Volvo XC90 Lease + Immediate Buyout

Ask the Hackrs
1

As everyone else is, I am looking into the backdoor way of getting the $7500 cap cost reduction via lease with immediate buyout. However, I need help with basic understanding of how this works.

Will I still be responsible for the Monthly Rent charge for the remainder of the lease? For example, on a Volvo XC90 Recharge 24/7.5K lease - the base MF with MSDs is 0.0028. On a 70K sale price, this equates to a month rent charge of approximately $333. If I buy out the lease immediately and I am still responsible for the rent charge x 24 months, that would mean I’m paying $8000 in interest, which completes wipes out the $7500 taxed incentive.

Is this how it works? Or would I just be responsible for the 1 month of rent charge + depreciation cost of the remaining 23 months?

Thanks!

1 Like
2

Always verify with the actual contract, but no, you dont pay unearned rent charge.

1 Like
3

You’re also paying the acquisition fee and the contract has to get funded before you can pay off. That will eat away at the savings.

4

So which one is correct? It seems the 1st implies the immediate pay-out works, but the 2nd denies it.

5

Have you thought about the depreciation you’re going to have to eat?

1 Like
6

The acquisition fee does eat away at some of the savings.

It’s probably be worth paying $1000 to save $7500 though

1 Like
7

I am curious about this as well but if the intent is to keep the car for 5 or more years does that really matter?

8

This is about buy vs lease-then-buy. Isn’t the deprecation there anyway?

Lease-then-buy would have some costs, with benefits of having $7500 EV credit. So the question is, how much the costs are, and whether it justifies the extra work.

9

I’m not saying there’s an exact answer but there needs to be some back-of-an-envelope math just to see we are directionally correct:

What’s the value of a 6yr old model today?
Calculate your depreciation from that.
Purchase price + TTL less 6yr old value

Add your financing costs over 72 months. Plus some extra maintenance/consumables over what’s required in a lease.

Vs

Two 36m leases.

2 Likes
10

Rent charges and acquisition fee are 2 different things.

11

Do we have any numbers to show whether lease-then-buy makes sense?

12

@Mohit_Gupta1 I think your strategy works. However,

  1. Have you checked with Volvo Finance if early payout is feasible?
  2. Do you know how many months are needed before making the early payout?

I think to maximize the gain, we should make rent charge as low as possible. Short lease term, low mile limit, and max MSD(10?) would help?

13

So did it work? Interested to find out.

14

I’ll let you guys know - but currently I’ve switched my search to an iX instead of recharge.

15

My dealer just tried to talk me out if an XC90 lease saying the cap cost reduction of 7500 doesn’t make sense if you’ll keep it for 5+ years…we keep our cars usually 7 years.

I want to capture the $7500 rebate but he’s saying the incentives are washed out through Volvo financial.

16

If Volvo is offering a subverted (below market interest rate) on a direct purchase and/or has purchase only incentives that might be the case. Just run the math on both scenarios.

1 Like
17

There’s no reason to have this discussion with a dealer.

5 Likes
18

As @max_g says, you have to do the math yourself. Th dealer isn’t looking out for you.

Also, and I say this has a very happy XC90 lesee - this isn’t the car I would own for 7 years. Especially not now as we approach the end of the generation 2 production run. The tech is already outdated and the complex small displacement engine is just not one I want off warranty - never mind if you are adding options like the air suspension (which I really like since I don’t have to worry about ever paying to fix it). And that’s some random Internet dude’s 2 cents.

3 Likes
19

I’d extend the warranty and own it for as long as the longest OEM warranty.

But yeah check what’s not covered, for example is air suspension covered under the extended?

1 Like
20

In addition to the acquisition fee, many states tax the $7500 rebate. That will also eat into the savings.

1 Like