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This is a terrible article. Not only does the writer not seem to understand that the residual is calculated by adding the $7500 tax credit, which means Ally has $7500 of cushion, but he seems to think it's a piece of fast depreciating consumer electronics, which it most certainly is not.
 

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Not only does the writer not seem to understand that the residual is calculated by adding the $7500 tax credit
That part he definitely doesnt understand. BUT, I dont agree that he is saying it any different than any other car. He is saying that no one knows. And that is a truthful statement. And your best option to hedge this bet is with a lease, in which your upside potential is great, and your downside potential is practically nil.
 

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This is a terrible article. Not only does the writer not seem to understand that the residual is calculated by adding the $7500 tax credit, which means Ally has $7500 of cushion, but he seems to think it's a piece of fast depreciating consumer electronics, which it most certainly is not.
I didn't get that from his tone. The tone that I got was that ANY car is a depreciating asset, and this car has more deprecation risk than most... something that a LOT of people on this site seem to agree with.
 

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Good article. The author makes a lot of very interesting points from a financial standpoint.
 

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And your best option to hedge this bet is with a lease, in which your upside potential is great, and your downside potential is practically nil.
Not necessarily true. Your downside is the $800 acquisition cost, the disposition fee, the finance payments you'll make as the lease's interest rate is not 0%, giving up any state incentives if you are elegible, and extra tax that you'll pay on a lease (varies by state; my state charges 9% on leases but 6% on purchases). Even after the extra cash GM throws on top of leases, for me this netted out to about $2000 extra to lease.
 

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Not necessarily true. Your downside is the $800 acquisition cost, the disposition fee, the finance payments you'll make as the lease's interest rate is not 0%, giving up any state incentives if you are elegible, and extra tax that you'll pay on a lease (varies by state; my state charges 9% on leases but 6% on purchases). Even after the extra cash GM throws on top of leases, for me this netted out to about $2000 extra to lease.
As I didn't lease, I don't really know. I drive too many miles.
 

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Not necessarily true. Your downside is the $800 acquisition cost, the disposition fee, the finance payments you'll make as the lease's interest rate is not 0%, giving up any state incentives if you are elegible, and extra tax that you'll pay on a lease (varies by state; my state charges 9% on leases but 6% on purchases). Even after the extra cash GM throws on top of leases, for me this netted out to about $2000 extra to lease.
With my Ally lease, the acquisition fee is $890 but there is no disposition fee. My lease interest rate was also 1.5% (loan rates were around 4% when I got mine). My sales tax is only 1/3 as much on the lease since it is based on depreciation and financing. Also, some people don't qualify for the $7500 federal tax credit, so leasing is the way to go for them. Leases vary a great deal depending on which state you are in, and your specific financial situation.

Uncertainty of battery life and future sales value tipped me into getting the lease. I never did a lease before, but in the case of the Volt it was a no brainer for me.
 

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That part he definitely doesnt understand. BUT, I dont agree that he is saying it any different than any other car. He is saying that no one knows. And that is a truthful statement. And your best option to hedge this bet is with a lease, in which your upside potential is great, and your downside potential is practically nil.
Of course nobody knows but we have a pretty darn good idea. We know for a fact that the two big drivers of resale price are reliability and MPG. How does the Volt fare on these criteria? Well it's the most reliable car that GM makes according to Consumer Reports, and it gets the best MPG of any car on the planet by a factor of something like 3X. This is why all the professionals who do the leasing guides have concluded the Volt will have a much higher than average resale value. But wait, as they say in those late night TV shows, "there's more". We have data now for about a year and a half, and what we know for a fact is that the Volt has an extremely high resale value. Finally, we know that in places like CA an HOV sticker adds about $3000 to the resale price of a car.

OK. But let's say you're very "risk averse" and want to "hedge your bets". What will this cost? To hedge your bet you have to pay an acquisition fee of $800 and and a disposition fee of $500 and you lose the $7500 tax credit. In essence you're paying $8800 to hedge your bet that a $32.5K car, which is depreciating far more slowly than average, will depreciate depreciate far more rapidly than average. That's a terrible bet. US Bank and Ally understand this, which is why they are more than happy to take the opposite side of the bet.

The point that people fail to understand is that there is no risk free option. They tend to think of the lease as being less risky but it really isn't. It's just a different risk. After leasing for three years your choice will be pay more than the Volt will be worth or to buy or lease something else. Those are expensive options. On the other hand, if you've bought the car and the resale price is lower than you want you just keep driving it at 175 MPG. What is less risky than this? And that's not getting into situations where you have to turn in the car for some reason or another, which is the worst situation for a lessee to be in.
 

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This is a very interesting article, and the author's analysis is pretty much in line with my thinking. I had to laugh, though, because I didn't apply options trading terminology when looking at it for myself, and I'm an active options trader.
 

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Well, since this thread has become more or less about leasing vs buying, I'll chime in (as a buyer)

One big thing, I don't end up with a highly versatile $500+ hitch to carry my bikes and excess cargo around if I lease the car. Most folks limit their investments in leased vehicles because they are not really 'theirs'

Buyers don't (and shouldn't) look back. The whole point is to keep the car and then not have to worry about ANY car payments in the years that follow. Resale value should be a fairly minor point for a buyer. I have thought more about this with the 2013 model promising a few more miles on a charge. Maybe this becomes important if your normal driving takes you near the edge of electric range. However, with a 20 mile round trip commute, it is a fools errand to be focusing on those few miles. Day in and day out, the Volt will meet our transportation needs. Boredom, or envy, may await several years from now, from something I cannot yet predict, but the Volt is the first car I have ever had that made me act to obtain the new vehicle just because it existed. I saved lots and lots of bucks by buying, and keeping, vehicles around for a decade (or more). The author of the article made it clear that he didn't like to 'own' a depreciating asset. Well, that's not sound thinking. If you go into business for yourself, you better cast that out that window- life is FULL of owning things that become worth less over time. You make money by keeping AND USING the thing. And you MAINTAIN it so it doesn't have to be replaced by ANOTHER THING. Financial 'gurus', to me, never seem to get the big picture, but then again, that's why I stopped listening to them years ago. This guy tells me I am smart for using a Volt; THAT is something I will agree with.
 

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Of course nobody knows but we have a pretty darn good idea. We know for a fact that the two big drivers of resale price are reliability and MPG. How does the Volt fare on these criteria? Well it's the most reliable car that GM makes according to Consumer Reports, and it gets the best MPG of any car on the planet by a factor of something like 3X. This is why all the professionals who do the leasing guides have concluded the Volt will have a much higher than average resale value. But wait, as they say in those late night TV shows, "there's more". We have data now for about a year and a half, and what we know for a fact is that the Volt has an extremely high resale value. Finally, we know that in places like CA an HOV sticker adds about $3000 to the resale price of a car.

OK. But let's say you're very "risk averse" and want to "hedge your bets". What will this cost? To hedge your bet you have to pay an acquisition fee of $800 and and a disposition fee of $500 and you lose the $7500 tax credit. In essence you're paying $8800 to hedge your bet that a $32.5K car, which is depreciating far more slowly than average, will depreciate depreciate far more rapidly than average. That's a terrible bet. US Bank and Ally understand this, which is why they are more than happy to take the opposite side of the bet.

The point that people fail to understand is that there is no risk free option. They tend to think of the lease as being less risky but it really isn't. It's just a different risk. After leasing for three years your choice will be pay more than the Volt will be worth or to buy or lease something else. Those are expensive options. On the other hand, if you've bought the car and the resale price is lower than you want you just keep driving it at 175 MPG. What is less risky than this? And that's not getting into situations where you have to turn in the car for some reason or another, which is the worst situation for a lessee to be in.
I take a different tact, I was leasing a 2008 Saturn Outlook for 39 months and bought out the lease for $16,500. I had made about 7 months in payments. My payments to lease was $459 per month for 39 months. My buyout was a credit union loan for 7 years at 4%. I usually lease cars to determine reliability and if they serve me well I buy out the lease . When I decided to lease the Volt the dealer appraised my car at $17,800 so I had $2000 in equity that I used to lower my leas payments on the Volt. Now my added concern with the Volt was getting locked into the technology curve too early. I don't mind being locked for 3 years but for reasonable payments I would need a 7 to 8 year loan and it still would not be as cheap as the lease payments. I suppose I could still have done the same thing with loans and just trade in on a new Volt early but my outlays would be much higher and I'd have to wait till 2013 to get my tax credit. With the lease I get the benefits of the tax credit earlier in my lease payments and my overall outlay is much less. Had I been more on the ball I would have foregone the original lease buyout of my Outlook and save myself some outlay but I still had questions about the Volt as I had only a GM roadshow test drive and never saw many at the dealerships I frequented.
 

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There are couple of other factors involved outside the standard "Buy vs. lease" financial calculation.

1. At the end of a lease you have a 3 year old battery. It still is unproven how long the batteries will last. In the real world we have less than 2 years of use on Volt batteries. Leasing makes this a non-issue.

2. EV's are an emerging technology. How much better (and possibly cheaper) will EV's/Volts be 3 years from now? In the ICE world, we can't expect much to change in 3 years, but in the EV world, a lot can change in 3 years.

These factors, along with the "decent" financial numbers as a result of Ally getting the $7500 tax break, tipped me in the direction of leasing.

If I feel the same way 3 years from now, I may lease again. I'll keep doing that every 3 years until EV's are finally where I want them to be in terms of price, performance and proven durability.
 

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With my Ally lease, the acquisition fee is $890 but there is no disposition fee. My lease interest rate was also 1.5% (loan rates were around 4% when I got mine). My sales tax is only 1/3 as much on the lease since it is based on depreciation and financing. Also, some people don't qualify for the $7500 federal tax credit, so leasing is the way to go for them. Leases vary a great deal depending on which state you are in, and your specific financial situation.

Uncertainty of battery life and future sales value tipped me into getting the lease. I never did a lease before, but in the case of the Volt it was a no brainer for me.
I leased for the most of the same reasons plus the fact I believe the MY2015 will have a lot to offer and will certainly order a new Volt, leasing of course....
 

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I usually lease cars to determine reliability and if they serve me well I buy out the lease.
I've done that but the Volt lease isn't structured like other leases so that doesn't work. Let's go back and look at what it costs to take a 3 year test drive. When leasing any car other than a Volt the 3 year test drive costs what you pay as an acquisition fee. That would be $800, which is not a big deal. But with the Volt lease it costs you the $800 acquisition fee AND, because the tax credit is added to increase the residual, you lose the $7500 tax credit if you decide to buy at the end of the lease. That's 25% of the cost of the car! Definitely not worth it.

If the Volt lease were structured like the Leaf lease, where the $7500 tax credit was applied as cap reduction, then you'd have a different story. I might have leased the Volt in this case since $800 is a reasonable price to pay for an easy out at the end of the lease. But adding the tax credit to the residual means you're paying 10X this amount, and this large amount just doesn't make a lot of sense, absent unusual circumstances.
 

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Not necessarily true. Your downside is the $800 acquisition cost, the disposition fee, the finance payments you'll make as the lease's interest rate is not 0%, giving up any state incentives if you are elegible, and extra tax that you'll pay on a lease (varies by state; my state charges 9% on leases but 6% on purchases). Even after the extra cash GM throws on top of leases, for me this netted out to about $2000 extra to lease.

Two weeks ago I leased a Volt with US bank with an msrp of $41,885 . I paid tax and license and I put another $1,000 down and have a payment of $336. The fees included in the payments are $1638 listed as rent charge . Interest rate is 1.78% . Also , there is a $395 termination fee if I don't purchase the car for $25,510 .

If I bought the car , I would not receive full benefit from the $7,500 tax credit and would have payments of more than $500 .
 

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The whole point is to keep the car and then not have to worry about ANY car payments in the years that follow. Resale value should be a fairly minor point for a buyer.

Boredom, or envy, may await several years from now, from something I cannot yet predict, but the Volt is the first car I have ever had that made me act to obtain the new vehicle just because it existed. I saved lots and lots of bucks by buying, and keeping, vehicles around for a decade (or more).

You make money by keeping AND USING the thing. And you MAINTAIN it so it doesn't have to be replaced by ANOTHER THING.
Amen all the way. Same here.

I have two cars, one a Volt. At some point I'll be replacing the other car. That's when I'll get another even newer/better/shinier EV.

The car I replaced with the Volt was new when I got it and 22 years old when I sold it. It was starting to show some wear (seats, clear coat), but still going strong. Sold it for $2k, which is about what it was starting to cost me a year to maintain it. I could have kept it, but the sexy Volt seduced me, what can I say?

The other car I also bought new and it's 15 years old and can easily go another 5 or more. By then, there should be more EV options to choose from and the tech should be getting even better. Even then, my Volt will only be in grade school.

Although it would be nice, I don't buy into the idea that EV's in five years will be so far ahead of today's that today's Volt will be worthless or even undesirable. My Volt will still be delivering the great mileage I'm getting today. Of course what no one knows is how well the Volt will age after say, year 8 or 10.
 

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Of course nobody knows but we have a pretty darn good idea. We know for a fact that the two big drivers of resale price are reliability and MPG. How does the Volt fare on these criteria? Well it's the most reliable car that GM makes according to Consumer Reports, and it gets the best MPG of any car on the planet by a factor of something like 3X. This is why all the professionals who do the leasing guides have concluded the Volt will have a much higher than average resale value. But wait, as they say in those late night TV shows, "there's more". We have data now for about a year and a half, and what we know for a fact is that the Volt has an extremely high resale value. Finally, we know that in places like CA an HOV sticker adds about $3000 to the resale price of a car.

OK. But let's say you're very "risk averse" and want to "hedge your bets". What will this cost? To hedge your bet you have to pay an acquisition fee of $800 and and a disposition fee of $500 and you lose the $7500 tax credit. In essence you're paying $8800 to hedge your bet that a $32.5K car, which is depreciating far more slowly than average, will depreciate depreciate far more rapidly than average. That's a terrible bet. US Bank and Ally understand this, which is why they are more than happy to take the opposite side of the bet.

The point that people fail to understand is that there is no risk free option. They tend to think of the lease as being less risky but it really isn't. It's just a different risk. After leasing for three years your choice will be pay more than the Volt will be worth or to buy or lease something else. Those are expensive options. On the other hand, if you've bought the car and the resale price is lower than you want you just keep driving it at 175 MPG. What is less risky than this? And that's not getting into situations where you have to turn in the car for some reason or another, which is the worst situation for a lessee to be in.

I leased my Volt, but not for financial reasons. I leased it because it's new technology. I work in an engineering environment so I know how unforseen things can jump up and bite you in the a$$. I'm absolutely thrilled with the car and amazed by the incredible feat of American engineering it represents, but if a major unforseen technical glitch turns it into a $40K brick, it's somebody else's problem in three years. If not, I can buy it for the residuals. Or trade up to whatever the latest technology is at that time.
 
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