Bolt lease numbers for January 2017

[bro19991]

$2,500 lease cash.
58% residual for 15k miles. 60% for 12k, 61% for 10k. Premier trim 1% less.

And the residual is inflated artificially ~10% resulting in a lower lease payment, which is where GM is giving the rest of the $5k.
Explaining in advance before the "where's the rest of MY (not) $7.5k tax credit?!" crowd shows up.

 

[rcrcr]

@bro19991 Do you have a screenshot or an otherwise viewable source to show those residuals, particularly the "same residuals for all trims" component? I am getting something different from a dealer, and would love to have some documentation to stand behind. Thanks!

 

[bro19991]

Whoops, premier is 1% less.

 

[evnow]

And the residual is inflated artificially ~10% resulting in a lower lease payment, which is where GM is giving the rest of the $5k.
Explaining in advance before the "where's the rest of MY (not) $7.5k tax credit?!" crowd shows up.

It is a non-transparent way of doing things and as one would expect, most people don't like it. Assuming 10% inflation - that would still be $4k and GM is keeping $5k of the credit. Better to have lower residual and higher CCR.

Only "explanation" is that GM somehow thinks keeping the residual high results in higher used values. Doubtful.

 

[wwhitney]

Only "explanation" is that GM somehow thinks keeping the residual high results in higher used values. Doubtful.

If we actually knew that residuals were inflated, i.e. we actually knew the market value of the Bolt would be $5,000 less than the current lease residual, then there wouldn't be any problem with leasing now with the inflated residual. At lease end, we'd just turn in our car and buy the identical car at the real price of $5,000 below residual. Or perhaps GM would recognize reality and offer us a buyout at $5,000 under the residual.

Of course, we can't actually know that, so it is an annoying source of uncertainty. Per leasehackr.com/calculator, 60% is the default residual for Chevrolet 12,000 miles/year leases. Part of the reason that residuals historically on electric cars are much lower as a percentage of MSRP is that with the $7,500 tax credit, the actual cash value of the car starts at $7,500 below MSRP. In 3 years time, perhaps GM will have run out of its federal tax credit, and the value of a Bolt will really be 60% of current MSRP. Who knows?

I would be happier with a lease that had a $7,500 CCR from GM, with a residual at 60% of (purchase price - $7,500), that's for sure. Since that's not the deal, I doubt I will lease.

Cheers, Wayne

 

[SparkE]

Only "explanation" is that GM somehow thinks keeping the residual high results in higher used values. Doubtful.

If we actually knew that residuals were inflated, i.e. we actually knew the market value of the Bolt would be $5,000 less than the current lease residual, then there wouldn't be any problem with leasing now with the inflated residual. At lease end, we'd just turn in our car and buy the identical car at the real price of $5,000 below residual. Or perhaps GM would recognize reality and offer us a buyout at $5,000 under the residual.

Of course, we can't actually know that, so it is an annoying source of uncertainty. Per leasehackr.com/calculator, 60% is the default residual for Chevrolet 12,000 miles/year leases. Part of the reason that residuals historically on electric cars are much lower as a percentage of MSRP is that with the $7,500 tax credit, the actual cash value of the car starts at $7,500 below MSRP. In 3 years time, perhaps GM will have run out of its federal tax credit, and the value of a Bolt will really be 60% of current MSRP. Who knows?

I would be happier with a lease that had a $7,500 CCR from GM, with a residual at 60% of (purchase price - $7,500), that's for sure. Since that's not the deal, I doubt I will lease.

Cheers, Wayne

But only a PART - and sometimes a very small part. Currently, there are oodles of 3-4 year-old, sub-29000-mileage EVs for sale near San Francisco for under $9000 - many of them are LEAFs. Cars generally don't drop in price by 66% over a 3 year period - unless they are electric. And until the past 3 months or so, even electrics didn't fall that fast. I don't think that the Bolts will fall that far that fast, but I plan on buying a low-mileage electric "city car" (80-90 miles range) for somewhere around $5-6K in the next 12 months (I expect prices to continue dropping).

 

[wwhitney]

Currently, there are oodles of 3-4 year-old, sub-29000-mileage EVs for sale near San Francisco for under $9000 - many of them are LEAFs.

I haven't been keeping up with what new LEAFs cost--if I take 1/60% of $9,000, and add $7,500, I get $22,500. Given the current promotions on LEAFs, can I buy a new LEAF with specs comparable to the 3 year-old, 30,000 mile, $9,000 used LEAF for $22,500? For that matter, what did those used LEAFs cost when new?

Cheers, Wayne

 

[evnow]

But only a PART - and sometimes a very small part. Currently, there are oodles of 3-4 year-old, sub-29000-mileage EVs for sale near San Francisco for under $9000 - many of them are LEAFs. Cars generally don't drop in price by 66% over a 3 year period - unless they are electric. And until the past 3 months or so, even electrics didn't fall that fast. I don't think that the Bolts will fall that far that fast, but I plan on buying a low-mileage electric "city car" (80-90 miles range) for somewhere around $5-6K in the next 12 months (I expect prices to continue dropping).

Good reasons for used values to be lower
- Better cars available today
- Battery capacity reduced
- 7.5k credit
- State credits / no sales tax only for new cars

In WA the last 2 alone add up to ~11k or some ~35% (!) of the new Leaf price. So, if normally the residual is 60% after 3 years, we should expect Leafs to be 20% to 30%. Used values are slightly above that 30% mark. So, even though there are a lot of reasons, tax credits/benefits alone can explain the low used values.

 

[tedkidd]

Only "explanation" is that GM somehow thinks keeping the residual high results in higher used values. Doubtful.

If we actually knew that residuals were inflated, i.e. we actually knew the market value of the Bolt would be $5,000 less than the current lease residual, then there wouldn't be any problem with leasing now with the inflated residual. At lease end, we'd just turn in our car and buy the identical car at the real price of $5,000 below residual. Or perhaps GM would recognize reality and offer us a buyout at $5,000 under the residual.

Of course, we can't actually know that, so it is an annoying source of uncertainty. Per leasehackr.com/calculator, 60% is the default residual for Chevrolet 12,000 miles/year leases. Part of the reason that residuals historically on electric cars are much lower as a percentage of MSRP is that with the $7,500 tax credit, the actual cash value of the car starts at $7,500 below MSRP. In 3 years time, perhaps GM will have run out of its federal tax credit, and the value of a Bolt will really be 60% of current MSRP. Who knows?

I would be happier with a lease that had a $7,500 CCR from GM, with a residual at 60% of (purchase price - $7,500), that's for sure. Since that's not the deal, I doubt I will lease.

Cheers, Wayne

It's also a great way to insure most don't want to buy out their leases at the end...

 

[JupiterMoon]

It is a non-transparent way of doing things and as one would expect, most people don't like it. Assuming 10% inflation - that would still be $4k and GM is keeping $5k of the credit. Better to have lower residual and higher CCR.

Only "explanation" is that GM somehow thinks keeping the residual high results in higher used values. Doubtful.

The consumer stands to gain if the entire $7500 tax credit is applied to the cap cost. That's why they don't do it.

For example if all things being equal a Premier at $43510 at 36 months and a given MF should lease at:

A) $639/month @ 57% residual and no applied tax credit

OR

B) $534/month @ 47% residual with the full $7500 tax credit applied. (A hypothetical residual to demonstrate the point).

You now see why they scam that money for themselves. And people actually defend this...lol

Reason being that the $7500 credit affects the calculations in a variety of places in the leasing equations.

Of course the dealer/financing firm may try and ask for more due at signing because they want to tax the $7500 credit as a "down payment" and that part is taxed.

I'm not exactly sure what "lease cash" means. Where do they apply that? Do they tax and pass that tax fee onto the "due at signing"??

 

[Schnort]

Raising the residual helps customers in states that charge tax on the cap buy down and payments as you go (like California)

 

[JupiterMoon]

Raising the residual helps customers in states that charge tax on the cap buy down and payments as you go (like California)

Applying the full tax credit is even more helpful to customers even if the residual drops.

 

[Schnort]

Not if you get taxed on the $7500 cap reduction it doesn't.

 

[tedkidd]

Not if you get taxed on the $7500 cap reduction it doesn't.

Not clear. Can you show how the math looks?

 

[JupiterMoon]

Not if you get taxed on the $7500 cap reduction it doesn't.

Yes...even if you get taxed. Do the math yourself. It's easy to do. The reduction in both base pay and lease rent and the tax on the sum of those two is far great savings than the tax on the $7500.

 

[Schnort]

Not if you get taxed on the $7500 cap reduction it doesn't.

Not clear. Can you show how the math looks?

Under california tax law, you're taxed on cap cost reduction, etc. so you'd pay sales tax on the full $7500.

If that $7500 is used to bolster the residual instead, then you don't pay tax on the $7500, you pay interest on the $7500 over the course of the lease.

In California, with good credit, it's 7.25%-9% sales tax vs 1.9% (compounded over the course of the loan).

The amount paid on the lease will be lower if it's applied to the residual.

 

[JupiterMoon]

Not if you get taxed on the $7500 cap reduction it doesn't.

Not clear. Can you show how the math looks?

Under california tax law, you're taxed on cap cost reduction, etc. so you'd pay sales tax on the full $7500.

If that $7500 is used to bolster the residual instead, then you don't pay tax on the $7500, you pay interest on the $7500 over the course of the lease.

In California, with good credit, it's 7.25%-9% sales tax vs 1.9% (compounded over the course of the loan).

The amount paid on the lease will be lower if it's applied to the residual.

I don't think so. Applying the full $7500 to the cap cost would lower your base payment, your rent charge, and the tax on the sum of those two.

The payment with applied credit is considerably lower (even with the tax paid towards the cap reduction) than if you raised the residual.

 

[wwhitney]

I don't think so. Applying the full $7500 to the cap cost

To be clear, we are talking about adding $5,000 of Capital Cost Reduction (to make the CCR $7,500 total) and simultaneously lowering the residual by $5,000.

would lower your base payment

No, the base payment is the amortized depreciation, based on capital cost - residual, which is unchanged by the above.

(lower) your rent charge

Yes, your rent on a 3 year lease would be lower by (roughly?) 3 * APR * $5,000. If you get a 0.0005 Money Factor, the APR is 1.2%, so that's 3.6% of $5,000.

and the tax on the sum of those two.

Yes, you'd save the sales tax on the reduced rent, so 9% of 3.6% if the sales tax rate is 9%. So your total savings would be 3.924% of $5,000. But you'd own sales tax on that extra $5,000 of Capital Cost Reduction, or 9% of $5,000.

Thus in California, if you intend to turn in the car at lease end anyway, inflating the residual by $5,000 saves you a bit over 5% of $5,000 over the course of the lease, or $250.

Cheers, Wayne

 

[JupiterMoon]

I don't think so. Applying the full $7500 to the cap cost

To be clear, we are talking about adding $5,000 of Capital Cost Reduction (to make the CCR $7,500 total) and simultaneously lowering the residual by $5,000.

would lower your base payment

No, the base payment is the amortized depreciation, based on capital cost - residual, which is unchanged by the above.

(lower) your rent charge

Yes, your rent on a 3 year lease would be lower by (roughly?) 3 * APR * $5,000. If you get a 0.0005 Money Factor, the APR is 1.2%, so that's 3.6% of $5,000.

and the tax on the sum of those two.

Yes, you'd save the sales tax on the reduced rent, so 9% of 3.6% if the sales tax rate is 9%. So your total savings would be 3.924% of $5,000. But you'd own sales tax on that extra $5,000 of Capital Cost Reduction, or 9% of $5,000.

Thus in California, if you intend to turn in the car at lease end anyway, inflating the residual by $5,000 saves you a bit over 5% of $5,000 over the course of the lease, or $250.

Cheers, Wayne

Run the numbers....reduce your cap cost by $7500 and see what residual you'd need to be at to equate to 57% at zero cap cost.

 

[wwhitney]

Run the numbers....reduce your cap cost by $7500 and see what residual you'd need to be at to equate to 57% at zero cap cost.

I'm unclear on what you are suggesting. My previous post was comparing two scenarios:

1) Current deal, $2,500 Capital Cost Reduction from GM, residual is (say) 60% of MSRP
2) Hypothetical deal, $7,500 Capital Cost Reduction from GM, residual is (say) 60% of MSPR minus $5,000.

I'd prefer deal (2), as I expect to want to buy out the lease. But if you know you want to turn in the car, and you live in California, and your money factor is only 0.0005, then deal (1) is $250 cheaper.

Cheers, Wayne