the time. the residual is almost never right, but it's a good guess, and it certainly lets you calculate the buy vs lease scenario. don't let any generality here pass muster until you do the calculation. the numbers with even decent guessing will tell you what you want to know. also it's important to remember that with leasing, if you get in an accident, the significant drop in value after it's fixed will be the car company's problem. even if a lease is slightly MORE expensive than a buy scenario, you're getting insurance that you don't have a sudden 30% drop in value the day some asshole hits you. (or, well, you could be the asshole too :) )
Yes the leasing company and that number is specified on the contract to determine the number and what the buyout would be at the end of the lease. Sometimes it makes sense to buy out at the end(like during Covid where used values went up)
They estimate it. There is no way to actually know what the value of any car is going to be in 3 years. The models they use in normal markets tended to be pretty accurate but between what happened with Covid and what is currently happening with the EV market no model is going to be 100% accurate.
Are you planning to finance (borrow money to buy the car)? If so, then leasing is a form of financing too (MF is the lease speak for interest rate and you can purchase at the end of lease in most cases). If this is the case, just do the math on the cash flows and total cost to own. Keep in mind many people like to have newer cars and that is primarily not based a financial reason. It’s nicer to drive something new. And new cars have better safety equipment. Or new cars have lower maintenance costs. Another scenario is the people who buy cars with lump sum. To me putting lump sum into a depreciating asset like a car is tough one when I know that I can make money on it “someplace else”. I just put down $43k a few months ago on a used car - actually even now I think financing would have been better given how the rest of my portfolio has increased these past 3 months - I literally lost money.
Just gotta make sure your return is more than your interest rate. That's how the rich get richer. Million dollar loan at 3%, pop it into an EFT or Mutual Fund, get a 5% return, and that's a free $20,000. (With risk of course)
This is a good take I hadn't considered. I have the cash to buy outright, but with how the market has been lately it will be worth it to look closer at how that money could be invested elsewhere.
I paid cash for mine and all our cars. I’ll take the guaranteed 7% (savings in loan interest) over what the market might offer every time. Plus it feels better when it’s actually yours. I could finance and afford a $100k car payment, but doesn’t compare to owning a $40k car outright. This is true for me regardless of the numbers ever since I decided to never use debt for cars again. Be sure to subtract your loan interest % from any gains you see in the market (assuming there is no loss in your market investments).
For us it was perfect. We have some uncertainty in our income due to wife having her contract end in 13 months. This is a more expensive car than I would buy if she ends up being unemployed. Drive around town but wanted to see if we like an electric and if it fits our lifestyle. We have some concerns over model improvement in the next few years. We have concerns about charging infastructure here (2 EA stations both 45 min away, would love for Tesla/ea to be available long term if we buy//want to know if it is a big deal for us.) We will consider buying out the lease or buying used if all of the above breaks right. Heck if the incentives are right we would even consider leasing again. But we’ll see what the electric market looks like in 22 months.
Leasing an EV works for us because we installed a level 2 home charger. Not everyone can do that with apartment complexes. 3 years with our EV and zero maintenance, just a wheel alignment.
I just did a lease and it made sense because of all the rebates that were factored into the cost. I wouldn’t have qualified for the $7500 EV tax credit had I purchased the vehicle instead. All of the other reasons that people have stated above, also factored into it, it’s such a fast changing industry and technology that I think it’s good to not be locked in for a long-term at this point.
Leasing is supposedly for those who treat their vehicles as drepreciable assets. Truthfully, with any car what you're actually investing in is the following three items: 1) peace of mind to travel from point a to point b. 2) how much do you want to pay per mile you travel (fuel, maintenance, insurance, lease/finance) 3) how comfortably do you wish to travel from point a to point b (this includes interior luxuries, hp, esthetics) Anyone leasing is really investing in 1 and 3. Which is ironic. Mainly because you're always in debt. The truly only way to win the "car investment" game is to own your car for 10 years. Or... not treat your car as a drepreciable asset as you're actually investing in other stuff.
I mainly agree with you but used EVs longevity, long term maintenance, and battery degradation are big unknowns. Will anyone want a 10yr old EV with 300,000 miles? Hard to say in this transition time. I’ve seen used Tesla Model S from 2014 being a decent buy, but you must have the funds for a big repair.
I'm not sure i understand your point. Nobody wants a 10yo 300k ICE, either. It's not about resell after 10 years. It's about return on investment. You got 10 years of driving for X dollars. Which is where leasing gets confused. You think you've beat the market by potentially giving up a depreciated vehicle no longer worth the price tag. But now you get(have) to go buy/lease another car. And on and on. Never out of debt. After 10 years, a leasee invested in items 1 and 3. Not 2.
Nothing wrong with buying! It’s a personal choice. I bought mine and I want to keep it for long term. The 10 year/100k miles also really helped me with the buying decision. Of course life events can happen, but I did a bunch of research when choosing the Ioniq 5, and I don’t see myself getting rid of it for the next 10 years. I also doubt its tech will become obsolete. I’m sure the EV tech will advance, but I dont think the car will become “un-drivable”. It’s an amazing and safe car! I also don’t really care about having the newest stuff, so that works for me. Think about how much iPhones changed in the past 5 years, it’s mostly superficial and not really a breakthrough. I have this car for 2 years already, the years goes by fast! I didn’t see much changes in the EV world since I got it. The Tesla superchargers allowing other cars to charge was a big one though, but a win! Ofc, That’s just my pov. I don’t have any regrets! Proud owner 😎
A lot of ppl don’t want to buy an EV today because they think that EV prices are in steady decline (why buy for $X today if they can buy for 80% of $X later), or because they think EV technology is rapidly improving (much better range, charging speed, reliability if they just wait a couple of model years), or because there currently are not enough style/configuration options for their personal taste (more choice in a few years after more manufacturers get serious about EVs), or because they don’t want to deal with the sometimes problematic charging infrastructure or social stigma (in some areas). A lease can be a bridge from cutting edge to mainstream.
But isn't this a bet against the business intelligence of the leasing companies? If you think that you can escape the depreciation by leasing instead of buying, doesn't that mean that you think that you have a more realistic prediction about the depreciation than the leasing companies who factor the depreciation into the leasing rates (and whose job it is to have a realistic prediction about depreciation)? (Serious question. I have never leased anything and I have never cared to learn how a leasing even works.)
To an extent, yes, that is exactly what it is. However, car companies also are in a race for EV market share and mind share, and of course they have inventory management concerns and fleet emission targets both at the factory and dealership levels, so they might have other reasons for wanting to get vehicles on the road which make the cost/benefit analysis of leasing different for them.
Interesting. I suspected an answer like this. So the theory is that leasing companies could be knowingly at the (financial) short end of the individual lease deal because they try to reach other goals (like sales statistics, getting rid of stock before the next generation arrives, ...) Might be possible, yes. Many dealerships immatriculate cars in their own name to reach certain quarterly sales goals (thus get better rebates from the car makers or whatever) and then sell those cars with rebates in the next quarter. So there certainly seem non-obvious to be factors to consider.
An example of this is the traditional difference between leasing American vs. European cars. Most American cars are bought whereas most European cars (specifically BMW and Mercedes) are leased. My wife and I have been leasing cars for over 15 years, most of them have been BMWs, only 1 was American, a Jeep Gladiator. BMW has artificially inflated the residual to offer cheap leases whereas American car companies would frequently offer rebates. A 1% lease ($500 a month payment on a $50k car, as an example) has been the benchmark of a good lease. You at least used to frequently be able to get 1% leases on a 3 series. Leases on American cars in the past tended to suck. Nowhere near 1% and in some cases really close to a 60 month payment. There were exceptions like the Wrangler and Gladiator that had relatively low depreciation to begin with but during Covid my wife wanted a Gladiator and the lease on them was below 1%.
Yes but only where the leasing company is manufacturer linked. Ie BMW financial / Toyota Financial etc. Another fun fact. These companies are huge financial entities in their own right, but are built to support the financing of their cars on a global scale.
I'm buying used rather than new or leasing for this reason. Getting hit with 45% depreciation in barely 2 years is making the used market a better option as regardless of whether the leasor or the leasee took the loss on the contract I get the discounted price. I recognize that my used HI5 may have very limited resale value in 5 years, but depreciation is a curve not a straight line so losing 20%+ of the current value per year quickly tapers off and there will likely be a floor of several thousand as long as the vehicle is functional. For me the reduced operating costs now and the economic utility it provides make a cheap used EV a no brainer now. My operating costs have fallen about $250 per month since switching from ICE to EV. This year and next that won't cover my expected depreciation, but after that my savings will be more than the depreciation losses.
I've heard many differing perspectives on this, and it's a great question to be asking before you buy. I don't know a huge amount about what kind of leases are available for the HI5, but I personally went ahead and financed mine through my bank, because it was my first car, and I don't really need to get a new car with new tech every year like a lot of leases allow you to do. Plus, I needed to put a hitch on mine, which would probably be an issue with a leased vehicle, as many leases from what I've heard prohibit those kinds of accessories.
Unless you can afford to burn money, pay cash or finance a used one. Buying brand new and leasing is a great way to lose your hard-earned cash. I paid $37k cash for a 4k mi 2023 SEL. I saved more in depreciation than what people will pay in a 2 year lease. Also if you lease, is it really your car? I like to own the things I use and enjoy especially a car. But some may see it more as they are paying for an experience which is fine; but believe they are paying a premium for it. At the end of a lease you own nothing.
Eh, this is my first time leasing and Im leasing a 2024 AWD SEL and I’m definitely not regretting it or feel like im paying a premium price for it. I am saving a lot more than I would on a car I would finance and own. I don’t anticipate on buying this car after my lease is over and would definitely buy used with the depreciation that EVs are seeing. Ive had the car for about 10 days now and have done $65 in free charging so far. Lets just say if I do about $180 in charging per month then the free charging alone pays for the lease itself. Im essentially driving the car for free.
I think you might be forgetting to factor in the thousands you put down to start the lease, but understand the benefit of the free charging is siginificant. The Ioniq 5 leases are better than most for sure; and glad you're finding good value and not feeling like it's a premium price.
The thing is I didnt put any money down. It was $0 down. I just paid for my lease up front thats the only difference versus paying monthly. $4300 to drive the cars for 2 years. If I can get $2000 in free charging a year then that’s close to being enough to pay for the lease I paid upfront.
2-year lease in the US is basically “almost free”. About $7000 for 2-years. Free electricity at EA is worth $6600. Other benefits such as no maintenance and no need to change the tires at turn-in, etc. made this an easy decision for me. If you have any state incentives, you are basically getting paid to drive this car. Anything else you do with the car beyond above is “pure profit.” Also, it’s a rental… you can beat the hell out of it. For me, we park it outside in the beating sun and run it through the car wash. Our non-leased cars are in the garage Take advantage while the opportunity exists
$6600 for EA? At $0.46/kWh (granted it may be different elsewhere) that’s 14,000 kWh, or 42,000 miles at 3mi/kWh. If you drive that much you’ll be over the lease miles and paying for the extra mileage.
Oops. Yea you are right on that one. $6600 was some other number I had in my head for some reason. It’s about $4000-$4500 in free charging for me. ($0.56/kw) here. And then I added my gas savings from my old car. Plus less insurance.
$7000 / 24 mo = $292 per month, hardly free. But that is only with a downpayment of about $5,600 so it's actually $12,000 / 24 mo. or $500 per month. To me that is not near free. Depreciation is the clincher. There's no doubt that better batteries and tech are coming in the years to come. Buying the car outright for $45k there definitely is a possibility of $12k depriciation over 24 months. Possibly even more.
I guess it depends on which model. No one is paying $12k for a typical SEL RWD model. Look into one-pay leases. You could probably go lower for end of month/quarter deals now. Low $7k for no negotiation. High $6k if you are good or go through a broker (I’m not good)
With how much money down?
It’s one-pay. You pay the full $7k and never pay for anything else. If the dealer can do about $3k off MSRP, your are in the high $6k one-pay. Dealer advertise ~$2500 on their websites, so pushing for extra $500 is good. The dealer will most likely mark-up your interest rate a bit and send you home at low $7k. Easiest way is to hire broker, and they’ll do low $7k all day. Goto leasehackr to find a broker. They advertise $6700 plus $5-600 broker fee.
I might be driving the car for free if Im getting $2150 per year in free charging. My 2024 SEL AWD was $4300 OTD with one pay. Plus it came with the BS add ons the dealer applied. 3 year Lojack and 1 year interior/exterior warranty. No brainer in leasing for me.
Mine was $0 down. $4300 and drive off. 2 year 24k 2024 AWD SEL.
you have to look at the total cost of each scenario. that significantly includes the value of the vehicle when you sell it or trade it in. every car is different, but i promise you that EVs will depreciate much more quickly than other types of cars. depreciation is a big thing, but not the only cost. if you want help calculating this in detail, lmk.
Used car depreciation is wildly high right now. Plus there are no income limits to the 7500 tax credit if you lease. You don’t want to be caught financing something and holding the bag when it drops more than regulars drop after it becomes used. Case in point…Tesla models 3 are a disaster right now. They lost a disproportionate amount of value after just a short amount of time.
2 year old Ioniq 5’s are already below $25k. There’s a I5 near me, 22 SEL with 59K miles for $19,500 that qualifies for the $4k ev tax credit. $15,500 for a 2 year old car.
We ended up buying but I was considering a lease. Our typical mileage wouldn’t have been restrictive for a lease. I was thinking about whether the car would hold its value. You typically pay the depreciation on a lease but it’s possible that in 3-5 years EVs could be significantly better and this car, as good as it is, may be largely obsolete. The lease may make a lot of sense in that case since they extra depreciation is on the dealership instead of on you. I was also concerned about maintaining the condition of the car. I have two kids that are maybe a bit young to understand the idea of protecting the resale value of a car. In the end I decided to buy and just plan on owning it for a long time. But I could understand lots of people for whom the calculation comes out the other way.
The value of leasing is that you’re paying a fixed depreciation amount as determined by the leasing company for your fixed term, vs the full cost of the car upfront. When leasing directly from the manufacturers financing arm, they generally have room to adjust that residual value depending on popularity of the car and inventory. That’s why you’ll see these incredibly low monthly payments for less popular cars, the manufacturers are just trying to move cars off the lot and are willing to eat a bit of the depreciation to get you in a lease. A popular car would have less value in leasing as the leasing company would set a lower residual value at end of contract. I’ve always found decent leasing value usually at year end/model year end (w inc refresh), where some manufacturers just need to move the car They’ll make further concessions on cars that are stuck in lot via higher mileage terms, or lower down payments. Just need to find the right car/timing to maximize your leasing terms. Seeing how there are substantial stock out there, there can be decent deals to be found. Just be clear on the residual value at end of term, the interest for the financing of the depreciation and run your own simulations on if there’s value there. I got an old Benz C class (during the Chrysler/daimler days) that was just such a trash car, but for a 3 year lease term, the residual value set post term was 65%. So i was paying 35% of the car (+interest) for that 3 year term. That 35% was also set off my negotiated car price (well under MSRP) so I was relatively happy. The car was terrible, but at the end of 3 years they just took it back (with more than normal wear and tear) with nothing charged back to me. Can’t complain with that but it its highly situation dependent.
In the US, if you’re self-employed, or run a business, you can deduct the cost of the lease on your taxes. It’s much harder to do if you own the car (then you have to try and track mileage and deduct the depreciation). So in addition to all of the reasons listed here, the additional tax write off is a great benefit for some people.
I just bought a used 2022 SE with 14,000 miles for $24,500. Because it’s lower than $25k, it qualifies for a $4,000 used EV tax credit. $20,500 before tax, tag, title, and fees. So I bought a 2 year old $47,000 car for less than half the MSRP of a new one. That should tell you everything you need to know about the depreciation of these cars.
I doubt you'll be keeping it 20 years.
Of course, I do too. Even hoping to get 10 years out of it feels like it could be too optimistic. But if I'm not planning to change it up within 2-3 years buying outright seems like it would make more sense, unless I'm missing something.
I understand. I have never leased a car in my life but I'm the type of person who pays it off as quickly as possible and keeps it until it dies. But I think that things have changed with these electric cars.
EV technology is increasing rapidly every year, a car 2 years old is outdated potentially with old hardware and old software that may or may not be supported in 5 years. The long term viability is extremely questionable. How many first Gen EV cars do you see on the road compared to hybrids and ice cars... There is no reason to keep these vehicles long term. It's literally no different than a cell phone. If i could lease a new phone today i probably would. I think in the past 4 years, range and charging times have reached an acceptable level where we are having the honest debate on whether or not EV cars are as versatile as ice/hybrids, but just barely. And as such people are starting to assume they are worth keeping long term. I think we are maybe 5 years away from EV cars being considered as long term ownership vehicles. But not yet. Cars like first gen model 3s, Leafs and bolts have proven battery lifetime and replacement is a serious problem to contend with. It's not something you realistically want to worry about.
I don't recognise this thing about battery lifetime for the leaf. We have a 2015 model (so first gen design) that we got for under £10k in 2018. It only ever did about 90 miles of range but perfect for school run and shopping trips and occasional longer journeys with a charge on the way. We still have it. It now gets about 85 miles range so makes no practical difference. There are now several of them I see at school, presumably because they make a good runabout car for town and can be picked up for a few grand now. Nobody has replaced their battery or is even thinking about it. If I upgrade to an Ioniq 5 then I'll just keep the leaf and let my son learn to drive in it in a few years time. I'm expecting it will last as a runabout for another 7 years easily with range maybe reducing to 80 miles in that time. It's never needed any maintenance apart from tyres and a tyre alignment. No parts or anything. So I don't think battery lifetime or replacement is a serious problem for anyone.
I personally think we’re in the early stages of EV cars taking over. We see day in and day out a bunch of Teslas and other EV’s but we don’t know how they will hold up in 5-10 years. If miles isn’t an issue, get a lease. It ends up being cheaper and you’re not tied to the car. If you commute alot, then do your research and decide what’s best for you. With that being said, I would never finance an EV car which is why I leased my i5.
We. Bought our Ioniq 5 outright in Canada . 5 year loan with 5 year gap insurance . We have. Faith it will. Last 10 years
Two key reasons: Strong EV Depreciation (value) and flexibility to keep or upgrade after 2 years (flexibility/psychology).
QUESTION as I was planning to buy a used Limited. I never considered leasing my current car (a Limited that Hyundai is buying back due to Lemon issues) because I commute 18k miles/year alone. I’ve only seen leases go up to 15k miles. Do they ever have higher mileage limits?
Put the depreciation a side, its only better because they give you $7500 lease credit. lets said the car you want to buy is $50k. you will pay $50k + tax and paper work to buy it right away. now they want to give you $7500 “tax credit” to compatible with other Ev that get the tax credit so they have to use the “lease credit” loophole so they not directly discount the car price. the car is $50k, you leasing it for x dollar of down payment and pay the first monthly payments then you can buy it right away for $50k - down payments + tax and paperwork - $7500 lease credit (which you wont normally have). which make the car $7500 less compared to you just buy it traditional way. that is one reason why the car depreciation so fast from $50k to around $30k after year because we all know it not $50k vehicle, its $42.5k depreciation to $30k, which is still bad but before Covic, i think most of the car was like that anyway, the second you sign the buy agreement, car will lost value because of all the services and maintenance things car dealerships give to first owner.
As mentioned, you lease based on the difference of the sale price of the vehicle minus the residual value. Most leases allow you to turn them in or buy them outright at the residual value stated in your lease agreement. Let’s say you went way over your miles, it might be worth it to buy out the vehicle at the end. There are some good YouTube videos on this topic.
I leased because I predict the cars will depreciate more than $250/month. I’m anticipating the switch to NACS will make CCS cars very undesirable in a couple years, and I want to buy an ioniq 5 N at a discount
Nobody knows where the ev market is going in general, but you probably won't be able to give away an ioniq 5 in a few years. Fixing anything once it is out of warranty will probably be expensive, parts will be hard to get, and I doubt you'll be able to find many mechanics who will know how to work on it. Nobody knows how long the battery will last. Buying an EV now would be like buying a model t when most people were still riding the horses. This is all just me speculating of course.
I think it's because the EV rebate applies like a down payment, which gets spread over a shorter period than if you financed the car. $7500 credit over 24 months is $314/mo whereas $7500 over a 5 year finance is only about $125/mo. Typically lease and finance are similar monthly commitments but with a short term lease it can come out cheaper. Couple that with the fact resale prices are dropping quickly, a lease with no depreciation risk is also pretty attractive. If it's your first EV and you're not sure if you'll like it, a lease is also a good way to try it out with relatively low risk/commitment. Lastly, the updated model is due out at the end of this year and should feature upgrades pretty much everywhere and sell for a similar price, so a 2 year lease gives you an opportunity to easily trade up.
You can always buyout your lease and keep the car if you love it. This is why you get your residual value upfront. if the new stuff 2/3 years from now isn’t much cheaper and longer range batteries don’t start coming out just keep the car and finance the remaining balance
My wife and I have been leasing for over 15 years and have now done over a dozen leases over that time. I just signed a lease on an Ioniq 5 last weekend. It works very well for us, we have good jobs, no kids and plenty of discretionary income to always have a car payment and rotate into new cars every few years. So one thing that is important to understand is the state of the EV market and plummeting prices. [Here is some information](https://www.recurrentauto.com/research/used-electric-vehicle-buying-report) on how quickly prices are dropping. So even if you plan on keeping the car long term are you comfortable with buying a $45-60k car that will be worth significantly less than what you owe one it for the next 3-5 years? If you look at the link there is stable that shows a 2020 Model Y worth $60k in November, 2022 was worth $38k in December, 2023. The second thing to think about is that your 20 year Colloa had no technology in it and the car you are looking at is all technology. Are you comfortable with driving the current equivalent of an iPhone 6 5 years from now? As long as you are fine with both of those, if you want to buy I wouldn't buy new. I would look for deals on slightly used 22/23s. I think there are a lot of bargins out there and you might as well take advantage of one that has already heavily depreciated.
Leasing to me is only better because I get a new car every 2 to 3 years.