[santellavision]

So, I'm about to get my '22 Recharge. Without starting a flame-war, what is the thinking about Leasing vs. Purchasing a new Recharge?

I'm going back and forth with both options. I was going to go with Buying it, but now with all the issues and it being a 'bleeding-edge' vehicle. That owned value after 3-4 years might be really low.

My thinking is this... There are so many new EV coming out that no doubt, will be better and better with more cool features (including the next gen XC40s) I wonder what the value will be of a 3-4 year old Recharge? That scares me a bit as I don't think it will hold much value against newer EV hitting the market. And, leasing will lessen the worries about all the hardware (Brakes, 220mi Range etc) and Software, LTE etc issues. You turn it in and pick a newer car.

Am I missing anything in my thinking that leasing might be a better option?

 

[Rousie13]

Can you just buy it and then sell it/trade it in when you decide it’s time? The interest rates from Volvo are really low right now. We drive a lot of miles, so we just buy and trade in/sell when it’s time for a new vehicle…..this has been as quick as 8 months up to about 2.5-3 years…..as you can see we don’t keep cars long.

 

[BuzzyBud]

For many potential owners, lease might be their best option. I usually drive over 20,000 miles each year, leasing for me might be too expensive. In the past I bought a vehicle, kept it a few years and then saw if my daughter needs a used car. She likes that arrangement.

 

[improvius]

I honestly don't think it makes that much difference. I think it all averages out more or less. Volvo will get your money either way.

 

[Ed_S]

We just picked up our '22 Recharge in early November, we had similar thoughts on purchasing vs. leasing. We ended up going with the lease for similar reasons you've stated, we were concerned that the vehicle's value might be considerably lower in 3 years due to continued advances and competition in the EV field. To be honest, I sometimes still question if that was the best decision, but just remind myself to accept it and move on. I gotta say, we love our XC40, absolutely no regrets and selecting it as our first EV!

 

[Rousie13]

Just remember with leasing the $7500 tax credit goes to Volvo and not you. I would factor that into your decision as well as how long you plan to keep it, miles driven, etc.

 

[santellavision]

Just remember with leasing the $7500 tax credit goes to Volvo and not you. I would factor that into your decision as well as how long you plan to keep it, miles driven, etc.

Thank you, totally forgot about that. Plus, Colorado give me another $2,500. on top of that.

 

[arijaycomet]

Just remember with leasing the $7500 tax credit goes to Volvo and not you. I would factor that into your decision as well as how long you plan to keep it, miles driven, etc.

That actually usually works to save someone $200+ per month, though. In the case of the leasing we’ve typically done the $7500 shows up as money down. For example my recent Jeep 4XE had a $7500 tax credit and it shows up right on the lease documents, as if I had put $7500 Down, or gotten a $7500 MSRP discount from the mfg. So — while it may go to the mfg, it is also a HUGE discount/incentive.

I say “usually” because in many cases, this ends up not showing up as a line item but instead as a rate. I know that Polestar (and maybe Volvo, too) instead provide REALLY low rates (money factors that convert to 0.99% APR or similar). Just be sure to read the documents— but yeah, the FedTaxCredit = BIG savings for leasing. This is how, back in the day with $7500 Fed and $2500 STate, you could lease a brand new Nissan Leaf for $99/mo with $0 down (friends of mine who live in LA did this!)

 

[santellavision]

In the case of the leasing we’ve typically done the $7500 shows up as money down. For example my recent Jeep 4XE had a $7500 tax credit and it shows up right on the lease documents, as if I had put $7500 Down, or gotten a $7500 MSRP discount from the mfg.

Wait, what? How did you get the $7,500 as money down from the IRS with a lease? That is only with a purchase.

 

[arijaycomet]

Am I missing anything in my thinking that leasing might be a better option?

You’re actually 100% on the money. And … because of the Fed Tax Credit (which will likely EVENTUALLY get a new life in ‘22 ) — plus Volvo not being anywhere near 200k cars— the fact is that a brand new let’s say $60k Volvo XC40 is actually $52,500 out the door for anyone. So where a normal car would depreciate 11% on average after first year, the EVs of the world go this way PLUS $7500.

Before the market went crazy with low new car production, you could pick up a $40k Chevy Bolt that was 2-3 years old for a mere $12-15k — as a matter of fact, a friend of mine picked up a brand new ‘21 Bolt mid summer of THIS year for $22k that was $38k MSRP. That was because they have no tax credit anymore, but other mfgs do— so they were offering $16k off MSRP but also b/c overstocked and a new model year coming. In 3 years the XC40 is likely to be replaced with a new model (its already been teased, and we’re already 5 years into this cars life cycle (XC40 in general; not the P8 Recharge but the chassis is getting long in The tooth).

By 3 years from now, chances are good the new car market will have come back online fully, and used car values will be where they were pre pandemic and pre shortages. Normally you’ll see a leased car have a ~50% residual value after 3 years, but then another $7500 (or 13% of MSRP for an EV. In other words, 3 year old EVs (excluding Tesla) have normally seen 60% value drops in 3 years. Hence that $38k Bolt for $15k —

If you lease, then you dont have to worry about it— but you DO have to worry about mileage. Which is why we leased. But we are over miles— and we figured in the long run even paying over miles is a risk (we even did 15k / yr)— but I’d rather have a mileage fine, and walk away, then not have that option. I’d really personally say the ONLY EV to buy and not lease is a Tesla, since those hold amazing values. But… this market is odd right now.

To the point of a few people above— if you drIve more than 15k/yr — leasing may not make sense overall, versus buying— but at that point you also are still going to lose $$ — its a given.

 

[arijaycomet]

Wait, what? How did you get the $7,500 as money down from the IRS with a lease? That is only with a purchase.

$7,500 Fed Tax Credit goes to whomever the FIRST owner of the car is; when you lease, it is the leasing company. So they will show it as money down on the car. Here is a rough example:

$60,000 estimated MSRP on a Volvo XC40
$30,000 estimated residual end of lease
= $30,000 it will lose over 36 months = $833 per month
ADD some interest, and assume you pay cash down to cover your local taxes
Your payment will be around $900 per month to lease that car
(most cars hold 50% value at 12k miles per year over 3 years)

When the car is leased, the $7500 benefit goes to the first owner, leasing company—
$60,000 becomes $52,500– the rest of the #s stay the same
Your payment is more like $625 + interest … thats how this would work.

 

[arijaycomet]

PS: the leasing company and the mfg don’t LEGALLY have to provide you that $7500 tax credit — this is why many are just offering a special interest rate. This is good for them financially, bad for you. If you do lease an EV, it is better to find one that shows the $7500 as down payment as that typically provides $200 (7500/36 months) savings and also lowers your tax obligation too. If they offer a lower rate, you’re still paying full tax on the MSRP, and the savings is likely not even close to as much.

 

[Homer]

Remember, the leasing company is going to make money. They establish a residual that will provide them money after you have paid them your monthly payment plus interest.

In some situations, they miscalculate the residual and the car might depreciate much more than factored. In these situations, you actually might come out ahead. However, they also have those "end of lease " costs and they sometimes add additional charges at the end of the lease due to wear and tear that the consider unusual.

Most leases drop these charges is you purchase another car from the same company.

I have leased and purchased EVs and ICE cars. In the end. the lack of any equity in the car has made me reluctant to lease.

If you have a business or in a situation where you can trade a car every 2-3 years and absorb the costs, then go for a lease. But, in the long run, the most cost effective ownership is purchase and keep the car.

 

[arijaycomet]

@Homer — you are correct that it makes good sense to buy a traditional car, and own it until the service costs exceed the useful life (read: a car that is worth $2k-5k that suddenly needs a $1000+ service may not be worth servicing, unless you feel confident that it wont need a subsequent service quickly there after) —

But I think he biggest point MANY people don’t consider is that we’re no longer buying traditional cars. Year over year, the changes in the cars capacities are more on-par with another market: consumer electronics. Especially that of 10, 20, or even 30 years ago. You wouldn’t probably want to keep a desktop computer for 10 years, would you?

Tesla (Elon) has gone on record saying that major iterations (hardware advancements) would flow out every 18-24 months. I think we’ll see legacy auto makers not quite as swift but— in 3 years, it seems reasonable to think that Volvo will have a similar vehicle to the XC40 with as much as 30% or more range for the same cost. More so, the hardware that powers the infotainment system right now (AAOS/Google) will likely be more advanced, the screen tech will be better, and so forth. There may be a redesign that makes the screens larger, to match what the Polestar has, for example.

If you want to approach the idea of the car in a traditional sense, yes, buying a car and driving/owning it for as long as possible is best. But if you see it more as an appliance, like your iPhone or personal computer, then…. giving yourself hte option to get the best/latest tech in a few years has a far more justified argument.

 

[B-mtrd]

We decided to go with purchase. We drive in average from 20-25k miles a year. Leasing wouldn’t work.
I tend to keep my cars for 5-6 years.

 

[greensage]

Thank you, totally forgot about that. Plus, Colorado give me another $2,500. on top of that.

santellavision
I was in the dilemma for sometime (Buy/Lease/Subscribe) and now settled for BUY. I actually started with XC40 R and after all the upgrades I need, it comes more or less 45K+ Tax.
I compared that with RECHARGE Ultimate and with 10K Rebate, you end up with 50K (With OTA with new features periodically..). That 5K can be easily compensated with the current gas price and Premium Grade in few years.

I liked subscription a lot that you can drive for 4 months and then cancel at any time and try something new.. Very good insurance coverage. But you may feel that you are throwing away $1000 each month. (But ideally Your own insurance expense + depreciation in a year is almost logically the same). But ended with BUY because my wife wants to stick to something standard for a while and not to mess with driving experience and risk as eventually my teen will also be eyeing for it..

 

[greensage]

@Homer — you are correct that it makes good sense to buy a traditional car, and own it until the service costs exceed the useful life (read: a car that is worth $2k-5k that suddenly needs a $1000+ service may not be worth servicing, unless you feel confident that it wont need a subsequent service quickly there after) —

But I think he biggest point MANY people don’t consider is that we’re no longer buying traditional cars. Year over year, the changes in the cars capacities are more on-par with another market: consumer electronics. Especially that of 10, 20, or even 30 years ago. You wouldn’t probably want to keep a desktop computer for 10 years, would you?

Tesla (Elon) has gone on record saying that major iterations (hardware advancements) would flow out every 18-24 months. I think we’ll see legacy auto makers not quite as swift but— in 3 years, it seems reasonable to think that Volvo will have a similar vehicle to the XC40 with as much as 30% or more range for the same cost. More so, the hardware that powers the infotainment system right now (AAOS/Google) will likely be more advanced, the screen tech will be better, and so forth. There may be a redesign that makes the screens larger, to match what the Polestar has, for example.

If you want to approach the idea of the car in a traditional sense, yes, buying a car and driving/owning it for as long as possible is best. But if you see it more as an appliance, like your iPhone or personal computer, then…. giving yourself hte option to get the best/latest tech in a few years has a far more justified argument.

@Homer @arijaycomet : Agreed. Even though they have hardware with future upgrades in mind, it may NOT be up to date to handle latest software.. Like Any OS upgrade in iPhone automatically degrades older version phones..
Just curious: if you lease or subscribe, can you get with all the custom equipment you need? example: Tow feature, Cross bar..

 

[arijaycomet]

@greensage — leased cars you can definitely get the tow hitch, or the roof rail/cross bars. They now also have that Volvo Care, which is different, and might have fine print that says no to towing but I really don’t know. I’d assume you’d be fine to tow/haul/roof rack — most leases are fine with this.

That said — many leases have rules against sublet (ex: TURO or renting your car is prohibited), things like that.

 

[greensage]

Got it..

 

[cinnamontoast]

I’m usually a lease fan, my spouse is a buy-and-keep type. Did the math on our second Recharge and after three years my out of pocket was the same, with lease residual around $31k and remaining loan at $24k. So we opted for purchase. Worst case scenario, we send it with the kid to college and lease the next one.