[TT97]

I'm trying to understand how residual value is calculated. If VW's stated cost is $40,939.50, and the customer pays $21,834.47, is the residual value roughly $19,000? And does that mean VW estimates the car will depreciate by 53% in 3 years, making it worth 47% of its original value? I might go compare the numbers with a Mustang Mach-E and a RAV4 Prime, both of which I would consider buying.

Residual is calculated on MSRP (not capitalized cost), however, I am thinking they are deducting the federal credit from the MSRP on their residual calculation. VW/Audi has never overinflated their residual values (unlike MB & especially BMW) so leasing a VW/Audi has never been as attractive as a BMW/MB lease. WV has been offering reduced interest rates (.0005 MF = 1.2%) but assuming they are probably not doing them (for now) on the ID.4 as it is a desirable car.

I did back of the envelope calculations on the F.E. lease rate using a 3% interest rate and I got a 53% residual value on MSRP after federal credit. This is in line with the 36 mo. RV of the Tiguan which is 52-56% depending on the trim.

 

[JTL]

I'm trying to understand how residual value is calculated. If VW's stated cost is $40,939.50, and the customer pays $21,834.47, is the residual value roughly $19,000? And does that mean VW estimates the car will depreciate by 53% in 3 years, making it worth 47% of its original value? I might go compare the numbers with a Mustang Mach-E and a RAV4 Prime, both of which I would consider buying.

Last I checked Ford was not offering a lease on the MME, but that may have changed.

 

[JTL]

Residual is calculated on MSRP (not capitalized cost), however, I am thinking they are deducting the federal credit from the MSRP on their residual calculation. VW/Audi has never overinflated their residual values (unlike MB & especially BMW) so leasing a VW/Audi has never been as attractive as a BMW/MB lease. WV has been offering reduced interest rates (.0005 MF = 1.2%) but assuming they are probably not doing them (for now) on the ID.4 as it is a desirable car.

I did back of the envelope calculations on the F.E. lease rate using a 3% interest rate and I got a 53% residual value on MSRP after federal credit. This is in line with the 36 mo. RV of the Tiguan which is 52-56% depending on the trim.

I came up with a much lower residual. The key is how to account for the tax credit. I prefer not to reduce the MSRP but count it as a down payment the reduces the monthly payment.

 

[TT97]

Last I checked Ford was not offering a lease on the MME, but that may have changed.

Yes & no. Ford is not offering a "lease," however, they have Ford Options which is virtually a lease except you own the vehicle and not Ford (so you would need to get the Federal Credit on your own).

https://www.ford.com/finance/finance-options/ford-options

 

[TT97]

I came up with a much lower residual. The key is how to account for the tax credit. I prefer not to reduce the MSRP but count it as a down payment the reduces the monthly payment.

I agree, I was just trying to calculate how VW was coming up with their RV. I had calculated $19,334 residual or 44% of MSRP (slightly higher than your calc but I was using 3% interest rate). If you back out the federal credit from MSRP, their residual is in line with the Tiguan, ignoring federal credit, their RV is terrible.

 

[TimD]

I agree, I was just trying to calculate how VW was coming up with their RV. I had calculated $19,334 residual or 44% of MSRP (slightly higher than your calc but I was using 3% interest rate). If you back out the federal credit from MSRP, their residual is in line with the Tiguan, ignoring federal credit, their RV is terrible.

For comparison, I looked at the terms of a 36-month lease for a RAV4 Prime plug-in (which is on my short list because I've had good experiences with Toyotas in the past). MSRP of $38,100, $3,082 due at signing, and payments of $432/month. I'm not sure if Toyota builds in the $7,500 tax credit as a "lease incentive". Does that mean Toyota estimates the residual value to be 51%, based on MSRP?

 

[ted99]

Have a look at my post on depreciation on e-Golf in the UK

 

[TimD]

Have a look at my post on depreciation on e-Golf in the UK

Thanks. That's a little reassuring.

 

[TT97]

For comparison, I looked at the terms of a 36-month lease for a RAV4 Prime plug-in (which is on my short list because I've had good experiences with Toyotas in the past). MSRP of $38,100, $3,082 due at signing, and payments of $432/month. I'm not sure if Toyota builds in the $7,500 tax credit as a "lease incentive". Does that mean Toyota estimates the residual value to be 51%, based on MSRP?

From what I have seen, Toyota is not offering the federal credit as any lease incentive, however, they are offering a high residual value and low MF instead of the incentive. The RV is in the 60% range. How much of the "due at signing" is downpayment? Usually, due at signing includes first month payment and other fees.

Are you able to get the RAV4 Prime at or near MSRP? I an not a fan of plug-ins, but if you can get it close to MSRP, grab it! I have seen dealers looking for $10k over MSRP on the Prime.

 

[Gerhard Zimmermann]

Could someone explain to me, please? I am Swiss with a property on Maui and would like to have the ID.4 there during my winter stays. Of course I am not qualifying for the federal tax credit as I only pay property tax in the US. Would a 3-year lease be an option to get the price reduction in some way but also secure the conditions for owning after this period? Thanks in advance!

 

[ErickF]

Would a 3-year lease be an option to get the price reduction in some way but also secure the conditions for owning after this period? Thanks in advance!

Yes, VW Credit will receive the tax credit being the vehicle owner with the lease, then pass it along as an incentive for the lease.

 

[Gerhard Zimmermann]

Yes, VW Credit will receive the tax credit being the vehicle owner with the lease, then pass it along as an incentive for the lease.

Thanks. And would you secure contractually the residual, remaining value and payment to own the car after 3 years? Provided you know that you want to keep it for much longer than just the leasing period.

 

[ErickF]

Thanks. And would you secure contractually the residual, remaining value and payment to own the car after 3 years? Provided you know that you want to keep it for much longer than just the leasing period.

Those terms would all be defined at the initiation of the lease. There will be some pressure on market value and there may be a possibility to purchase at something less than negotiated buyout.

 

[TimD]

From what I have seen, Toyota is not offering the federal credit as any lease incentive, however, they are offering a high residual value and low MF instead of the incentive. The RV is in the 60% range. How much of the "due at signing" is downpayment? Usually, due at signing includes first month payment and other fees.

Are you able to get the RAV4 Prime at or near MSRP? I an not a fan of plug-ins, but if you can get it close to MSRP, grab it! I have seen dealers looking for $10k over MSRP on the Prime.

Last May, a southern California dealer put me on their waitlist for a RAV4 Prime for delivery in 2021 and said they won't charge any additional markup, although that was before Toyota revealed limited production numbers. I haven't followed up because the VW ID.4 caught my eye.

 

[Miked2855]

Last May, a southern California dealer put me on their waitlist for a RAV4 Prime for delivery in 2021 and said they won't charge any additional markup, although that was before Toyota revealed limited production numbers. I haven't followed up because the VW ID.4 caught my eye.

Residual is calculated on MSRP (not capitalized cost), however, I am thinking they are deducting the federal credit from the MSRP on their residual calculation. VW/Audi has never overinflated their residual values (unlike MB & especially BMW) so leasing a VW/Audi has never been as attractive as a BMW/MB lease. WV has been offering reduced interest rates (.0005 MF = 1.2%) but assuming they are probably not doing them (for now) on the ID.4 as it is a desirable car.

I did back of the envelope calculations on the F.E. lease rate using a 3% interest rate and I got a 53% residual value on MSRP after federal credit. This is in line with the 36 mo. RV of the Tiguan which is 52-56% depending on the trim.

Another thing to consider about the buy vs lease scenario is if you can take advantage of the full $7,500 federal tax credit. If you can do so at tax time then it would be very tempting to go the 'buy' route. If your gross yearly income in the year you purchase the vehicle is not high enough to take advantage, I would think it would then make more sense to lease. VW would get the full tax credit but then would pass a portion of that along to the lessee and would be reflected in somewhat lower monthly lease payments.

 

[TimD]

Another thing to consider about the buy vs lease scenario is if you can take advantage of the full $7,500 federal tax credit. If you can do so at tax time then it would be very tempting to go the 'buy' route. If your gross yearly income in the year you purchase the vehicle is not high enough to take advantage, I would think it would then make more sense to lease. VW would get the full tax credit but then would pass a portion of that along to the lessee and would be reflected in somewhat lower monthly lease payments.

I‘d rather buy than lease because I typically hold on to a car for 5 -10 years. But now that I’m retired, my federal tax liability isn‘t close to $7,500. It strikes me as funny to think about ways to increase my taxes in 2021.

 

[Miked2855]

If you are retired and looking for additional income to take advantage of the full federal tax credit, you could just withdraw a portion of your 401k or IRA funds

 

[TimD]

If you are retired and looking for additional income to take advantage of the full federal tax credit, you could just withdraw a portion of your 401k or IRA funds

Yes, that's what I would consider.

 

[ixlr08]

If you are retired and looking for additional income to take advantage of the full federal tax credit, you could just withdraw a portion of your 401k or IRA funds

I'm retired and that was my plan. Withdraw the funds from my IRA and have my financial advisor not take out $7500 worth of the taxes I will owe so I can get the tax credit.

 

[1238]

Literally a copy/paste from vw.com

What's the problem with that? I was disseminating important information to people who might want it.