OR, do a Roth Conversion if you want to keep the money in a tax-free vehicle. When I hit RMD age, I converted all my IRA money to Roth IRA's, paid the income tax due on the IRA funds and transferred the money to a Roth IRA whose principal and future earnings are tax-free. The big disadvantage of a Roth conversion is that you immediately owe the deferred taxes on the IRA, which a tax credit will offset. You will eventually pay the taxes on all IRA withdrawals, why not do it at a time when you have "unused" tax credits? Disadvantage is that you may be getting a larger interest rate on "old" IRA funds than you can get today.
Leasing info for FE
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A couple side effects from cashing in or converting an IRA: some states will tax the income, and Medicare may slap on a premium surcharge for the following year. It's time to consult a tax advisor!
If the residual on an ID4. is around 46%, then I believe it really makes sense to lease as VW is passing along a sizable portion of the federal tax credit in their calculations. I am looking to the lease the ID.4 Pro S RWD. Total amount paid (incl. down payment) after 36 months would be $19,502. Residual would be $20,468. If you add the 2 numbers it would come out to $39,970. So you could lease the this ID.4 (MSRP at $44,495) then buy it out if you choose and pay $4,525 less than MSRP.
Mathematically valid tho' it may be, it just doesn't make sense to me to pay more taxes just to recoup more credit of same. But then I'm an ol' frugal Yankee at heart.
Actually, in ~1.5 years (age 70.5) the IRS will force me to withdraw a percentage of my 401k on a thereafter annual basis. I guess they figure they've waited long enough to collect taxes on same.
Actually, in ~1.5 years (age 70.5) the IRS will force me to withdraw a percentage of my 401k on a thereafter annual basis. I guess they figure they've waited long enough to collect taxes on same.
The FE of course being a bit better bang for the MSRP buck in terms of included options at a lower price.
I continue to be on the lease/buy fence. Although on the one hand I plan (?) to hold onto the ID.4 for quite some time [buy] I think we're at the tipping point of a flood of new EV models and technologies and may want to be availed of same three years hence [lease]. I've only leased once, paying all up front and then ultimately buying, so not really a good deal in that case. But that was my wife's current Benz GLA and I wasn't sure she'd like it in the long run as she didn't her prior Caddy ATS (thankfully she does tho').
I continue to be on the lease/buy fence. Although on the one hand I plan (?) to hold onto the ID.4 for quite some time [buy] I think we're at the tipping point of a flood of new EV models and technologies and may want to be availed of same three years hence [lease]. I've only leased once, paying all up front and then ultimately buying, so not really a good deal in that case. But that was my wife's current Benz GLA and I wasn't sure she'd like it in the long run as she didn't her prior Caddy ATS (thankfully she does tho').
Ford is now offering a lease on Mach-e as well as the Ford Options. Supposedly it will be similar cost to Options. Options does have a $2500 sweetener (in California and some other states), but really all that does is balance out the higher up-front sales tax. My calculation for three-year lease cost, factoring in all of the Federal and California state incentives:
ID.4 (Pro S Gradient AWD) $20,400
Mach-e (Premium ER AWD) $25,600
Tesla Model Y (LR, AWD) $22,400
a few other differences - VW says they are passing on the entire $7,500 federal incentive directly to the customer through reduced sale price, so beyond the interest aspect of the lease, a VW lease should be an equalizing option for those without the $7,500 tax liability. Also, last check with dealer, you can do an early buyout, or buy the car at the end of the lease. (Honda did the same sort of fed tax incentive pass along at times since 2017, for the Clarity)
Not sure if Ford is passing along all of the $7,500 federal incentive, or only part of it.
Finally, I have read that you cannot buy your Tesla at the end of the lease.
I don't get this "manufacturer pass along of federal credit." It's your own personal Fed/State income tax that is being credited by purchase of an EV regardless of manufacturer. Similar to the tax credit for installing an EV home charger. What am I missing?
The federal credit is available to the first owner of the new EV. In the case of a lease, the lessor (either VW, or the VW leasing company) is the first titled owner of the car during the lease period and so the leasing company, as first owner of the new EV, claims the $7,500 credit. Some companies, at some times, pass along the entire $7,500 to the lessee. They can subtract $7,500 from the cost of the car before calculating the lease payments and other lease numbers. It appears that VW is passing along the entire $7,500 from their lease company, at least for these first ID.4 lease contracts.
Only for a direct purchase by the buyer, cash or finance (with some caveat for Ford's exotic options plan)
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Lease options makes more sense in CA even without the sweetener (assuming you don't intend to keep the car at the end of the term). On a $55k price, you are avoiding paying sales tax on the residual (est $22k) plus deduction of Fed Credit. In L.A. at 9.5% sales tax, that is a savings of $2,800. Plus, the annual registration fee will be lower as well as it is based on a lower initial price.
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I am guessing it would depend on the state and how the rebate/credit is paid. For example, in California, there are multiple rebates available (and two most people qualify for). The California Clean Fuel Reward is a $1,500 "reward" that is instant so available at purchase (and guessing is factored into the lease). The Clean Vehicle Rebate Project (CVRP) is a $2,000 credit you need to apply for but paid to the Lessee (and not the bank). It takes a while to receive (and the State often runs out of funds before being replenished) so would not get factored into the Lease.
I am in the same place and have been back and forth on this since I made the reservation. I tend to drive a lot and worry about the 30k mile limit. But using the above numbers, it would seem I could buy an additional 10k miles up front (0.25/mile for $2500 extra) and still come out ahead or right at the numbers for an outright buy. And still have the option to upgrade to newer tech or buy at that point. And the leasing in the case leaves more options open longer and protects against the low resale risk. Is there something in that logic that I am missing?
On lease vs. buy, a few more things to consider. Of course the choice only makes sense if your annual miles qualify for lease.
For a lease, the title is the lease company name, and if you buy the car, it can take 3 months+ to get a new state title in your name, might vary state-state, in NY it can be several months.
It is relatively easy to sell a car these days (Carvana, Vroom, online companies and forums, Carmax, trade-in, etc). So, instead of thinking about possibly selling / upgrading in three years as the only deciding factor, just work the numbers as best as you can estimating what the car will have cost you in 3 years (or some other time frame) comparing buy to lease. Which will have cost more?
In terms of what the car might be worth in three years, first subtract the $7,500 and your state incentive, and devalue from there for miles and time of ownership. If you got an incredible end of year deal with other dealer and/or mfgr incentives, you might break even or make a $k or two (less likely), but if you buy near MSRP as we are about to do this round, you can probably count on around a $8k loss give or take a few $k, in two or three years (usually the cost of being an early MSRP buyer).
Finally, if you got a state incentive, you may need to either pay back or pay back a pro-rated amount to your state. In NY you just report sale before three years and pay back the prorated difference; so far no limit on how many times you can do that (the more EVs in the world are better state approach). I hear in CA, you can only use the incentive some number of times.
For a lease, the title is the lease company name, and if you buy the car, it can take 3 months+ to get a new state title in your name, might vary state-state, in NY it can be several months.
It is relatively easy to sell a car these days (Carvana, Vroom, online companies and forums, Carmax, trade-in, etc). So, instead of thinking about possibly selling / upgrading in three years as the only deciding factor, just work the numbers as best as you can estimating what the car will have cost you in 3 years (or some other time frame) comparing buy to lease. Which will have cost more?
In terms of what the car might be worth in three years, first subtract the $7,500 and your state incentive, and devalue from there for miles and time of ownership. If you got an incredible end of year deal with other dealer and/or mfgr incentives, you might break even or make a $k or two (less likely), but if you buy near MSRP as we are about to do this round, you can probably count on around a $8k loss give or take a few $k, in two or three years (usually the cost of being an early MSRP buyer).
Finally, if you got a state incentive, you may need to either pay back or pay back a pro-rated amount to your state. In NY you just report sale before three years and pay back the prorated difference; so far no limit on how many times you can do that (the more EVs in the world are better state approach). I hear in CA, you can only use the incentive some number of times.
Sales tax is an important factor for people considering buyout at end of lease in those States where sales tax is levied on full purchase price at the start, and again on the buyout. BMW, and now Ford (Mach e), are now offering what looks like a lease, except it is a sale with a big balloon payment at the end of the term with a guaranteed buyback price in the sales contract. That way, you are only paying the sales tax once if you are doing a "buy out". In this case, the buyer would have to file for the tax credit because VW would not be the first owner. I've just e-mailed my dealer ID.4 specialist here in Houston asking if this option is available from VW. I know BMW only offers this option in States with double taxation of leases.
Sales tax can be important in NY too. We are not a double tax state (interesting), and pay full sales tax on the lease at time of lease. Another benefit of the $7,500 "discount" from the fed tax pass along is that also causes a reduction in sales tax.
On the buying side, NY reduces sales tax for a trade-in. If the trade in has significant value, this reduction in NY sales tax might make a trade-in easier, even where one of the big online companies offers a higher buy price.
On the buying side, NY reduces sales tax for a trade-in. If the trade in has significant value, this reduction in NY sales tax might make a trade-in easier, even where one of the big online companies offers a higher buy price.
Good points. I had forgotten about the effect of the TC on the base for sales tax. Yes to the trade effect on sales tax. TX is a State that allows this, too. I have used the CarMax offer as a negotiating tool for trade-in purposes. So far, the Dealers have viewed my trades as desirable enough to raise their offer to match the CarMax price, even though they are also aware of the sales tax effect. This will be the first time around for me having multiple sources for comparison trades. Word on the street is that Vroom is offering the best prices if you have a desirable car.
I just sold one of my cars to Vroom, it was the highest offer. They even bought it directly off lease (early buyout option) treating it like a finance payoff. It took a few days for pickup, but they did come to my home (Carvana does not serve my town, so I have to drive an hour for them). They got the payoff wrong though, and it was a small hassle straightening that out, but I think I fixed it by paying the difference (no change to the total selling price, they just paid me too much, and the lease company too little). Funny, after many calls and no promised 24-48 hour followup, I kind of want to rate them "1", but if it all ends well, I guess it's okay, maybe "4" ish. I read some Vroom horror stories by buyers online, and at least one other seller complained that he found out months later he still owed on his lease (that is why I followed the payoff so closely).
Carvana is MUCH better. They drive up with a Carvana marked hauler, check out the car, hand you a check, load up the car, and drive away. Of course I owned that one, and then I had to rent a car to drive the hour home (I am not in a home pickup Carvana service area).
Carvana is MUCH better. They drive up with a Carvana marked hauler, check out the car, hand you a check, load up the car, and drive away. Of course I owned that one, and then I had to rent a car to drive the hour home (I am not in a home pickup Carvana service area).
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