I was hoping to get some clarity on my options with our brand new lease on an 2025 Ioniq 5 XRT. We’ve never leased before, so I’m pretty new to all this. I’m mulling over if buying out our lease ASAP makes the most sense in our situation.
Relevant background:
We live out in the country and work in town, so we put a lot of miles on our vehicles. We’ve owned the car for two days and have already put 200 miles on it with very normal driving - our lease is for 36 months/15k miles per year.
The intention with the lease was to take some pressure off of our high mileage, low MPG vehicles and to cut down on our gas bill, plus I’ve been jonesing for an EV for the driving experience. Originally, the plan was to not necessarily use the EV everyday, since we use so many miles, but we both already love driving this car.
We were able to utilize the Colorado Vehicle Exchange Program, where we gave the state an old paid off high emitting vehicle in exchange for a $9k up front credit on our lease. We also got $3.85k off by assigning the Colorado tax credit to the dealer. Combined with the Hyundai lease incentives, this ended up being over $32k in cap cost reduction.
The dealer wasn’t even able to do our original quoted deal since the adjusted cap cost was lower than the residual. Looking at our contract, the numbers are as follows:
Adjusted capitalized cost: ~$27,800
Residual value: ~$27,600
Our payment is ~$150/month. My understanding is that basically all of this is interest, based on the cap cost and the residual (interest rate came in high, credit score they pulled was much lower than I expected, but have reasons to think that it should come up to above 720+ within the next 6 months).
Some posts online make it sound like we’d need to pay our full 36 months of lease payments + the quoted residual to buy the car, but others make it sound like we’d need to only make up the difference between the residual and the cap cost, which is ~$200, on top of the residual purchase price.
So, leasehackrs, am I understanding right that we have the option to buy out our brand new EV at what is basically the lease end residual value? I know EVs depreciate like crazy, which is one reason leasing seemed to make sense, but on the other hand, I don’t see why we wouldn’t buy out ASAP to avoid paying only interest for 3 years, and then having to deal with mileage limits. I’ve also found myself wondering if the newer the car, the better the rates we may be able to get for financing such a buyout.
Isn’t the interest rate/money factor really good on that car? If so, why rush and buy it out now? Why not wait until month 34 or 35 to buy it out then?
Do you know the money factor on your lease? That will be the biggest factor in your decision.
You answered your own question! On Hyundai financial, you can see your current payoff. If that’s lower (it should be lol) than the sum of all your payments + residual, and you will exceed the mile allowance heavily (which is sounds like you will) — you can definitely buy it out. The only question is, what will cost you more — the mile overage at the end of a lease return, or buying the car now for X amount and selling it in Y years for Z amount?
All comes down to expected miles to be driven. Let’s say you’ll do 25,000 miles over on the life of the lease. 25,000 * .20 = $5,000.
Let’s say you buy the car today for $30K — at 70,000 miles in the same 3 years, the car will definitely be worth less than $20K and have a worn out battery and outdated EV tech. Honestly, I don’t even think it’s worth $30K today. Sometimes leasing makes a lot of sense even when you drive a lot. This seems to be one of those cases.
I would ride the lease out, enjoy paying $5250 for the 3 years (assuming $0 due at signing) and a $5K overage charge at the end and not be left with a depreciating electric vehicle which will be significantly older technology, a used up battery which will eventually need replacing, and just a headache bound to happen.
35 on time payments will boost your credit as well.
Summary: You can def buy out but buying a depreciating asset which will have a lot of miles will probably cost you more than lease + mile overage.
I definitely considered it but my lease is almost all depreciation and very little interest
The generalization that “EVs depreciate like crazy” is useless IMO. Because I suspect that’s measured from original MSRP and that’s a useless starting point. My 6m old EV is worth, say, $25k right now. That looks disastrous from a $50k MSRP perspective. But that’s irrelevant because the net selling price was more like $28k.
And it’s much more useful to chart your EV’s resale value rather than generalize across all EVs.
So why would the OP want to buy a quickly depreciating asset today and have to finance the entire buyout price versus simply paying only the finance costs to carry the lease? High mileage 2023 I5s are listing for under $20K now. Let the bank carry the residual risk and see what values look like in 3 years. Then decide whether to buy the vehicle or pay the mileage penalty and return.
Because the financing cost of buying today is a lot lower than buying in 3 years. Current model year loan APRs are a lot lower than used car loan APRs.
So the OP doesn’t actually have the free optionality to decide in 3 years. Make the decision now. Own it into the shallow part of the depreciation curve or adopt the lease-return-lease again cycle because buying in 3 years will probably make the least financial sense.
Your strategy makes sense for EVs like mine where most of the lease payment goes towards depreciation and very little rent charge which in fact is like an almost free loan, however the OP has a complete opposite situation where almost none of his payment is going towards principal
We don;t know that for sure in 3 years. Interest rates could be lower. Also, wouldn’t the OP have to pay full taxes on the current value of the vehicle, not necessarily the original cap cost. Not sure how CO taxes on vehicles work.
Sorry if im repeating anything, but the correct comparison here is the total lease payments plus overage fees vs buyout with 3 year depreciation assuming some level of financing is needed? So $150*35 +$5000 (=11250) for leasing and returningas mentioned vs the lease buyout plus 3 years of financing costs minus 3 year old, similar mileage market price (which sounds like its $27,800+ early lease buyout fees + loan interest - let’s say $20,000 for market reference). What is the exact buyout total?
And most of the 3 year old I5s below $20k i see tend to be lesser trims or without awd, though perhaps new tech will.change that in 3 years. I’m debating finding a lease with the intent to buy one out myself, but I’m seeing money factor equivalent rates and financing rates from a bank to be similar.
