Lease or buy

[liveintheville]

We were saving up for a Tesla but won’t have the money until next year at the earliest. And we’re refinancing our home which will eat into our savings a bit. We’ve been discussing how it sucks we need to buy now because in a few years there will be many more electric cars to choose from. So our financial planner recommended buying an interim car. Initially we were just going to buy a used car. Then a friend suggested leasing might be the way to go. We’ll keep this car somewhere between 2-5 years.

What would you do?

[oswin]

I think usually the numbers are against leasing a car, but it also depends on your use case. I would make a spreadsheet with various car options and calculate the TCO (total cost of ownership) for each possibility. Include purchase price, insurance costs, charging/fuel costs, expected value of the car in 2-5 years, etc. There are a bunch of non-Tesla electric cars out there, but depending on your usage pattern you may be limited on which ones have enough range. We have a 2013 Nissan Leaf that we love, but it's already had one battery replacement (under warranty) and only gets about 80 miles of range. Which is fine for us.

[dr.girlfriend]

Would you lose more money by leasing or by financing the Tesla?

[liveintheville]

May 7, 2019 16:44:54 GMT -5 dr.girlfriend said:

Would you lose more money by leasing or by financing the Tesla?

By leasing. We plan to keep it at least 10 years.

[dr.girlfriend]

May 7, 2019 17:51:23 GMT -5 liveintheville said:

May 7, 2019 16:44:54 GMT -5 dr.girlfriend said:

Would you lose more money by leasing or by financing the Tesla?

By leasing. We plan to keep it at least 10 years.

Sorry.  I'll rephrase.  I would calculate how much you'll lose by leasing a car for a few years and THEN buying the Tesla, versus buying the Tesla now with financing and paying that interest.  

[liveintheville]

May 7, 2019 18:25:59 GMT -5 dr.girlfriend said:

May 7, 2019 17:51:23 GMT -5 liveintheville said:

By leasing. We plan to keep it at least 10 years.

Sorry.  I'll rephrase.  I would calculate how much you'll lose by leasing a car for a few years and THEN buying the Tesla, versus buying the Tesla now with financing and paying that interest.  

Ah my bad. We should definitely calculate that.

[liveintheville]

May 7, 2019 15:33:04 GMT -5 oswin said:

I think usually the numbers are against leasing a car, but it also depends on your use case. I would make a spreadsheet with various car options and calculate the TCO (total cost of ownership) for each possibility. Include purchase price, insurance costs, charging/fuel costs, expected value of the car in 2-5 years, etc. There are a bunch of non-Tesla electric cars out there, but depending on your usage pattern you may be limited on which ones have enough range. We have a 2013 Nissan Leaf that we love, but it's already had one battery replacement (under warranty) and only gets about 80 miles of range. Which is fine for us.

Yeah the range on the leaf won’t work for us. The bolt doesn’t come AWD but we’re going to go test drive one.

[oswin]

Oh yeah, uh, which Tesla did you want? Because a Model 3 is not much more expensive than a Bolt, though I'm not sure what the lead time on one is at the moment. Also it's possible to find used Model S's in that same price range.

[picaflora]

Lead time on an AWD model 3 is ~ 3 weeks or so. Advantages to looking at a Bolt is that there may be used ones, whereas there aren't really many used 3s at this point.

Do you think you'll put a lot of miles on the lease/interim car? That might help you decide which is better for the lease vs buy.

Tesla has started doing leases for the 3, but... they don't look to be that great of a deal (supposedly can't buy out the lease at the end).

For us, we put down a significant chunk and financed the rest of the 3. The interest/payment is reasonable, and we should have it paid off in ~ 3 years or less (but financed for 5 years in case we ever needed the wiggle room).

[liveintheville]

May 7, 2019 20:12:20 GMT -5 oswin said:

Oh yeah, uh, which Tesla did you want? Because a Model 3 is not much more expensive than a Bolt, though I'm not sure what the lead time on one is at the moment. Also it's possible to find used Model S's in that same price range.

The 3 we’re looking at prices out at close to 60k. By the time you add everything in it gets pricey.

[liveintheville]

May 8, 2019 10:21:35 GMT -5 picaflora said:

Lead time on an AWD model 3 is ~ 3 weeks or so. Advantages to looking at a Bolt is that there may be used ones, whereas there aren't really many used 3s at this point.

Do you think you'll put a lot of miles on the lease/interim car? That might help you decide which is better for the lease vs buy.

Tesla has started doing leases for the 3, but... they don't look to be that great of a deal (supposedly can't buy out the lease at the end).

For us, we put down a significant chunk and financed the rest of the 3. The interest/payment is reasonable, and we should have it paid off in ~ 3 years or less (but financed for 5 years in case we ever needed the wiggle room).

No we only put about 6-8k miles a year on the car. Problem is during ski season we drive quite a ways to the mountain and occasionally go to Long Island to visit my sil so the battery needs to go pretty far.

[oswin]

May 8, 2019 10:45:45 GMT -5 liveintheville said:

May 8, 2019 10:21:35 GMT -5 picaflora said:

Lead time on an AWD model 3 is ~ 3 weeks or so. Advantages to looking at a Bolt is that there may be used ones, whereas there aren't really many used 3s at this point.

Do you think you'll put a lot of miles on the lease/interim car? That might help you decide which is better for the lease vs buy.

Tesla has started doing leases for the 3, but... they don't look to be that great of a deal (supposedly can't buy out the lease at the end).

For us, we put down a significant chunk and financed the rest of the 3. The interest/payment is reasonable, and we should have it paid off in ~ 3 years or less (but financed for 5 years in case we ever needed the wiggle room).

No we only put about 6-8k miles a year on the car. Problem is during ski season we drive quite a ways to the mountain and occasionally go to Long Island to visit my sil so the battery needs to go pretty far.

Here's something to consider - how often do you really need a long range? Because I feel like a lot of the time people buy cars based on their very occasional use case (2x/year need to tow a boat, or drive to Tahoe, or whatever) when really they could buy a car that's what they need for everyday then rent what they need for that very occasional trip. I'm not saying that I know all of your use cases, but why buy a $60k car when you could get a $15k car (used Leaf) and spend $1-2k/year renting something else? Just something to consider. I see a lot of people around here (Texas) driving pickup trucks for long daily commutes, just because they sometimes want something with cargo or towing capacity for occasional use. The math just doesn't add up, though of course for some people it's more about convenience than money. Also, admittedly our Leaf isn't our only car, so I can see how an EV with a short range is less doable if you only have 1 car in a household.

[picaflora]

May 8, 2019 10:45:45 GMT -5 liveintheville said:

May 8, 2019 10:21:35 GMT -5 picaflora said:

Lead time on an AWD model 3 is ~ 3 weeks or so. Advantages to looking at a Bolt is that there may be used ones, whereas there aren't really many used 3s at this point.

Do you think you'll put a lot of miles on the lease/interim car? That might help you decide which is better for the lease vs buy.

Tesla has started doing leases for the 3, but... they don't look to be that great of a deal (supposedly can't buy out the lease at the end).

For us, we put down a significant chunk and financed the rest of the 3. The interest/payment is reasonable, and we should have it paid off in ~ 3 years or less (but financed for 5 years in case we ever needed the wiggle room).

No we only put about 6-8k miles a year on the car. Problem is during ski season we drive quite a ways to the mountain and occasionally go to Long Island to visit my sil so the battery needs to go pretty far.

I think I would look at leasing a Subaru or the like for a few years then until you're ready to get the Tesla.  Or if you can find one in good shape to buy, that works too.  Most of them hold their value relatively well, so if you sell it off you may not lose all that much.

A couple of cautions for the Tesla though - it may be AWD, but the clearance is LOW.  This is not a car that's going to go up and over much snow.  If the roads have been plowed at least once, I think you'd be fine.  Secondly, the range drops significantly in the winter with keeping the battery warm/running the cabin heat.  Something to keep in mind while planning trips, and make sure there's a charger around when needed.  For non-Tesla chargers that the 3 uses, check out PlugShare and ChargePoint.  And feel free to PM me if you have any questions about the Model 3.  We've had ours since Aug and while there are some quirks, we love it!

[bullygirl979]

What would your interim car be? For me that would dictate the decision. If you buy something that has great resale value then buying may make more sense. If you are looking at something that doesn't have great resale value then leasing may be the smarter choice.

Ditto oswin about making a spreadsheet with all the data. Make sure you include down payment, monthly payment, oil changes, tires, brakes, any other routine maintenance, fuel, etc. etc.

FWIW, I asked my financial planner once about his thought process on leasing vs. buying. He said his rule of thumb is that if you are looking to only have the car a few years then leasing may be the better option (due to depreciation).

[polarbearfans]

From any insurance standpoint, make sure you get gap coverage no matter which route. A Tesla is more likely
to total because of the costly repairs, and some area only have 1 shop that can repair Tesla’s and if it is a long wait increases the likelihood to total.

I would lean towards leasing more just because of technology evolution. But of course it is better to run all the numbers. Make sure to include maintenance as well and any incentives.

[flygirl]

I guess my question is why you are refinancing your home...if it’s to pull equity out of your house for debt, you shouldn’t be buying a 60K car in the first place

[liveintheville]

May 13, 2019 12:53:38 GMT -5 flygirl said:

I guess my question is why you are refinancing your home...if it’s to pull equity out of your house for debt, you shouldn’t be buying a 60K car in the first place

We have an arm and are refinancing to a fixed. With 3/4 point we’re getting 3.625. We have 42k currently saved for a car. We’re actually at the dealership looking to buy a used Volvo.

[liveintheville]

We just bought a 2018 Volvo inscription premium with 6500 miles for 21000. It should last us as long as we need it to. We may trade it for an electric car in a few years or keep it for 10. We wanted to keep our options open.