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Super confused about the $7500 and leases!

5455 Views 15 Replies 9 Participants Last post by  eric_n_dfw
How is the $7,500 tax credit used by the leasing companies such as US Bank and Ally?

From the Chevy national deal and and other posts here I understand that the savings are passed down to the leasee, but the math doesn't make sense to me.

For the example below I'm not considering any fees, taxes, etc just the basic numbers.
Approx $35,000 base price X 58% residual value = $20,300

If the car costs $35,000, and you subtract out the $7500, you are left with $27,000.

Keyes and Rydell are offering $5000 off invoice, so that comes to $22,000.

Cap $22,000 - Residual $20,3000 = $1700

$1700/36 = $47 a month.

Now I know a brand new car is not going to lease for $47 a month, but what am I misunderstanding here to get to that number?

Some other poster said it is the leasing companies money and not mine so I shouldn't have to worry about it, but then why advertise that the savings are being passed on?

For a real world example, I got a quote for a US Bank backed lease. The dealer had put the residual at 37% for a value of $12,948 and then added in the $7,500 to get to $20,448 which is 58% and some change.

From other websites the residual for the 2014 Volt is around 58% BUT that doesn't include the $7500 tax credit.

Where is the supposed $7500 savings in the US Bank lease?

Ally does something similar as well to come with a ~20K residual.

What am I getting wrong here!?
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As everyone is telling you, the credit gets added to and increases the residual rather than, as you (and everyone else) would think, subtracted from the selling price. The treatment doesn't change the lease cost since it just changes the order in which the credit is applied. It would be the same either way. However, adding the credit to the residual makes buying the car at the end of the lease much less attractive since the buy out price will be high.

In your example, the car would be $35K. If the residual starts at 50%, then that's $17.5 (FYI I don't know what the residual is, I'm just guessing). The $7500 tax credit gets added to that, making the residual $25K. The adjusted cap cost is the $35K minus the $5K mark downs, giving a net buying price of $30K. So the depreciation for the lease period would be $30K - $25K = $5K, and the depreciation would be $5K/36 months = $138.88. That won't be the lease price because you have interest both on the depreciation and the part of the car you're not buying as well as various other fees, but that's basically it.

At $22K the Volt is the best buy for a car on the planet. Even with the way the residual is treated, it's a very good deal on the lease well but going in you need to know you won't want to keep it.
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Simple answer: If you own a business the lease payments are a 100% tax write off. Finance payments are NOT.
Unlike an ICE vehicle, where you never want to take the standard mileage deduction, with an electric you're probably better off just taking the standard mileage. Your accountant probably won't ever even think of this unless he/she has an EV.
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