I got an email yesterday that Mossy was just invoiced for my LEAF. He expects to see it early in the week, possibly on Monday. As I was not expecting to see the car for another week yet, I hadn’t finalized my financial preparations just yet, so I got started with that yesterday.
I’ve been wrestling with the idea of purchase vs. lease for quite some time now. I’ve decided to purchase the car for a number of reasons – many of which will not apply to most. As with most things in life – everyone’s situation is different.
Living in the United States, I am eligible for the $7,500 Federal Income Tax credit. We are fortunate enough to pay more than that amount, so we will realize the entire credit on our 2011 tax return. Also, being self-employed, we can structure our tax situation to receive the benefit throughout the year, as opposed to having to wait until next year to realize the full benefit.
Living in California, I am eligible for California’s Clean Vehicle Rebate Project. This project provides a rebate of up to $5,000 for light-duty electric vehicles (EVs), for which the LEAF qualifies.
These two incentive programs combined reduce the purchase cost of roughly $34,000 to roughly $21,500. Looking at the lease programs currently offered, residual values in 36 months (projected value as guessed by bankers) are estimated to be 45-47%. This would put projected value at roughly $15,300. With additional lease costs (acquisition and disposition fees totaling over $1,000) the value of the LEAF at the end of three years would need to be around $14,000 for the lease to make more sense for me than the purchase. I truly do not believe that the LEAF will be less than $14,000 in three years. Why not? Supply and demand.
LEAF production is not set to scale upward until 2013. Smyrna will come online in late 2012, but if it took Oppama 6 months to scale from zero to 50,000, we expect it to take at least that long (likely longer) for Smyrna to scale production to their capacity of 150,000 units annually. With regular gasoline in Southern California already above $4.00 per gallon in some areas (and likely to rise rather than fall over the next three years), we anticipate strong demand and little supply for the LEAF during this time.
We are contractually obligated to maintain ownership of our LEAF throughout the life of the EV Project, which ends on December 31, 2012. Nothing prevents us though, from selling this LEAF and replacing it with another during this time frame. If the 2012 or 2013 LEAF offers significantly improved features we could sell this LEAF and replace it with another. While the Clean Vehicle Rebate Project may not still be available, the Federal Income Tax credit will exist until 200,000 LEAFs are produced. More likely, we will continue to own this car for many years, as is our vehicle ownership history. Once the LEAF battery capacity becomes impacted enough to reduce the driving range, that sounds like a good time to give the car to our daughter, who will be driving by then.
Everyone needs to evaluate their personal situation to determine which might be the best alternative. Just as with driving, not everyone’s circumstance is easily substituted for another’s.