[llninja]

LLninja’s guide to car shopping.

I found this while clearing up my files, and figured i’d break my radio silence to cut and poste this. I wrote it awhile back, but never posted it

———
Saving money on car purchases

I've only purchased 4 cars for myself and my wife in my lifetime and can proudly say I've spent less than $23k on each of them. These cars weren't bottom of the line econoboxes either. They include a used BMW 535i, a used Chevy Suburban, a new Cadillac CTS, and a new Chevy Volt. For the two new car purchases, I got the CTS at about $10k off the $33k MSRP, and for the volt I got $23K off the $44K MSRP.

So here's my list of how to save when buying a volt (or any car for that matter)

1. Don't let emotions and the allure of a new car cause you to spend too much or get options you don't need or want. There will always be more, that's what more means.

2. Buy end of model year clearances, especially in Jan thru April. GM piles on rebates at this time to clear out remaining inventory.

3. Widen your search to 150 miles or more. Several thousand dollars saved easily pays for the longer trip or even a plane ticket

4. Don't just look at the price posted on a webpage, contact each dealer with a potential car you want and negotiate. My best deals were listed at MSRP on the dealers website, but they were really anxious to sell me the car.

5. Get a GM card - the original card nets a 5% rebate capped at $500 per year and rebates expire after 7 years. The new GM Buypower card gives you 5% capped at $250 per year, plus 2% on subsequent purchases with no redemption limits nor expiration dates

6. If you have a GM card, wait until January to see if you are lucky enough to get a $2500 or $3500 top-off. Lately they’ve only been giving out $750 bonus offers.

7. Never lease. Although you can get nice low payments, you end up going back to the well every 2-3 years, which forces you to a cadence that may not match the schedule of the next car you want, and it adds to the number of opportunities to falter on tip #1.

8. Never lease. Leasing lures you into getting into a car that you cannot afford. If you can't afford to buy a mercedes with cash, but can afford a Honda Accord, why are you leasing a mercedes?

9. Drive it into the ground, while maintaining the car of course. Cars last much, much longer than their bumper to bumper warrantees. After the bumper to bumper warrantee or even the powertrain warrantee expires, the cost to maintain a vehicle is almost always far less than the payments on a new one.

10. Did I say never lease? I'll even go so far as to say never borrow money to buy a car. Both leasing and borrowing puts you in a mindset of getting what you want today at the expense of delaying the payments (pain) down the road. Far too many people drive really nice cars while their financial situation is in shambles because of school loan debt, credit cards, and general overspending, Flip the equation around. Save up cash and when you've saved enough, buy what you want. It forces you to save in advance, causes you to not overextend, make do with what you have, and allows you to wait for the deal of the decade.

And one more thing, make sure you qualify for the $7500 federal tax credit.

———
My wife made the executive decision this weekend that she wants a Tesla. I have a plan in place to get her an X or an S with cash. It should be a piece of cake once the mortgage is gone.

 

[narstune]

Pretty sound advice altogether. Although, your perception of a lease deal may be a bit obstructed. Many people have come out on top at the end of a lease deal, especially for higher price tag vehicles ($50k and above) including the Volt. I would recommend researching this option a bit to get a better understanding.

I've had well over 20 vehicle purchase transactions in my lifetime ranging from cash, finance, and recently a lease deal on a 2017 BMW M3. I say patience, being savvy with available resources, and having above average negotiation skills are the key elements of a good car deal. For example, I've purchased/negotiated at least 4 cars that were located 400+ miles away for thousands less than buying local -- all deals were done via phone, e-mail or chat within a matter of minutes.

 

[llninja]

Pretty sound advice altogether. Although, your perception of a lease deal may be a bit obstructed. Many people have come out on top at the end of a lease deal, especially for higher price tag vehicles ($50k and above) including the Volt. I would recommend researching this option a bit to get a better understanding.

I've had well over 20 vehicle purchase transactions in my lifetime ranging from cash, finance, and recently a lease deal on a 2017 BMW M3. I say patience, being savvy with available resources, and having above average negotiation skills are the key elements of a good car deal. For example, I've purchased/negotiated at least 4 cars that were located 400+ miles away for thousands less than buying local -- all deals were done via phone, e-mail or chat within a matter of minutes.

Your 20 vehicles vs. my 4 over 29 years kind of proves my point. I’m pretty certain I have spent far less on vehicles than you have. I have yet to find a lease deal that doesn’t benefit the finance company and car manufacturers.

 

[narstune]

Your 20 vehicles vs. my 4 over 29 years kind of proves my point. I’m pretty certain I have spent far less on vehicles than you have. I have yet to find a lease deal that doesn’t benefit the finance company and car manufacturers.

That's 20 cars within 14 years of eligibility, which makes me not an ideal example, because I'm a car enthusiast who tend to waste (or at least used to) my money on go fast parts. The Volt (currently for sale) was simply a means to an end for when I needed to commute 60 miles one-way to work through 3 of the busiest freeways in the SF Bay Area. However, my point is that lease deals are sometimes better than financing, especially for premium priced cars and EVs. What's missing with your take on lease deals is the option to buy the car on a post-negotiated residual cost, or simply unloading the car (if retail cost is higher than projected residual cost) to a place like CarMax for an easy profit.

Like I said, do a bit of research, and you'll be surprised how wrong people are about leasing.

 

[llninja]

That's 20 cars within 14 years of eligibility, which makes me not an ideal example, because I'm a car enthusiast who tend to waste (or at least used to) my money on go fast parts. The Volt (currently for sale) was simply a means to an end for when I needed to commute 60 miles one-way to work through 3 of the busiest freeways in the SF Bay Area. However, my point is that lease deals are sometimes better than financing, especially for premium priced cars and EVs. What's missing with your take on lease deals is the option to buy the car on a post-negotiated residual cost, or simply unloading the car (if retail cost is higher than projected residual cost) to a place like CarMax for an easy profit.

Like I said, do a bit of research, and you'll be surprised how wrong people are about leasing.

Hoping to unload a car at a higher value than residual can’t possibly always happen. Some luck and skill where the vehicle is in high demand near the end of your lease term is needed. I save my money at the buy ($10K and $23K off a CTS and Volt respectively). If I could predict the future, I’d be making money left and right with stock optoins. Alas, I can predict that the stock market will go up. I can also predict that it will go down. I just cannot predict when.

With cars, I can predict that the value will go down. How quickly if drops is a fools game. Alas, when I drive my car off the lot, it’s pretty much a 100% depreciation thing for me. The money is gone, and I don’t expect any of it back. And when I’ve used up the car, I give it away to some person more needy than me. My BMW 535i is now some high school kid’s first car.

 

[Jmaj]

I'm told at the local Ford dealership 80+% of the vehicles are leased. Chevy guy I talk to says the same thing, there are a couple of models that make sense to buy (like Corvette) but otherwise leasing generally is a better deal.

 

[llninja]

I'm told at the local Ford dealership 80+% of the vehicles are leased. Chevy guy I talk to says the same thing, there are a couple of models that make sense to buy (like Corvette) but otherwise leasing generally is a better deal.

Like I said, the car companies would love to lease you a car. They make more money on leases than they do on an outright purchase. Ask for the cost of capital and money factor when you lease. That’s where they make the money - usually it comes out to about 14%. That just means 80% of the people are getting way more car than they can afford and giving their money away to the finance companies. A famous talk radio host claims that 70% of the people are living paycheck to paycheck with little to no savings or retirement. So 7 out of 10 of your neighbors are driving their nesteggs that depreciate like a rock instead of earning interest. Some of them will be on the Alpo diet when they retire. But they looked good getting there.

 

[narstune]

Like I said, the car companies would love to lease you a car. They make more money on leases than they do on an outright purchase. Ask for the cost of capital and money factor when you lease. That’s where they make the money - usually it comes out to about 14%. That just means 80% of the people are getting way more car than they can afford and giving their money away to the finance companies. A famous talk radio host claims that 70% of the people are living paycheck to paycheck with little to no savings or retirement. So 7 out of 10 of your neighbors are driving their nesteggs that depreciate like a rock instead of earning interest. Some of them will be on the Alpo diet when they retire. But they looked good getting there.

I wouldn't say lease is a gamble, but in a way it sort of is. However, you have a very small sample size in car buying, and it sounds like you're limiting your projections to economical cars only. Once you get in the 50k to 100k+ price tags, you will see that leasing or leasing to own > financing. See a basic example below:

$80,000 vehicle (Lease)
Cap Cost (after lease credits and negotiation): $75,000
Residual: $47,000
MF: 0.00140
Tax Rate: 9.25%
----------------
Monthly: $940.69
TCL: $33,864.84


$80k vehicle (Financed)
Negotiated cost (no lease credit): $78,000
1.9% APR for 72 months
9.25 tax rate
----------------
Monthly: $1,254
TCO: $90,288


Lease to Own (Non-negotiated)
$47,000 Residual Cost (could be negotiated)
+ $1500 to qualify the vehicle for CPO coverage and special financing
1.9% at 72 months
----------------
Monthly: $780
TCO: $56,160
+ Original TCL: $33,864.84
----------------
Overall cost: $90,024


Summary:

By going the Lease to own route, the buyer is able to stretch his payments over the course of 9 years as opposed to 6, but ends up paying less than someone who went the finance route, and was able to add the option to qualify the vehicle for CPO extended warranty.

If this was a sought after car (e.g. BMW M or Honda Pilot Elite), then the possibility of the retail cost being thousands more than the residual cost is very high. This is the case the right now for 2015 M3s that are coming off lease. BMW set the cap cost to $44k, but retail is currently going for $52-55k, so a lot of leasees are dumping their cars to CarMax, or selling their cars back to the dealer for more than the projected residual cost.

Also, if the specific vehicle MY happens to be a problematic one, then the leasee has the option to surrender the car without losing a lot of money compared to someone who's trading in or selling a financed car.

As I've been saying this whole time, please do a bit of research on vehicle leasing. It's not always the best route to take, but it can sometimes lead to a better deal if the buyer is smart and savvy.

 

[llninja]

I wouldn't say lease is a gamble, but in a way it sort of is. However, you have a very small sample size in car buying, and it sounds like you're limiting your projections to economical cars only. Once you get in the 50k to 100k+ price tags, you will see that leasing or leasing to own > financing. See a basic example below:

$80,000 vehicle (Lease)
Cap Cost (after lease credits and negotiation): $75,000
Residual: $47,000
MF: 0.00140
Tax Rate: 9.25%
----------------
Monthly: $940.69
TCL: $33,864.84


$80k vehicle (Financed)
Negotiated cost (no lease credit): $78,000
1.9% APR for 72 months
9.25 tax rate
----------------
Monthly: $1,254
TCO: $90,288


Lease to Own (Non-negotiated)
$47,000 Residual Cost (could be negotiated)
+ $1500 to qualify the vehicle for CPO coverage and special financing
1.9% at 72 months
----------------
Monthly: $780
TCO: $56,160
+ Original TCL: $33,864.84
----------------
Overall cost: $90,024


Summary:

By going the Lease to own route, the buyer is able to stretch his payments over the course of 9 years as opposed to 6, but ends up paying less than someone who went the finance route, and was able to add the option to qualify the vehicle for CPO extended warranty.

If this was a sought after car (e.g. BMW M or Honda Pilot Elite), then the possibility of the retail cost being thousands more than the residual cost is very high. This is the case the right now for 2015 M3s that are coming off lease. BMW set the cap cost to $44k, but retail is currently going for $52-55k, so a lot of leasees are dumping their cars to CarMax, or selling their cars back to the dealer for more than the projected residual cost.

Also, if the specific vehicle MY happens to be a problematic one, then the leasee has the option to surrender the car without losing a lot of money compared to someone who's trading in or selling a financed car.

As I've been saying this whole time, please do a bit of research on vehicle leasing. It's not always the best route to take, but it can sometimes lead to a better deal if the buyer is smart and savvy.

Economical cars? Since when is a BMW, CTS, and Suburban considered economical? I could understand if I presented a Ford Focud or a Toyota Yaris into the mix.

You need a better calculator. So for your scenario 1, assuming a 36 month lease, total cost of leasing is $33.8K, and compared to ownership, you still need a car, so presumably, you will re-lease again, either a similar car or a more expensive one. So over a 9 year period you will be well over $100K TCL.

Your option 2, only negotiating $2K off of an $80K car is paltry. I’d find a deal of the decade and get at least $20K off.

Between options 2 and 3, you’re doing all that work for a paltry $264? Like I said before, I save my money at the buy. $10K and $23K off (30% and 53% respectively) of my last two new cars.

I propose an option 4. Even assuming you can only negotiate the $80K car down to $78K, the 100% down, $0 per month, 0% financing, unlimited term, unlimited miles plan puts you at $85.2k with tax, far better than any of the 3 options you presented.

Then there’s option 5, pick up a 2 to 3 year old car for $25-45K off the original $80K price and let someone else take the depreciation shellacking. A coworker of mine just got himself an i8 for almost half MSRP of a new one. It’s still an awesome car even if he didn’t get to drive it off the lot new.

Of course, if you are a multimillionaire, it deosn’t matter if you prefer to lease for the convenience of walking away from a car if you grow bored of it. But don’t fool yourself into thinking you are saving any money by leasing. Your numbers don’t show any savings at all. It doesn’t matter if it is for an expensive car or for a cheap car. The finance companies make their money, and you blindly give it to them. As for opportunity costs of investing that money instead of having it tied up in a car, sure the math might show some payback with investing with a higher rate of return, but that calculation leaves out risk. Otherwise we’d just borrow $10M and earn 8-10% off that money and all be rich. The problem is the gut wrenching fact that you owe someone $10M.

 

[coffee4matt]

IMHO the reason the lease-vs-buy debate never ends is because there is a natural tendency to assume one must be better than the other, just "in general". I have seen some really long threads on this topic over the years, and must confess I've enjoyed them all. Here is my take:

1. It all depends on the specific circumstances of the new car shopper, in terms of what their highest priorities are. If you decide you need to always be driving a new and/or high-end car (maybe you're a realtor in an upscale community, a top salesman or near the top of a multi-level marketing organization, and image is everything in your job), then leasing is almost certainly the way to go, and can be much cheaper than BUYING a new, high end MBZ or BMW, etc every 2-3 years.

2. However if lowest total cost of ownership per mile driven is more important, LLninja is absolutely correct. BUY, don't lease, a well-researched, high quality car, preferably on sale or w/ the deepest discount (because it's not the most popular color or options) and with a few thousand $ of GM Card earnings. Then drive it until the wheels fall off someday! Even if you do buy a higher end car like a late model/ well equipped MBZ, this is all still true, because by driving it for 200K miles or more vs only 30K miles or whatever, you are averaging-in most of your miles way further down the depreciation curve, which are much less expensive.

3. Where I live, in So Cal, most people who are leasing are NOT top sales people or realtors in Newport Beach, and if I was their financial planner I would urge them to follow LLninja's 10 tips, for a better retirement . But lots of people in Newport Beach drive leased BMW's & MBZ's, who have no business (financially) doing so. Many also are renters, which kind of amazes me.

4. One of my favorite books in my formative years was "The Millionaire Next Door" by Thomas Stanley & William Danko. They ALWAYS buy, not lease (and a Honda Accord one would assume if you read the book). HOwever I also read "Rich Dad, Poor Dad" by Robert Kiyosaki. He makes a compelling case why in some professions, projecting financial success is critical to achieving it. I'm guessing his fans probably lease a lot. So I believe the right answer depends mostly on the car shopper, and their particular priorities.

5. I have had 29 cars in the 42 years I've been driving (bought my first car at age 15), and I leased 4 or 5 of them. In 20/20 hindsight all the leases were the right move, and I'm glad both option are out there. (But many who lease are not as well-equipped negotiating or researching ability-wise as myself, and can easily get taken advantage of. As LLninjas points out, leasing is tailor made for the auto dealers to use a complex instrument to totally confuse an unsophisticated buyer. As a CPA, I made my own spreadsheets to compute the implicit interest rate, and every other lease variable, and actually enjoyed hours of negotiation at the dealership before the internet made it less necessary. Just a year ago, I bought my wife a new 2016 MBZ GLC300 from Fletcher Jones Motorcars in Newport Beach (#1 MBZ dealer in the USA by volume), an experience all in itself, and ours may have been the only car they SOLD vs leased that weekend! (But to get the deal I wanted took 8 hours...that was too long!)

6. Last point: 2 of my 3 favorite all time cars were my 2014 Gen 1 Volt (purchased new) & my current daily driver, a 2016 Cadillac ELR (purchased used w/ 5K miles - which I flew across country to snag.) Go Voltec!!

 

[linkim]

I have never leased a car, so I am speaking with no experience on this topic. However, I came upon two situations where the driver wanted to lease for different reasons.

Steve Jobs, who wasn’t short of cash, always rented his car as explained in the following link. If money is no object a very short lease can work, if you're Steve Jobs.
https://thenextweb.com/apple/2011/1...-car-never-had-a-license-plate/#.tnw_YwFFM8oU

I have a friend [double lung transplant recipient] who leases for two-years because he is not sure he will outlive the term of the lease. His rational is that he wants to drive a nice car but not have his wife [drives a Mercedes and also has another luxury vehicle] deal with what to do with it upon his demise. So far, he has outlived the first 2-year term and starting on the third 2-year term, if my count is correct. Maybe, this short lease is one way to keep spending money and living to drive.

 

[llninja]

@coffe4matt,

Great points. I didn’t read the Millionaire Next Door but I did read the Millionaire Mind - same author. As opposed to your Newport Beach neighbors who want to look like millionaires but are likely broke,

Reminds me of a time when I pulled up in my older suburban to fill the tank, wearing a farmer’s carharts, and a dude pulled up in a shiny new Silverado. I commented on his nice ride, and he proceeded to tell me his life story. He works as a janitor for a social work organization, but likes to lease his trucks and always drive something new. I’m guessing my salary was easily 10 times his, but it didn’t show.

 

[Maxvla]

Purchasing doesn't work for a good amount of people because of the income requirements for the $7500 incentive. Sure, someone not making $45k or more probably shouldn't be looking at a $33k new car, but a 25,500 new car isn't much above the recommended 50% annual income limit. The problem is you can't get one without the other.

It's a quandary I find myself in while looking at electric cars. I live in an area where the standard of living is cheap, so nationalized pricing (such as cars) are disproportionately higher cost for me than if I lived in LA, for example. The irony is that buying a car like the Volt is one of the smartest cost reduction measures you can do. Calculating mileage, you can easily save over $1000 per year, possibly double that if you drive a lot, by driving electric, charging on specialized rates during surplus hours. If you drove the Volt its entire electric capacity (and no gas) every day (even just 1 charge per day), the car could pay for itself in about 12 years ($25k), even at today's low-ish gas prices, compared to the usual 20-25mpg suv/sedan ($2k per year). It would be nice to be able to take advantage of the $7500 incentive to buy the car I want, with the options/color I want, but that is not really possible if the incentive is cut in half.

Then, thinking about that nearly $2k per year gas savings, which is about 2/3 of a decent Volt lease (per year) with the $7500 discount and other lease cash incentives, dealer price reductions, etc. Leasing seems good, especially if you can get a reasonable purchase offer from the leasing company when your time is up.

 

[llninja]

I have never leased a car, so I am speaking with no experience on this topic. However, I came upon two situations where the driver wanted to lease for different reasons. If money is no issue, then this short lease can work, if you’re Steve Jobs.

Steve Jobs, who wasn’t short of cash, always rented his car as explained in the following link. If money is no object a very short lease can work, if you're Steve Jobs.
https://thenextweb.com/apple/2011/1...-car-never-had-a-license-plate/#.tnw_YwFFM8oU

I have a friend [double lung transplant recipient] who leases for two-years because he is not sure he will outlive the term of the lease. His rational is that he wants to drive a nice car but not have his wife [drives a Mercedes and also has another luxury vehicle] deal with what to do with it upon his demise. So far, he has outlived the first 2-year term and starting on the third 2-year term, if my count is correct. Maybe, this short lease is one way to keep spending money and living to drive.

So if you die, I guess the lease ends, the estate hands the keys back to the leasing company. If I have another medical scare, maybe it’s time to lease a Lamborghini.

 

[llninja]

Purchasing doesn't work for a good amount of people because of the income requirements for the $7500 incentive. Sure, someone not making $45k or more probably shouldn't be looking at a $33k new car, but a 25,500 new car isn't much above the recommended 50% annual income limit. The problem is you can't get one without the other.

It's a quandary I find myself in while looking at electric cars. I live in an area where the standard of living is cheap, so nationalized pricing (such as cars) are disproportionately higher cost for me than if I lived in LA, for example. The irony is that buying a car like the Volt is one of the smartest cost reduction measures you can do. Calculating mileage, you can easily save over $1000 per year, possibly double that if you drive a lot, by driving electric, charging on specialized rates during surplus hours. If you drove the Volt its entire electric capacity (and no gas) every day (even just 1 charge per day), the car could pay for itself in about 12 years ($25k), even at today's low-ish gas prices, compared to the usual 20-25mpg suv/sedan ($2k per year). It would be nice to be able to take advantage of the $7500 incentive to buy the car I want, with the options/color I want, but that is not really possible if the incentive is cut in half.

Then, thinking about that nearly $2k per year gas savings, which is about 2/3 of a decent Volt lease (per year) with the $7500 discount and other lease cash incentives, dealer price reductions, etc. Leasing seems good, especially if you can get a reasonable purchase offer from the leasing company when your time is up.

I guess I should add #11

11. Don’t buy a car if you don’t have the cash for it. I subscribe to the 100% down $0 per month, 0% interest plan. There are plenty of interesting used cars at the $2-10k price point that I’d enjoy.

 

[linkim]

So if you die, I guess the lease ends, the estate hands the keys back to the leasing company. If I have another medical scare, maybe it’s time to lease a Lamborghini.

Hopefully you won't need to lease a Lamborghini. Just keep driving the cars you have until the wheels fall off. Then put your experience and 11point plan into getting a new vehicle at a great price.

 

[Maxvla]

I guess I should add #11

11. Don’t buy a car if you don’t have the cash for it. I subscribe to the 100% down $0 per month, 0% interest plan. There are plenty of interesting used cars at the $2-10k price point that I’d enjoy.

Ah, but the thing is, it being electric makes it affordable over time. The old wisdom about buying a gas car if you have cash for it must evolve if you are paying $150 per year to fuel it, instead of $2000. A $25k electric car would cost $1500 in electricity over 10 years vs $20,000 for the typical $25k gas suv/sedan. You're then looking at a $26,500 car vs a $45,000 car.

You would probably counter by saying 'buy a used Leaf for $8k, it's electric'. Sure, but it is range limited, and most have reduced battery capacity thanks to Nissan's lack of foresight. Ok, so get a $10k Volt, you'd next say. For that price you'd be looking at a 2011-2012 with high mileage (100k+) and potential problems as well as quite a lot of wear. This doesn't sound like a vehicle I'd want to start a 10+ year relationship with. So next you'd say get a off-lease 2014-2015 Volt for 15-17k, reasonable miles, good condition, some warranty left, the last years of the overbuilt Volt when most issues were ironed out. Indeed that would be wise advice, and is what I'm looking at doing. Then again, you speak about getting a new Volt for $21k (iirc), and I look to see how I could get a deal like that. Only $4-6k more for a new car seems like a no brainer.

But I'm unable to get that deal because of my income. I could have $100k in the bank, but I would still pay more for the car than someone who makes more per year but is in debt due to maintaining an expensive standard of living. That's the flaw in the incentive. The people who could use the electric cost savings can't buy the vehicle because they don't make enough money to qualify for enough of the incentive. It's not a question of cash vs loan or whether they should buy it or not.

Once these incentives reach their stated limit, some manufacturers are going to have a hard time moving electric cars. Some of the Asian makes might have been very smart for resisting electric cars while other companies developed the technology. Now companies like Kia/Hyundai are just beginning their allotment when the technology is proven and getting cheaper every year.

 

[138luis]

Z


Sent from my iPhone using Tapatalk

 

[llninja]

Ah, but the thing is, it being electric makes it affordable over time. The old wisdom about buying a gas car if you have cash for it must evolve if you are paying $150 per year to fuel it, instead of $2000. A $25k electric car would cost $1500 in electricity over 10 years vs $20,000 for the typical $25k gas suv/sedan. You're then looking at a $26,500 car vs a $45,000 car.

You would probably counter by saying 'buy a used Leaf for $8k, it's electric'. Sure, but it is range limited, and most have reduced battery capacity thanks to Nissan's lack of foresight. Ok, so get a $10k Volt, you'd next say. For that price you'd be looking at a 2011-2012 with high mileage (100k+) and potential problems as well as quite a lot of wear. This doesn't sound like a vehicle I'd want to start a 10+ year relationship with. So next you'd say get a off-lease 2014-2015 Volt for 15-17k, reasonable miles, good condition, some warranty left, the last years of the overbuilt Volt when most issues were ironed out. Indeed that would be wise advice, and is what I'm looking at doing. Then again, you speak about getting a new Volt for $21k (iirc), and I look to see how I could get a deal like that. Only $4-6k more for a new car seems like a no brainer.

But I'm unable to get that deal because of my income. I could have $100k in the bank, but I would still pay more for the car than someone who makes more per year but is in debt due to maintaining an expensive standard of living. That's the flaw in the incentive. The people who could use the electric cost savings can't buy the vehicle because they don't make enough money to qualify for enough of the incentive. It's not a question of cash vs loan or whether they should buy it or not.

Once these incentives reach their stated limit, some manufacturers are going to have a hard time moving electric cars. Some of the Asian makes might have been very smart for resisting electric cars while other companies developed the technology. Now companies like Kia/Hyundai are just beginning their allotment when the technology is proven and getting cheaper every year.

I wouldn’t wish a used Leaf onto my worst enemy.

So go make more per year to get that tax credit.... even getting a temporary extra job might bump you over the edge.

When I bought my volt in 2013, fuel prices were nearing $4 per gallon, my commute was 50 miles per day, and the volt purchase almost said for itself in fuel savings compared to the gas guzzling Deville I got for free (26k Miles, 9 year’s old, it was like new when I got it, drove it to 134k miles and all sorts of expensive suspension repairs were in its future). You could use the fuel savings argument then, but it’s not as easy to make that argument today with low gas prices.

The $21k for a volt was for a 2013 premium. I could have gotten a base for $18.5 at the time. But times change. It seems that GM hasn’t dropped volt pricing quite yet, but if history repeats itself, fall of 2018 could see an MSRP price cut for 2019 models.

The IRS rules are what they are. And if you don’t qualify for the tax credit because of income, then like you said, you really don’t have any business getting an expensive new car unless you’ve artificially kept your income down like a retiree pulling miserly out of their multimillion dollar nest egg to keep the taxes low. And even then, they could do some Roth conversions to generate a big enough tax burden to get the full tax credit.

 

[Voltaire1776]

Question about this.

We've always bought outright, but we're now looking at hybrid, electric cars. We could buy a new one outright, but the technology is changing rapidly, both as to the batteries, the range, and the incredible safety feature (collision avoidance, lane departure, blind spot viewing, cross traffic alerts, etc.). That means that buying seems a much riskier proposition. Buy now and not only does the car depreciate instantly, it will be outdated, and outmoded, in just a couple of years!

Plus, the $7,500 federal tax credit only works to cover taxes owed. We typically don't owe much as our taxable income has been lowered by lots of the salary going into tax-deferred annuities and tax-deferred retirement accounts.

Add in IRA contributions, and we typically receive IRS refunds rather than owe anything at all! So, that credit *vanishes* unless we lease! From what I,be read, the car company can receive the credit and lower the price of the car.

Combining both factors (rapidly changing tech) and inability to use the tax credit suggests to us that leasing could now be a smarter strategy. (The car company can take the $7,500 credit and reduce the price.) It's even more of a logical choice given that our state offers a couple of thousand dollar electric rebate (buy or lease) and some of the auto companies are giving another several thousand off.

$7,500 + $2,000 + $3,000 = $12,500 off!

So, that $32-38,000 new electric hybrid would have a sticker price of only $19,500 to $25,500! The lease deals with potential purchase at the end can total even less.

However, we're not looking forward to essentially "renting" a car and having to read all the fine print, deal with excess wear and tear charges, etc.

So, curious what the consensus is here given our situation, and would especially like to hear from the OP -- LLninja -- whose advice is don't lease; don't lease; and, oh, did he say, "DON'T LEASE!" LOL!