Buying vs. Leasing a RAV4 EV?

[swogee]

I am looking to get a RAV4 EV, but I am trying to decide if a purchase or lease is better. The main advantages of the lease as far as I can see is the lower monthly payment and the upfront 16,500 in cash that Toyota provides for the lease. The disadvantages are: the insurance will be more expensive due to required "gap" insurance; if the car is totaled during the first 3 years during the lease period all of the money spent on leasing the car disappears and a person is left with nothing; since the vehicle is lease and not owned it cannot be modified in any way. Also, if the RAv4 is purchased after the lease for the residual there will be no special financing.

If the RAV4 is purchased disadvantages will be: there will be a higher monthly payment (depends on the down payment) and the Toyota cash is $2500 plus $7500 Federal tax credit that comes after April 2015. There is also 0% financing for up to 5 years as well if it is purchased. The CA state rebate is available on both the 3 year lease and the purchase so I didn't mention it earlier. If the RAV4 is purchased advantages will be that modifications can be made and there is no risk of losing all of the money paid in the first three years since the vehicle is owned and the insurance company will pay the owner for the value of the vehicle if it is totaled.

I usually like to purchase my vehicles, but I am trying to see what would be the most cost effective.

Any thoughts or ideas are welcome.

Thanks in advance.

-Steve

 

[smkettner]

$16,500 > $10,000 so the difference is $6,500. That is worth all other risks combined and a lot more.
Right now I plan to buy a the RAV at lease end but the lease does give an exit if life changes.
I bought my LEAF and in hindsight should have leased.

 

[eplantz]

I had a leased car totalled in 2008 (it was 2 years old at that time) and the insurance company bought me a new car (about $52,000).

 

[TonyWilliams]

The main advantages of the lease as far as I can see is the lower monthly payment and the upfront 16,500 in cash that Toyota provides for the lease.

Yes, if you really want to buy it (which I don't recommend), then lease the car and after a few days, pay off the the lease amount due plus the residual. Voila... you own the car with a $16,500 discount from Toyota.

Of course, you can always but the car at the end of the Rav4 EV lease. Plus, you are in control in 36 months to decide if you want to keep it or turn it in. What if the $36,000 battery were "tanking" for some reason? That's not a warranty repair (no warranty on capacity), so you're stuck with a lemon on a purchase, but with a lease, you toss them the keys and GET A BRAND NEW CAR IN A NEW LEASE !!!

The disadvantages are: the insurance will be more expensive due to required "gap" insurance

If you don't have "gap" insurance on your purchase, then this really isn't an apples to apples comparison. You put YOUR money at risk without gap insurance on a financed purchase.

if the car is totaled during the first 3 years during the lease period all of the money spent on leasing the car disappears and a person is left with nothing;

Uh, that's exactly how a normal lease works even without "totaling" the car... at the end of the lease, you turn in the car and "you're left with nothing". Just the way I'd normally want it.

since the vehicle is lease and not owned it cannot be modified in any way.

Well, certainly there are limitations, but you could do all the things folks seem to want to do to a car these days. Put on ridiculously large tires (just save the originals), put on a too loud stereo (just keep the original), fuzzy dice, tinted windows, etc.

Also, if the RAv4 is purchased after the lease for the residual there will be no special financing.

Car loans are cheap. I don't know how much "special financing" you would need to pay off a $20k residual. The difference between a used car loan for $20k and a new car loan for $20k isn't that great.

If the RAV4 is purchased disadvantages will be: there will be a higher monthly payment (depends on the down payment)

Gotta stop you right there. I can make a lease or purchase any size you want... with_a_down_payment. Your money isn't free, so if you want to compare apples to apples, then it's either with or without a down payment for both a lease or a purchase.

By the way, I NEVER recommend a down payment on a depreciating asset. Never. If a dealer ever told me they wouldn't sell a car to me without a down payment, I would just walk. By the way, surprisingly I've bought a LOT of cars in my lifetime.

and the Toyota cash is $2500 plus $7500 Federal tax credit that comes after April 2015.

So, $10k off on a purchase and $16,500 off on a lease. That's correct.

And both options (lease or purchase) are eligible for $2500 are through June 30, 2014 from California. After June 30, 2014, that may drop to $2000 with a restriction that if you already got the rebate two times previous, then you are not eligible.

There is also 0% financing for up to 5 years as well if it is purchased.

The money factor on the lease is almost zero, too.

Since you mention about the car getting "totaled" a lot, here's a scenario; if you drive off the lot with your shiny new Rav4 EV and a drunk driver while texting his drug dealer runs into your car, then:

1) Lease - You just walk away and get another. All money paid is lost, so don't make a down payment if you like your money. It's dumb, but even dumber on a RENTAL. If you can't afford the monthly payment, why do you think you can afford to throw you "100% at-risk" cash at the dealer "up front" to lower your payment?

2) Purchase - You owe the difference between the actual cash value (ACV) of the car and the amount owed to your insurance company. It could be easily $10,000. Your down payment is LONG gone.

3) Purchase w/GAP insurance - You walk away owing nothing, but your down payment is once again LONG gone.

Have you noticed a trend with your down payment? A down payment is a profit maker for a dealer and they will happily take your cash EVERY TIME.

 

[rayray]

Unless, if you had the opportunity to buy the car with an awesome purchase deal! ...
1) $2500 off MSRP
2) $10,000 Toyota Cash
3) 60 months 0% interest
4) Got the $2500 CA rebate
5) Got the $7500 Federal rebate
6) and your insurance is full replacement value of the car ... Only cost $200 more per year (at least for me)
7) The batteries are under warranty for 8 years ... I'm saving about $1500 a year in fuel, and maintenance cost. Range is not an issue, so even if I lose 50% capacity, the batteries are still required to be under warranty if the cells die.. That's another 8 x $1500 = $12,000.... That's a great ROI for me ....


However, today, if I was going to get the car ....I would only do the lease, as the above deal is not available, and knowing that I want a Tesla more than ever, and Toyota's stance on EV's....

 

[tailgate1234]

The imputed interest on the lease is basically zero. You can lease with zero down and then buy out the lease 1 day later and it would be much cheaper than buying up front. But why buy when you can pay down the lease slowly and see how the EV market unfolds in the next 3 years?

 

[rayray]

The imputed interest on the lease is basically zero. You can lease with zero down and then buy out the lease 1 day later and it would be much cheaper than buying up front. But why buy when you can pay down the lease slowly and see how the EV market unfolds in the next 3 years?

How do you figure - comparing to my deal ?
Looking at Dianne's latest best deal - 3 year lease with unlimited mileage is $479 a month with zero out of pocket....
-- 36 x $479 = $17244, and residual is $18924
To purchase after 3 years, you have to pay the residual, and the tax on it. SDDC's best rate for a used purchase is 1.49% for 42 months (keeping the payment at $500 a month).
So, another $1500 for tax, and licensing, plus $552 for interest, the total cost is $35,720 after the CA $2500 rebate.
-- ($17244 + $18924 + $1500 + $552) - $2500 = $35,720 (and 7 years pf $500 payments!)

My deal
$48500 for the car, plus $4000 tax and licensing, minus $10000 Toyota cash, minus $2500, and minus $7500, and 60 months 0% financing from Toyota.
-- ($48,500 + $4000) - ($10000+$2500+$7500) = $32,500 (and only 5 years of payments)

That's a difference of $3200! ....So, if you wanted to own it .... that was a better deal, and I wanted to own it !

Cheers.

 

[miimura]

The imputed interest on the lease is basically zero. You can lease with zero down and then buy out the lease 1 day later and it would be much cheaper than buying up front. But why buy when you can pay down the lease slowly and see how the EV market unfolds in the next 3 years?

How do you figure - comparing to my deal ?

All he's saying is that if you look at the lease deal, you have a capitalized cost, basically the amount that you're making payments on. The total of payments is only about $30 higher than the capitalized cost, so the effective interest is nearly zero. That is all. The comparison of lease vs. buy has a lot to do with your personal tax situation. If you don't have enough tax liability, you should not do a purchase because you won't get the full benefit of the tax credit. In any case, today's deals from Toyota are heavily tilted toward leasing. When I purchased in April last year, the deal was heavily tilted toward purchase because Toyota was giving the $10,000 purchase rebate on 2012 model year vehicles. Now it's only $2,500, so the "My Deal" is not available today.

 

[smkettner]

$48500 for the car, plus $4000 tax and licensing, minus $10000 Toyota cash, minus $2500, and minus $7500, and 60 months 0% financing from Toyota.
-- ($48,500 + $4000) - ($10000+$2500+$7500) = $32,500 (and only 5 years of payments)

That's a difference of $3200! ....So, if you wanted to own it .... that was a better deal, and I wanted to own it !

Cheers.

Where does the $10,000 Toyota cash come from?

 

[rayray]

>> smkettner - That was the deal last year on 2012's ($10,000 Toyota cash + 0% financing for 60 months)

>> miimura - Agreed .... In fact that's why I originally said, today I would lease it ... However, I was just trying to point out that all deals should be looked at carefully .... Last year the purchase made more sense, and had a better ROI, and now the lease is the best way to go ... But you have to always do your due diligence to make sure the numbers make sense for what you want to get out of the car.

 

[swogee]

Thanks for the replies. Forgive me if I am not 100% familiar with a lease as I am still trying to figure out how leases work.

Tony, you are correct with regards to the down payment. In order to make a valid comparison both the lease and purchase would have to have no down payment. So given no down payment in both cases the purchase would cost more month.

Ditto for the gap insurance. I was under the impression it was for people leasing vehicles but it is a good idea for people that don't put at least 20% down on a vehicle when purchasing.

The two modifications I was considering are the DC fast charge add-on that I believe QuickChargePower is working on and the addition of a third row seat. Neither is a cosmetic modification.

With regards to totaling the RAV4 EV during the lease period I was under the impression that the actual owner of the vehicle will get the insurance payment for value of the totaled vehicle and at that point the lease would be ended due to lack of a vehicle. Would the owner be obligated to purchase another RAV4 EV to finish out the lease period? What happens if a new RAV4 EV is no longer available which would seem highly likely as this is the last year for it?

With regards to the lease, I guess what the monthly payment goes toward is purely the use of the vehicle and no equity is built up in the vehicle as in the case of purchasing. I guess the thought of paying some monthly fee to lease a vehicle as opposed a monthly payment to own the vehicle is just something I was never enthusiastic about. The main thing that has me considering the lease is high amount of money Toyota will provide to lessee as opposed to a person purchasing. It's like buying a house vs renting a house but in this case the house appreciates while a vehicle depreciates. The other thing that has me considering a lease is that there still is the option to buy the vehicle for the residual value at the end of the lease. I guess the option to buy a vehicle with a known history is worth something to me as well. I tend to not change vehicles very often and I maintain them very well so that's why I have never considering leasing before. I have only bought a new car once before about 14 years ago. Since this is a BEV and technology changes rapidly it makes things a little different in this case.

I'm still not entirely convinced it's a bad idea to put money down when purchasing a vehicle. If the vehicle is totaled, and there was money put down gap insurance would not be needed if the down payment was at least 20% and there would likely be no difference between the ACV of vehicle when it is totaled and the balance owed on a loan with a down payment on a purchase. The 0% financing though makes a low or no down payment more attractive.

Thanks again for all of the info. Any additional thoughts or ideas are still welcome.

-Steve

 

[TonyWilliams]

Our JdeMO (CHAdeMO on non-native CHAdeMO cars) will be offered in both removable and permanent installs. It will be possible to have us remove it (not the end user).

Also, that third row seat should just bolt in. Completely removable.

 

[smkettner]

Do you really pay sales tax on top of the residual? I kinda assumed you make just the residual payment and the title will show up in the mail.

 

[tailgate1234]

The imputed interest on the lease is basically zero. You can lease with zero down and then buy out the lease 1 day later and it would be much cheaper than buying up front. But why buy when you can pay down the lease slowly and see how the EV market unfolds in the next 3 years?

How do you figure - comparing to my deal ?
Looking at Dianne's latest best deal - 3 year lease with unlimited mileage is $479 a month with zero out of pocket....
-- 36 x $479 = $17244, and residual is $18924
To purchase after 3 years, you have to pay the residual, and the tax on it. SDDC's best rate for a used purchase is 1.49% for 42 months (keeping the payment at $500 a month).
So, another $1500 for tax, and licensing, plus $552 for interest, the total cost is $35,720 after the CA $2500 rebate.
-- ($17244 + $18924 + $1500 + $552) - $2500 = $35,720 (and 7 years pf $500 payments!)

My deal
$48500 for the car, plus $4000 tax and licensing, minus $10000 Toyota cash, minus $2500, and minus $7500, and 60 months 0% financing from Toyota.
-- ($48,500 + $4000) - ($10000+$2500+$7500) = $32,500 (and only 5 years of payments)

That's a difference of $3200! ....So, if you wanted to own it .... that was a better deal, and I wanted to own it !

Cheers.

There is no "toyota cash." You can get 16500 off the lease and buy the car the very next day after you take delivery. Or you can lease the car at zero interest and take your time on deciding. If you buy the car at lease end you will have paid a total of about $20 in interest ("rent") more than if you bought the lease out on day 1 but you get the option to not buy. Unless the buy incentives go up or the lease incentives go down, leasing is a no brainer.

 

[Khaihon]

There is no "toyota cash." You can get 16500 off the lease and buy the car the very next day after you take delivery.

Actually, on a buy, there's still a $2500 cash incentive applied to the 0% financing (or rebate check if you finance elsewhere). It's in Dianne's current deal. Current lease deal is definitely still better and the flexibility to give or keep the car is worth the little extra paid on top of the best deal of all time when Toyota was clearing out the 2012 RAV4's.

 

[miimura]

$48500 for the car, plus $4000 tax and licensing, minus $10000 Toyota cash, minus $2500, and minus $7500, and 60 months 0% financing from Toyota.
-- ($48,500 + $4000) - ($10000+$2500+$7500) = $32,500 (and only 5 years of payments)

That's a difference of $3200! ....So, if you wanted to own it .... that was a better deal, and I wanted to own it !

Cheers.

Where does the $10,000 Toyota cash come from?

The $10,000 Toyota cash was the promotion last year, called "Subvention Cash" and only on 2012 models, in SoCal only. At the time, the amount in NorCal was something like $9,300. That is one reason I bought my car in Oxnard and not from a local dealer. The Subvention Cash was structured in a weird way such that you had to use Toyota Financial for purchase financing (0% 60 months) and it appeared on the contract as an additional down payment, but paid by Toyota. So, you had to pay sales tax on the full amount you negotiated with the dealer. Anyway, the purchase incentive now is only $2,500, as stated earlier.

 

[ekcanzano]

I am not normally a believer in leasing. Except in rare cases (like current RAV4-EV lease deals), it is the leasing company getting the good deal at the expense of the lease customer.

I wanted to purchase a RAV4-EV for cash. Not a good idea with Toyota's (TFS's) amazing lease deals. For someone such as myself, who wants to own, the best move was to lease and then purchase at the end of the lease for the guaranteed residual value.

My lease vs. purchase calculations (back in November 2013) showed that it was $10,000 cheaper to lease rather than purchase. That's a lot of money difference because Toyota offers great incentives for customers to lease (unusually great incentives).

I added up every penny I would spend on lease payments, taxes, licensing, ($0 lease down) and residual purchase, etc. Added in the benefit of the $2,500 California incentive and it was a no brainer. The best way to ownership was to lease first, then buy.

The lease incentives are even better today.

Other important strategies that have been mentioned:
* $0 drive off - if the car is totaled, the lease company absorbs the loss
* Unlimited miles lease for $30 per month causes the residual value to be approximately $1,000 cheaper. This means that $30/month for 36 months is $1,080 but if you purchase the car at the end of the lease (my plan) you pay $1,000 less. Therefore, it is an $80 decision NOT a $1,080.
* You can always elect to not purchase the car at the end of the lease for any reason.

Having driven my beloved RAV4-EV for 6 months, I cannot imagine giving it up. I LOVE IT!!!

Of note, I thought I would not really need more than 12,000 miles per year. Because the RAV4-EV is so much fun to drive, I take it most everywhere. Only three times since last November, I have used my ICE because I needed the range. Only three times! I am averaging about 1,400 to 1,600 miles per month (about 18,000 miles/year). I love driving this car!

My only other note is that after following the progress of the RAV4-EV since its concept announcement, I can honestly say do not even consider obtaining yours from other than Diane and Gloria at Carson Toyota. They truly understand the RAV4-EV and its owners. I hope you are as thrilled with your deal as I am with mine.

It is truly a privilege to drive a zero polluting vehicle with such exhilarating performance and comfort.

 

[miimura]

Because the RAV4-EV is so much fun to drive, I take it most everywhere. Only three times since last November, I have used my ICE because I needed the range. Only three times! I am averaging about 1,400 to 1,600 miles per month (about 18,000 miles/year). I love driving this car!

I take the RAV4 EV everywhere. In 13 months, I've never taken our ICE car because of range.

 

[TonyWilliams]

Because the RAV4-EV is so much fun to drive, I take it most everywhere. Only three times since last November, I have used my ICE because I needed the range. Only three times! I am averaging about 1,400 to 1,600 miles per month (about 18,000 miles/year). I love driving this car!

I take the RAV4 EV everywhere. In 13 months, I've never taken our ICE car because of range.

With two Rav4 EV's, the poor Infinti G37 convertible just sits... waiting. I did sneak a top-down drive in yesterday, though.

 

[swogee]

Thank you again for all of the replies. ekcanzano, my thoughts pretty much mirror what you have posted. I am currently attempting to contact Dianne at Carson Toyota, but she seems kind of flakey. Initially I contacted her and she responded and then for a while and then nothing. So I sent another e-mail and she finally responded again. At this point I have sent two more e-mails with no response since Wednesday of last week. I'm kind of feeling like I have keep bugging her to be able to buy the RAV4 EV which is not confidence inspiring.

My hope is to use the RAV4 EV for primarily in town driving. I actually commute by bike, but my wife who has to shuttle the kids to school drives on average 50 miles a day. I figure we can use RAV4 EV as long as we drive inside of San Luis Obispo County and Northern Santa Barbara County (Santa Maria). It's about 35 miles to Paso Robles (North of SLO) and 35 miles to Santa Maria(South of SLO). There is one DC fast charger at a Nissan dealer in Goleta that is publicly available during business hours so if the RAV4 EV had the aftermarket CHADEMO add on on we might be able to make down there as well. The cost of the CHADEMO add on and if affects the lease and warranty are concerns though. I am wondering if the dealership notices the CHADEMO add on if they will try to void the warranty or at least notify the leasing company.

Thanks again for all of the info.

-Steve