I’m buying a new car (an EV), and am definitely buying, not leasing. The dealer is encouraging me to lease it, then buy out the lease in a couple weeks. He says the price will be essentially the same, the only difference between a trivial amount of interest over the two weeks. He thinks leasing is much better for me, because I get the total $10K EV tax rebate ($7.5K federal, $2.5K Oregon) at purchase. If I buy the car outright, I have to wait for tax time next year to get it.
Maybe he’s solely looking out for my interests, although I suspect the car company has better incentives for the dealer for leases versus purchases. And that’s fine by itself - if it’s no skin off my nose, I’m OK with doing something to help the local dealer.
But I want to make sure it’s truly no skin off my nose. He says there’s no penalty or fees for buying out the lease early. Does anyone know if there are hidden gotchas here I need to worry about? Anyone know any reasons why this might be a good or bad idea?
… although I suspect the car company has better incentives for the dealer for leases versus purchases. And that’s fine by itself - if it’s no skin off my nose, I’m OK with doing something to help the local dealer. As long as the dealer will give me most of that value in the form of a bigger discount on the price, I will let them keep a few percent of that incentive.
I agree w @iamthewalrus_3 that any business-level gotchas will be specific to that manufacterer’s and dealer’s contract.
Here’s one possible government gotcha: If you have a trade-in there may be significant differences in how the sales tax is computed if the trade-in occurs as part of the sale or as part of the lease.
That seemed odd to me, but after some additional reading is perhaps de facto correct: technically you don’t get the tax rebate at all in the case of the lease; it goes to the financier of the lease but in practice they often pass that along in the guise of a cheaper purchase price.
I agree with @iamthewalrus_3 in that there isn’t a way to know without carefully reviewing the contract. I’d speculate that their motivation is indeed better commission or dealer profit for selling leases. It’s plausible that has very little material impact to you if you pay it off quickly and that it’s still worth it to them on average due to most people not doing that.
This may just be an irrational personal quirk, but I’m extremely suspicious of overly complicated transactions with extraneous parties involved. Similar to a “if I don’t understand what it is, I don’t invest in it” philosophy I’d pick the simple transaction (i.e. the straightforward sale and claiming the rebate later). There’s less moving parts, less opportunity for things to go wrong (from my perspective) and less opportunity for the much more experienced dealership to screw me over in a way that I don’t detect until it’s too late.
Perhaps you’re in a position to scrutinize the contract and calculate the time value of having the 10k now instead of in 9 months versus the precise dollar amount of leasing and buying back and can see that it’ll save you a specific dollar amount that is worth it to you. I’m exhausted just thinking about that. Personally, I’d pass.
What the OP needs to look for is a $10,000 Capital Cost Reduction on the lease paperwork. The lease is then based on the difference between the CapCost (+taxes, PDI, floor mats, blinker fluid, etc.) and the residual cost. The buyout is the residual, the sum of all the planned payments, and then credited for the unearned interest that the financing company would have earned.
Two big things to watch for is admin fees on both lease origination and termination.
These things are all top of mind since I just leased a new car last week, although I’m not planning on buying out the lease in two weeks!