Who is leasing vs buying?
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It’s math. Not maths. None the less you are assuming the car won’t lose much value in two years. Basically I would lease every EV UNLESS you plan on keeping it after the lease or for longer than 4 years. Think of a EV like the lasted iPhone. Every couple years they get better. More battery life, more features, better software . So owning old EV ( with exception of EV companies that updates software for free and adds new features often) is like owning an old iPhone. Nobody wants an old iPhone.
And I do expect the EV to lose at ton of value over 2 years. But given the cost to lease, it would need to lose a whole lot of value for a lease to make sense.
Do you have the math (no s) comparing purchase and lease over 2 years that supports your argument?
Last edited by tmrqs; Sep 4, 2024 at 12:42 AM.
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Alright let's do some quick math and assumptions.
- Car is $101,900 pre tax, would cost $110,434 with tax.
- Let's round it up to $111k to include the dealer's fees mentioned.
- We'll compare buying cash at $111k vs leasing over 39 months + investing that cash for that period.
Looking at the lease itself
The amount paid over the course of the lease will be: $10,000 down + $61,386 (1,574 over 39 months) = $71,386
If you return it then, pay some extra fees but the cost of ownership would have been about say $72k.
The residual value of the car being $58,083 (pre-tax) - if you were to keep the car at the end of the lease, the total cost of the car would be: $134,333 (+ some fees they may charge you)
But you could potentially get about $10k back investing the cash at 5% over 39 months.
Now let's say you buy it upfront but still want to sell it after 39 months
The cost of the car is $111k and you get zero interest from your savings, you paid it all upfront, taxes included.
Let's be dramatic and say the car devaluates like crazy, and it only worth $40k in three years, a much worse valuation than Porsche is giving it (at $58k). That would represent a 61% drop in valuation.
You would have paid $111k and recouped say $40k selling it.
The cost of ownership would have been $71,000. Which is about the cost of leasing the car (with the $7,500 incentive)... assuming a much worse valuation than Porsche.
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Alright let's do some quick math and assumptions.
- Car is $101,900 pre tax, would cost $110,434 with tax.
- Let's round it up to $111k to include the dealer's fees mentioned.
- We'll compare buying cash at $111k vs leasing over 39 months + investing that cash for that period.
Looking at the lease itself
The amount paid over the course of the lease will be: $10,000 down + $61,386 (1,574 over 39 months) = $71,386
If you return it then, pay some extra fees but the cost of ownership would have been about say $72k.
The residual value of the car being $58,083 (pre-tax) - if you were to keep the car at the end of the lease, the total cost of the car would be: $134,333 (+ some fees they may charge you)
But you could potentially get about $10k back investing the cash at 5% over 39 months.
Now let's say you buy it upfront but still want to sell it after 39 months
The cost of the car is $111k and you get zero interest from your savings, you paid it all upfront, taxes included.
Let's be dramatic and say the car devaluates like crazy, and it only worth $40k in three years, a much worse valuation than Porsche is giving it (at $58k). That would represent a 61% drop in valuation.
You would have paid $111k and recouped say $40k selling it.
The cost of ownership would have been $71,000. Which is about the cost of leasing the car (with the $7,500 incentive)... assuming a much worse valuation than Porsche.
- Car is $101,900 pre tax, would cost $110,434 with tax.
- Let's round it up to $111k to include the dealer's fees mentioned.
- We'll compare buying cash at $111k vs leasing over 39 months + investing that cash for that period.
Looking at the lease itself
The amount paid over the course of the lease will be: $10,000 down + $61,386 (1,574 over 39 months) = $71,386
If you return it then, pay some extra fees but the cost of ownership would have been about say $72k.
The residual value of the car being $58,083 (pre-tax) - if you were to keep the car at the end of the lease, the total cost of the car would be: $134,333 (+ some fees they may charge you)
But you could potentially get about $10k back investing the cash at 5% over 39 months.
Now let's say you buy it upfront but still want to sell it after 39 months
The cost of the car is $111k and you get zero interest from your savings, you paid it all upfront, taxes included.
Let's be dramatic and say the car devaluates like crazy, and it only worth $40k in three years, a much worse valuation than Porsche is giving it (at $58k). That would represent a 61% drop in valuation.
You would have paid $111k and recouped say $40k selling it.
The cost of ownership would have been $71,000. Which is about the cost of leasing the car (with the $7,500 incentive)... assuming a much worse valuation than Porsche.
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I expect the car to be worth less than the residual but even with a 60% drop in value, leasing isn’t compelling so…
Will the car lose 65 or 70% of its value in 3 years? Who knows… but feels unlikely. Just a (mildly?) educated guess of course.
Last edited by tmrqs; Sep 5, 2024 at 03:37 PM.
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TMRQS, Yeah the residual seems high based on the current EV depreciation trends. I don't agree with your comment about lease end. Porsche wants you to be in the money or breakeven on the residual so that you can trade on another Porsche or they can provide you a pull ahead offer 6-12 months from maturity and get you into another Porsche. If they've overstated the residual, they certainly would prefer that you buy it out. Porsche Motors and PFS don't retail used cars, dealers do. If this Macan is severely underwater on the residual they will lose the difference between residual and wholesale value when they sell it.
With this 58% residual, a dealer would believe they can retail this Macan at $70k after reconditioning (15% gross profit). for Porsche FS to break even and have a dealer buy it for $58k.
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TMRQS, Yeah the residual seems high based on the current EV depreciation trends. I don't agree with your comment about lease end. Porsche wants you to be in the money or breakeven on the residual so that you can trade on another Porsche or they can provide you a pull ahead offer 6-12 months from maturity and get you into another Porsche. If they've overstated the residual, they certainly would prefer that you buy it out. Porsche Motors and PFS don't retail used cars, dealers do. If this Macan is severely underwater on the residual they will lose the difference between residual and wholesale value when they sell it.
With this 58% residual, a dealer would believe they can retail this Macan at $70k after reconditioning (15% gross profit). for Porsche FS to break even and have a dealer buy it for $58k.
With this 58% residual, a dealer would believe they can retail this Macan at $70k after reconditioning (15% gross profit). for Porsche FS to break even and have a dealer buy it for $58k.
If they cant sell it in 90 days, they will send to auction and then the used car market will take over.
Last edited by TurboIXXI; Sep 6, 2024 at 09:29 PM.
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i think the residual is too high and Porsche doesn’t want you to buy it at the end of the lease, they’ll sell it themselves. And if you want to keep the car, they’re charging a premium with that residual.
I expect the car to be worth less than the residual but even with a 60% drop in value, leasing isn’t compelling so…
Will the car lose 65 or 70% of its value in 3 years? Who knows… but feels unlikely. Just a (mildly?) educated guess of course.
I expect the car to be worth less than the residual but even with a 60% drop in value, leasing isn’t compelling so…
Will the car lose 65 or 70% of its value in 3 years? Who knows… but feels unlikely. Just a (mildly?) educated guess of course.
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I ran the numbers and it's hard to justify buying in the US given the $7,500 lease incentive. Here's my logic:
If I buy the car for $105,000, I pay $114,181 (with tax).
If I lease with the following terms, I pay $63,167 over the life of the lease:
- Down payment: $37,697 + $3,942 tax: $41,639
- 39 month lease payments at $552 (including tax): $21,528
In addition, if I lease (compared to buying), I will earn about $9,839 in interest over the 39 months given the above terms and 5%.
So, if I lease, I will have $72,542 more in my bank account on day 1 of the lease. At the end of the lease, I will still have $60,853 (original amount + interest earned - 39 lease payments). If the residual is $59,913 (57% residual) and I still love the car, I can buy it with the money I saved (I would still have to kick in the sales tax of around $4,000).
Given the following facts, I prefer Porsche to take on the risk of my long term ownership. If we end up loving the car after 39 month, then I'll pay $4,000 more than what I would have if I'd purchased outright. If I don't, Porsche can keep the car and I can drive something shiny and new:
1. This is the first version of any car on the new PPE platform, what could go wrong? And, if there are problems, I don't know how responsive our local dealership will be. So far, we haven't been super impressed with them.
2. I haven't got to drive the car yet in my city to know how it feels and behaves on our terrain.
3. I haven't seen what it looks like with my options. One of us might dislike it in the flesh.
4. I don't know if my partner and I will be happy with squeezing it into our garage over the long haul, time will tell. But we aren't getting more agile as we age
If I buy the car for $105,000, I pay $114,181 (with tax).
If I lease with the following terms, I pay $63,167 over the life of the lease:
- Down payment: $37,697 + $3,942 tax: $41,639
- 39 month lease payments at $552 (including tax): $21,528
In addition, if I lease (compared to buying), I will earn about $9,839 in interest over the 39 months given the above terms and 5%.
So, if I lease, I will have $72,542 more in my bank account on day 1 of the lease. At the end of the lease, I will still have $60,853 (original amount + interest earned - 39 lease payments). If the residual is $59,913 (57% residual) and I still love the car, I can buy it with the money I saved (I would still have to kick in the sales tax of around $4,000).
Given the following facts, I prefer Porsche to take on the risk of my long term ownership. If we end up loving the car after 39 month, then I'll pay $4,000 more than what I would have if I'd purchased outright. If I don't, Porsche can keep the car and I can drive something shiny and new:
1. This is the first version of any car on the new PPE platform, what could go wrong? And, if there are problems, I don't know how responsive our local dealership will be. So far, we haven't been super impressed with them.
2. I haven't got to drive the car yet in my city to know how it feels and behaves on our terrain.
3. I haven't seen what it looks like with my options. One of us might dislike it in the flesh.
4. I don't know if my partner and I will be happy with squeezing it into our garage over the long haul, time will tell. But we aren't getting more agile as we age