When comparing leases, I think that the easiest and quickest comparison is to just add up what you’ll be shelling out over the next three years, all the way to lease termination. This includes the total drive-off and all the monthly payments. You can also add the lease termination fee, but often that’s not provided on the web page or newspaper ads. Seems to be about $400 these days. I usually ignore it since I end up trading in the car rather than turning it in. When comparing leases for the same vehicle from the same financier, it washes out so I won’t consider it here.
Let’s take a current example in Los Angeles area newspapers today. One of the Valley dealers is advertising two three-year 10,000 miles per year leases on a base 2014 Volt: One is $287/mo+tax, $0 due at signing, the other is $179/mo, $3990 due at signing. And via email, the local dealer in my area is advertising $159/mo, $4000 + taxes + fees to start. So to compare:
- Lease 1: ($287+$25.83 tax) * 35 payments + $0 due at signing = $10949.05
- Lease 2: ($179+$16.11 tax) * 35 payments + $3990 due at signing = $10818.85
- Lease 3: ($159+$14.31 tax) * 35 payments + $4000 + $246 tax on rebate and first pmt + $350 license fee = $10415.85
All of these leases are better than Chevy’s website deal – $269/mo, $2679 due at signing, plus tax, license, and fees. That comes out to ($269 * 35) + $2679 + tax, license and fees. That’s $12094 over three years. Tax of 9% on the $2575 rebate and the 36 payments (first payment is part of the drive-off) is about $1113, and license is $350, which brings the total of $13557 after 3 years, which is over $2700 more than the above leases (!). It’s horrendous, but good to know when negotiating with the dealer. It serves as a shining example of what NOT to pay.
So in my case, last month I was able to get a $0 drive-off, $267/mo lease (tax included) for a 36-month 10,000 miles/year lease on a base Volt from my local dealer. After all 35 payments, that’s $9345… about $1100 – $1500 off of the above dealer-advertised offers and over $3700 off of the corporate offer. I’m not bragging… just trying to give you a sense for what is possible. I suspect that my deal would be fairly easy to beat at this moment since dealer inventory seems to be up since last month and there’s a $1000 voucher you can get on the Chevy website that can be applied to the cap reduction cost, which should lower monthly payments by $30 or so.
Hope this helps… it really is that simple – just add up the total 3-year cost to get a decent comparison between leases.
Now if you’re thinking of keeping the car after lease end, it gets a little more involved. You’ll have to add the residual cost, plus tax on that residual cost, to the 3-year total, then compare that total between leases. But if you’re looking at a Volt, beware… the banks that offer the leases on Volts set unreasonably high residuals to lower the payment – about $7500 high it seems, equal to the federal tax credit they are pocketing. Leases on the Focus Electric and RAV4 EV are much more palatable since the fed tax credit is given immediately to you in the form of a huge rebate, so you get the benefit of a low payment and a residual value that is much closer to the anticipated market value of the car after 3 years.
In the near future I’ll blog some thoughts on comparing leases between competitive models (i.e. Volt vs FFE vs Leaf vs ???) and on deciding between a lease vs loan vs cash purchase.