Immediate lease buyout for EV credit; can someone check my math?

Ask the Hackrs Buy/Finance
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1

Hello!

I am looking for a new car after selling my 2015 Audi A3. I’d like my new car to be an EV, but the list of cars that qualify for the EV tax rebate is small, and I don’t love any of them. I’m thinking of signing a lease on an EV and buying it out immediately to get the $7,500 lease credit on a greater set of cars.

I have never signed a lease before, so I am very inexperienced. Obviously, I don’t want to make a costly mistake. I did a lot of reading last night about leases, and I think I understand how they work generally, but I would still really appreciate someone double-checking me on this.

I went to Volvo to look at a 2023 XC40 Recharge Ultimate. These are the lease details they gave me.

MSRP: $63,165.00
Discount: $3,500.00
Sale Price: $59,665.00

Total Rebates: $7,500.00
Total Cap Cost Reduction: $7,500.00

Documentation Fee: $445.00
Acquisition Fee: $995.00
New Plates/Title/Inception: $170.00
Upfront Tax: $27.81

Due on Delivery: $1,491.83
Advanced Payments: $849.02
Upfront Charges: $642.81

The “Upfront Charges” are comprised of the $445 documentation fee, the $170 new plates/title/inception fee, and a $27.81 upfront tax. The $995 acquisition fee is rolled into the capitalized cost.

The Money Factor (MF) is 0.00273 or 6.55% interest. The Residual Value (RV) is $32,845.80 or 52%.

Based on my calculations,

Monthly Depreciation Fee: $564.31
Monthly Finance Fee: $234.79

Is this a good lease? I calculated how much it would cost for me to buy it immediately.

$1,491.83 (Due On Delivery)
$19,750.85 = 35 * $561.31 (Depreciation)
$32,845.80 (Residual)

Does this mean I would need to finance $19,750.85 + $32,845.80 = $52,596.65?

I have a pre-approval from Tower FCU for a 2.99% interest rate. Assuming I can ask them if I can extend the approval to give me tie to do this and change the loan from a new car loan to buy out the lease and keep the interest rate (big if), this seems like a good deal for a Volvo, considering the MSRP was a little over $10,000 more.

I feel like my math is off. Could someone check me, please? And is this a good offer? I was a little surprised he took $3,500 off. Is that because it’s a lease? Are there any elements of the offer I can negotiate to get a better deal?

Thank you!

2

If you finance, you collect tax credits outside of your loan, as long as you qualify. This means you are financing the entire sale price plus tax, and over 60 months, that’s maybe $1078/mo with 0 down.

3

Your net capitalized cost before incentives is
$59665 - $7500 = $52,165

Since you rolled in your acquisition add $995 to that making it $53,160

Assuming the “depreciation fee” + the finance charge is your monthly payment ($799.1)

So $53,160 minus your 1 month depreciation of $564.31 would be $52595.69

Lease buyouts usually add like an extra fee of some sort that is maybe like $100 or so that’s a +/-

This is just my assumption

4

Your math is missing expectation of resale value in N years.

I’d be surprised if you could get more $20,000 in 4 years. Do the math with some resale value scenarios.

5

Thanks for your reply. Are you referring to financing the car immediately or leasing and then buying out immediately? The Volvo XC40 doesn’t qualify for the federal tax rebate because it’s not assembled in North America, and it doesn’t qualify for my state’s rebate (Massachusetts), because the MSRP is over $55,000. The only way I can get the rebate is by leasing.

6

I hadn’t considered that. How do you factor the resale into the math? Is the idea just that you don’t take too much of a loss if you sell in 4 years? I sort of assumed that it was expected that you would lose money if you sell before keeping the car for 6+ years.

7

Your adjusted (net) capitalized cost is 59665 + 995 - 7500 = 53160. Your monthly payment before tax is calculated as follows…
0.00273 x (53160+32845.80) + (53160 - 32845.80) / 36 = 799.08

It appears that your sales tax rate is 6.25% and so, your monthly payment, including tax, amounts to…

799.089 x 1.0625 = 849.02

Hope this helps…

8

Yea, they are going to lose value. That depreciation comes out of your pocket. So how much are you willing to spend to drive a XC40?

1 Like
9

talk to @Bostoncarconcierge , he has a few at good discount, worth speaking to.

10

im confused about something - are you doing this because you don’t qualify for the credit on your taxes normally so you’re using the buyout as a backdoor into getting the credit, or are you doing this because you think its a better deal than buying it with the tax credit outright?

11

This particular vehicle does not qualify for a tax credit on a purchase.

12

ok well that certainly simplifies things.

13

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