Hello all. I am trying to run the math on this transaction involving a trade in plus a new lease. I own a car (financed, close to fully paid) and I have been offered what seems to be a good deal to trade-in that car and get a lease.
Information on the car I own (factory warranty expired):
Total cost (tax and fees incl): 30289$
Downpayment: 15K USD
Total Loan (5% interest rate, 48 months): 15289$
Loan Balance: 7478$ (payments are 360$ monthly)
Insurance: 1420$ per semester (i know, its high)
Information on the new car lease (same car but the highest end model and brand new with warranty)
MSRP: 64600$
Final price after discounts: 58625$ (9.25% electric vehicle discount)
Residual value 65% after lease
Lease terms: 36/10 paying 400$ per month and giving 1900$ driveoff
Total lease cost: 15562$
Insurance: 1930$ per semester (yep)
If I trade in my current vehicle, they would give me 30.5K USD, and I will net around 22K after paying my loan. I would make money on that transaction. I will have the cash, which I can invest and earn a yearly return. I am unsure if doing this business makes any sense or not, as it depends on the value of the cars after 36 months. It seems like I would be taking advantage of the current all time high prices, getting a good deal because of the electric vehicle discount which probably wont exist in the future
My calculations are as follows:
Cost of my new lease is 15.5K
Remaining balance of my current car loan in the next 36 months is 7478$
Differential is -8K.
By selling/trading in my current vehicle, I will get my equity back, which I can invest easily getting 3-5% yearly returns. That would get me 22K * 1.04 (power of 3). That results in +2750$ of earnings.
Last but not least, its reasonable to expect that the car market will normalize in 36 months, and therefore my current car will not sell at a premium, but at a loss. Will that price decrease be higher than 5-6K in 3 years? Highly likely.
So according to my numbers: My worst case scenario seems to be breakeven, while driving a much better car. Reason being the electric vehicle discount on the MSRP of the new lease.
That was my exact question, too. Maybe a Jeep 4xe?
Also, OP, is the dealer cutting you a check for the trade? Have you determined what selling your car to another party might get you? I think you should focus on whatās happening right now, rather than what might happen in 5-6 yrsā¦
Is this an order youāve already placed, a new order, or an inventory unit?
You keep saying the 9.25% discount is the electric vehicle discountā¦ that doesnāt make sense to me. Are you saying that the 9.25% discount is the net discount after the $7500 tax credit AND whatever discount theyāre giving?
I donāt quite understand the thought behind this. A new car has a warranty, so that really shouldnāt make a difference in terms of your total cost of ownership.
At any rate, Iād follow @mllcb42ās advice and think about some more immediate, concrete things regarding the deal, rather than about the various things that may or may not happen in the future.
This is a new order, 8-12 week wait. I havenāt factored that in, so thats something Ill take into account.
The thing is, I donāt need the āupgradeā. I just want to make the upgrade if it is likely that this will be a breakeven (or small ācostā) deal compared to keeping my current Jeep Wrangler Sport S.
$2500 savings on an average balance of ~6k over 3 years (~14k 1 pay less 2k dp = 12k starting and 0 ending balance) is 13+% tax free would be hard to come close with no risk
Do the one-pay. It is a no-brainer. Youāll still get like $7k cash back. Plus, it is a REALLY safe bet that youāll maintain positive equity in the new Jeep, so that will pay back in the end, too. Sounds like you are a student (based on the āsemesterā comments), and having a vehicle under warranty is tremendous peace of mind, too.