[Vwvkk]

I’ve never leased before but seriously thinking about it for the Id.4 especially because the EPA numbers will likely be less than 250 for the AWD. The lease numbers look pretty expensive for an AWD pro. Will federal credits be passed back in the lease? If so, how does that work?

 

[Kitt]

I leased a BMW i3. The owner of the car (e.g. VOA finance or whoever offers the lease) will receive the 7500 tax credit. They may choose to pass (a part of) the 7500 to you in the form of lower monthly payments, but they don't have to.

 

[Vwvkk]

I leased a BMW i3. The owner of the car (e.g. VOA finance or whoever offers the lease) will receive the 7500 tax credit. They may choose to pass (a part of) the 7500 to you in the form of lower monthly payments, but they don't have to.

Thanks, that makes sense. I guess VOA hasn't announced anything on this yet, or decided not to.

 

[ErickF]

It's a lock for VW Credit. The footnotes are related to pending IRS approval of the tax credit.

With the great likelihood of the used market price being significantly lower than the residual, the seems a good bet that there will be favorable buyout offers. The midrange market won't mature for 2-3 years.

 

[Vwvkk]

It's a lock for VW Credit. The footnotes are related to pending IRS approval of the tax credit.

With the great likelihood of the ised market price being significantly lower than the residual, the seems a good bet that there will be favorable buyout offers. The midrange market won't mature for 2-3 years.

Thanks I missed that footnote! It looks like they are passing back about 1400$ of the credit unless I misread or miscalculated that. They mention 7500 but comparing totals on the two lease terms the difference is about 1400$.

 

[plh]

Here's the footnote for the leasing an ID.4 Pro with no additional options.

Closed end lease financing available for a new, unused 2021 ID.4 Pro, on approved credit to highly qualified customers by Volkswagen Credit through participating dealers. Monthly lease payment based on MSRP of $39,995 and destination charges less a $7,500 Lease Incentive and suggested dealer contribution resulting in a capitalized cost of $31,182.80. Excludes tax, title, license, options, and dealer fees. Amount due at signing includes first month’s payment, customer down payment of $2,501, and acquisition fee of $699. Monthly payments total $13,644. Your payment will vary based on final negotiated price. At lease end, lessee responsible for disposition fee of $395, $0.20/mile over 30,000 miles and excessive wear and use. Offer not valid in Puerto Rico. See your Volkswagen dealer for details or, for general product information, call 1-800-Drive-VW. Offer is subject to change or terminate without notice.​

Looks like the entire $7500 is taken off the price with an additional "Dealer Contribution" of about $1300.

 

[vwid4]

Here's the footnote for the leasing an ID.4 Pro with no additional options.

Closed end lease financing available for a new, unused 2021 ID.4 Pro, on approved credit to highly qualified customers by Volkswagen Credit through participating dealers. Monthly lease payment based on MSRP of $39,995 and destination charges less a $7,500 Lease Incentive and suggested dealer contribution resulting in a capitalized cost of $31,182.80. Excludes tax, title, license, options, and dealer fees. Amount due at signing includes first month’s payment, customer down payment of $2,501, and acquisition fee of $699. Monthly payments total $13,644. Your payment will vary based on final negotiated price. At lease end, lessee responsible for disposition fee of $395, $0.20/mile over 30,000 miles and excessive wear and use. Offer not valid in Puerto Rico. See your Volkswagen dealer for details or, for general product information, call 1-800-Drive-VW. Offer is subject to change or terminate without notice.​

Looks like the entire $7500 is taken off the price with an additional "Dealer Contribution" of about $1300.

Some states have additional incentives - not sure whether they are applicable for leasing a EV car

 

[Vwvkk]

If we take the above, That's what is confusing. The regular lease is:

Lease a 2021 ID.4 PRO with automatic transmission for $379 a month. 36-month lease, $3,579 due at signing. Excludes tax, title, license, options and dealer fees. No security deposit required. For highly qualified customers through Volkswagen Credit.

379*36+3579 = $17223
17223-13644-2501 = $1078 which is not even close to $7500
So it's far from a 1-1 value on the federal credits. It makes sense it isn’t 1-1 given its just 3 years vs the lifetime of the vehicle but I’m not seeing how they are coming up with it.

perhaps experienced leasees have a better idea than I

 

[ted99]

I did a back of the envelope calculation of this, after a correction pointed out by another member, which I'll repeat here. If one disregards TT & L fees, sales tax, and the time value of money (at 1% bank interest this isn't too far from reality) for simplification purposes: Lease cost is $13,644 + $2501+$699+395=$17,239. Purchase cost is $39,995 - $7500 = $32,495. Break-even at the end of 3 years is if the car is worth: $32,495 - $17,239 = $15,256. If the car is worth less than that, you made out with the lease. The VW residual in the contract is not stated in the above quote, but it's likely more than that. So, if you leased with the expectation of buying out your car at the end and the contract amount is greater than $15,256, you lost. Contract residual is surely more than $15,256. So, what about VW offering discounts on the buy out? $15,256 is 47% of 32,495 or 38% of 39,995. I maintain that when calculating fractions of residual, it needs to be the after TC amount, because any new buyer is looking at the post TC amount, not MSRP. It's a different matter after the TC go away, where those that bought with a TC have a resale advantage because the residual is going to be compared to the MSRP. So, is the lease a good deal? If the TC are still available in 3 years (impossible now, but could happen with a Biden Admin) a residual of 38% is probably a good hedge against technology improvements. If the TC are gone in 3 years, a residual of 47% with a contract buyout less than that could result in a lease being a money-making proposition. This really looks to me like "heads I win, Tails you loose". Anybody see an error in this thinking?

 

[ted99]

The people that made out the best were those that are purchasing a 3-yr-old 2017-18 i3 for less than $20K. Anyone want to wait to 2023 to buy a 2020 FE for $15K? If you have a good relationship with a VW dealer, you might be able to get a CPO 2020 FE for $25K 18 months from now, but to put that in perspective, why wait when you can have a new one for $32.5K in a few months. Just pointing out what a good deal the ID.4 Pro is (when it gets here) with the current TC.

 

[Vwvkk]

The people that made out the best were those that are purchasing a 3-yr-old 2017-18 i3 for less than $20K. Anyone want to wait to 2023 to buy a 2020 FE for $15K? If you have a good relationship with a VW dealer, you might be able to get a CPO 2020 FE for $25K 18 months from now, but to put that in perspective, why wait when you can have a new one for $32.5K in a few months. Just pointing out what a good deal the ID.4 Pro is (when it gets here) with the current TC.

Yes, it seems like buying outright is the only decent deal. The Lease deals are not optimal and not much is passed back on the federal credits if you are not buying either.

If Biden brings back Credits for companies like Tesla it will really impact VW negatively. I have a lot of things Iike about the VW over the Tesla, but range and efficiency isn't one of them and an apples to apples comparison would make things really difficult. It would be smart for VW to offer better lease deals.

 

[agzand]

Thanks I missed that footnote! It looks like they are passing back about 1400$ of the credit unless I misread or miscalculated that. They mention 7500 but comparing totals on the two lease terms the difference is about 1400$.

If they reduce capitalized cost by $7500 and the residual value of the car is 50%, that means they passed $3750 to you and kept $3750. To pass entire $7500 to you they need to reduce capitalized cost by $15000.

BMW i3 is a specific case, because the MSRP is way out of line with what the car worth in US market.

 

[ted99]

Yes, it seems like buying outright is the only decent deal. The Lease deals are not optimal and not much is passed back on the federal credits if you are not buying either.

If Biden brings back Credits for companies like Tesla it will really impact VW negatively. I have a lot of things Iike about the VW over the Tesla, but range and efficiency isn't one of them and an apples to apples comparison would make things really difficult. It would be smart for VW to offer better lease deals.

If TC are restored for Tesla, a lot of mfg's are going to have to reduce prices because purely on paper, Tesla waxes the competition on everything except price. Yes, the Tesla Model 3 and Y have spotty assembly problems, but those are sure to be fixed with the TX plant, coming on line at the end of 2021. Add to that their new battery pack and expected 400 mi range, all the rest will be sucking canal water. The question on the table is WHEN Biden can extend the TC. If he gets the Senate, it can be in the 2022 Authorization Bills (unlikely to be a stand-alone bill) which won't be before Sept 30, 2021. It could be in some stand-alone omnibus Environment legislation late next Summer, but not if he doesn't get the Senate. If he doesn't get the Senate, he will be limited to what can be done by amendments to existing Rules, but not anything which requires new legislation. Extending the TC will require legislation. I think we'll have a good idea of when/if this will happen by Sept, which is about the time the ID.4 AWD is going to arrive. People stepping up to the FE in March may find that VW has dropped prices by Sept.

 

[agzand]

he Senate. If he doesn't get the Senate, he will be limited to what can be done by amendments to existing Rules, but not anything which requires new legislation. Extending the TC will require legislation. I think we'll have a good idea of when/if this will happen by Sept, which is about the time the ID.4 AWD is going to arrive. People stepping up to the FE in March may find that VW has dropped prices by Sept.

I don't believe Tesla range is significantly different that other manufacturers in real world. It is better on paper because they have regen by default and test the car using a more comprehensive procedure (5 step EPA test vs. 2 step).

Edmunds recently compared Model Y against Taycan and Taycan got significantly more range despite its EPA range is 50% lower.

Tesla Model Y vs. Porsche Taycan: Testing EPA Range in the Real World | Edmunds

I think if they change federal credits they will reduce it (e.g. broader credits but smaller amount). They could also set a limit of one per tax filer or something like that. Current credits are too generous and mostly benefit high income filers. I think a fair credit is $3000 with no manufacturer production cap.

 

[ted99]

What you and I and the other members of this forum understand about EV range is not what the new EV buyers that VW is aiming at know about range. I believe the EPA range rating is all they will see when making comparisons and I also believe that range will be the principal differentiating metric for those buyers, followed closely by "design". Who knows on the TC and even if they will be modified. That's the crap shoot we make when we make a "buy" decision. I certainly fall in your demographic. I've been changing PHEV/EV's about every 2 years, since 2014 and have now "benefitted" from 5 of the Fed TC and 4 of the TX $2500 grants. The TX legislature may do another grant session in it's 2022 budget and I'm doing my ID.4 purchase to conform. If the Legislature doesn't do another in it's Jan-March session, I'll take the FE I have on reservation in late March. If it does, the window will open on 9/1/2021 and I'll pass on the FE and execute my Pro reservation with it timed to a post 9/1 delivery. I really am hoping for the Pro, as I really don't want 20" wheels and a glass roof for my grocery-getter. I think that will be it for me and new EV's for quite a while. After much trial and error, I've settled on my optimum mix of a full-EV med-size SUV as a grocery-getter and a luxury PHEV sedan for interstate travel. When the next step change in battery technology brings us solid-state batteries, I'll change out the PHEV for a full-EV, but I don't expect that until after 2025.

 

[corfam]

Who knows on the TC and even if they will be modified. That's the crap shoot we make when we make a "buy" decision.

Yep, that's my fear. Planning on $7.5k Federal Tax Credit, buying the car early in the year, and then by year's end finding out tax law changes that reduce the credit or limit it based off some income amount. That's one advantage of the lease where any baked in credit would be VW's risk. I'm planning to buy, not lease, but still.

 

[Vwvkk]

Yep, that's my fear. Planning on $7.5k Federal Tax Credit, buying the car early in the year, and then by year's end finding out tax law changes that reduce the credit or limit it based off some income amount. That's one advantage of the lease where any baked in credit would be VW's risk. I'm planning to buy, not lease, but still.

I doubt they would make changes that affect the existing tax year since people will make decisions based on existing programs. I can't claim to know how legislation works, but at the very least it would be hugely unpopular.

 

[corfam]

I doubt they would make changes that affect the existing tax year since people will make decisions based on existing programs. I can't claim to know how legislation works, but at the very least it would be hugely unpopular.

I hope so...since there's a good chance of some sort of change next year.

 

[ted99]

Yep, that's my fear. Planning on $7.5k Federal Tax Credit, buying the car early in the year, and then by year's end finding out tax law changes that reduce the credit or limit it based off some income amount. That's one advantage of the lease where any baked in credit would be VW's risk. I'm planning to buy, not lease, but still.

Having written a little Legislation, I do know how it works. Any change to tax law would not apply retroactive to it's introduction (not passage); and could be later--like the end of the year, so if you have purchased a qualified vehicle, whatever was in effect at the time you purchase it is what determines your TC status. Lots of precedent here wrt "ex post facto" law. Under some circumstances things can be retroactive, but it's VERY uncommon.

The other factor is "phase out" under the current regulations. This is when a manufacturer reaches certain sales milestones and the TC starts going down, by quarter, until it reaches zero. GM and Tesla hit those numbers and so purchasers of their EV's (irrespective of model) get no TC. If VW is very successful with the ID.4, the TC "could" start getting phased out, but unlikely to be before late next year. In any event, you get whatever TC was applicable at the time you bought it, not what is in effect at the end of the year.