Thoughts on Lease vs Purchase?

[atebit]

In terms of BEVs in general, and perhaps the Taycan in particular, I’m curious what people are thinking in terms of lease vs purchase?

Now, I understand (or at least know) the classic arguments for lease vs buy (can you write off the lease, a way to be able to drive more car for less money, etc.). But with BEVs in general, the velocity of battery and other tech improvements right now could lead to (even greater) significant depreciation in just a few years. Which makes me wonder if a closed-end lease where Porsche Financial has to deal with any wacky depreciation might move the needle in that direction?

My experiences with disposing of used EVs: When my Model 3 was imminent from Tesla, I traded my Model S toTesla. At the time, they were looking to kinda corner the market on pre-owned Tesla’s, so I don’t think the trade value I received on that car is as relevant.

When it came time to trade the 3 year old Model 3, I actually got in the high 50% - 60% range trade equity. That surprised me, as that’s at least as good as Porsche Financial’s stated 3 year 52% residual value in the Taycan.

So I don’t know, maybe my “depreciation anxiety” is overblown. But as more and more BEVs are introduced over the next say three years, with better and better range, charging & tech, are used car managers going to cringe when you show up looking to trade your 5 year old EV?

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[kort]

I look at these EVs like I look at apple I phones, you always try to have the latest model available. I swap my phones every 2-3 years.
I had bought an early tesla model S90 , a year after I bought that car, tesla introduced the model S85 and 100 with both AWD and AP1 which in my mind made my first model S functionally obsolete, so I uprgraded to a 2015 model S 85, in 2018 tesla rolled out the model 3 with some battery improvements and a tighter ride than the boat like model S, so I bought a model 3 LR performance, great car which I kept until the Taycan.
the point is that these cars are still evolving and I enjoy having the latest and greatest.
how does this relate to leasing? it really doesn't leasing is just a financial decision that you want make depending on your circumstances. for many leasing makes little sense, especially since hanging onto cash doesn't offer decent returns. and for others leasing allows them to own more car than they could afford to own. I leased my taycan on the premise that in 2+ years porsche will take me out of the lease and put me into a new taycan or EV whatever they develop and leasing puts more risk on porsche than me regarding the introduction of new features making the older cars less desirable, going back to telsa that original model S took a beating in value because of the lack of AP in it.
the bottom line is that your decision to lease or buy comes down to you doing the calculations to figure out what works out best for you. one other variable to consider is do you envision keeping the car for a long time or are you like me that likes to be in a new car every few years.
either way that you go is not wrong and you will be in a great car.

 

[Klepper]

...... But as more and more BEVs are introduced over the next say three years, with better and better range, charging & tech, are used car managers going to cringe when you show up looking to trade your 5 year old EV?

This is my exact worry as well. I am in the same boat - deciding whether to lease or buy.

Does the lease provide somewhat of a hedge against depreciation? If Porsche sets the residual at 52% on a 3 year lease, then I could buy out the car in three years if it ends up being worth 58%? Conversely, if the car ends up only being worth 47% after 3 years, then I just turn it back in to Porsche. The depreciation risk has now shifted to Porsche. It seems to me the cost of that hedge is the increased financing rate (ie the money factor) vs the finance rate of buying (usually much lower) or what you could otherwise invest your money at somewhere else if you were paying cash.

 

[atebit]

+1 to both posts. I was (somewhat pleasantly) surprised at the trade equity I received for the M3...but that could be due to today’s relative scarcity of pre-owned EVs, people still looking to test the waters & taking advantage of a lower cost of entry, etc. The question is, when are the halcyon days going to end and people just start looking at EVs as “cars” again vs some new, mysterious & enticing tech?

 

[TYKHAAAN]

For me, it depends on how i intend to use and enjoy the vehicle. If it will be just a daily back and forth to work, or for dirty work, or grocery getter or whatever, I dont mind a lease. But I REALLY enjoy driving. I go out for miles with no destination in mind and just cruise. I make up excuses or jump on any chore to drive, if I really enjoy the car like I do with this one. I dont have garage queens or space for a weekend car right now. So i do not like to be limited to X amount of miles or paying huge fees for going over them. I’ll probably put 15k-20k miles on this car in the first year, most of them unnecessary bc I love the drive in it. It’ll settle down in the future, but I’ll be way over any lease miles in 3 years. I dont expect this car will have a particularly high trade in value when I’m looking to do something new, which will likely be around the 5 to 6 year mark, but I’m ok with that. I’ll look at the new Taycans, and other EVs Porsche may have by then and make my choice. But I do certainly see what you all are saying about the value of a lease to some. It really is up to the individual and what works for you.

 

[Klepper]

For me, it depends on how i intend to use and enjoy the vehicle. If it will be just a daily back and forth to work, or for dirty work, or grocery getter or whatever, I dont mind a lease. But I REALLY enjoy driving. I go out for miles with no destination in mind and just cruise. I make up excuses or jump on any chore to drive, if I really enjoy the car like I do with this one. I dont have garage queens or space for a weekend car right now. So i do not like to be limited to X amount of miles or paying huge fees for going over them. I’ll probably put 15k-20k miles on this car in the first year, most of them unnecessary bc I love the drive in it. It’ll settle down in the future, but I’ll be way over any lease miles in 3 years. I dont expect this car will have a particularly high trade in value when I’m looking to do something new, which will likely be around the 5 to 6 year mark, but I’m ok with that. I’ll look at the new Taycans, and other EVs Porsche may have by then and make my choice. But I do certainly see what you all are saying about the value of a lease to some. It really is up to the individual and what works for you.

You make a great point about the other restrictions that come with a lease, mileage being a big one.

 

[rich_r]

My issue with Porsche leases is the above market interest rate they charge (Approx 5% currently). Given the relatively low project residual and above market interest rate, I don't see much advantage to leasing a Taycan. I think if you buy it and decide you really want to trade it in for something new in 3 years, you'll be hard pressed to end up worse off than you would've had you done the lease. Either way, given the amount of likely depreciation I couldn't justify owning or leasing a Taycan for such a short period. If I pull the trigger on one, it'll be for 6 years minimum.

 

[atebit]

I was quoted a MF of .0024 (5.76%)

 

[Klepper]

I was quoted a MF of .0024 (5.76%)

 

[Miwa]

MRM and residuals that aren't particularly great is what keeps me from leasing Porsche usually.

I think I'd prefer to lease large sedans, and BEV large sedans preferentially, due to the usual terrible resale value and saving on sales tax in CA. But the Porsches usually turn out pretty badly for the lease numbers though.

 

[Klepper]

In some ways, leasing (not taking into account mileage restrictions) feels like buying a Call option on the Taycan, where:

Strike Price = the Residual Value

Premium = the “extra” financing charge (Lease Rate vs Buy Rate) over the lease term.

 

[kort]

In some ways, leasing (not taking into account mileage restrictions) feels like buying a Call option on the Taycan, where:

Strike Price = the Residual Value

Premium = the “extra” financing charge (Lease Rate vs Buy Rate) over the lease term.

bingo, two scenarios are possible that makes this plausible, one is if the car is a bust and values plunge, probably will not happen and two, over the term of the lease porsche or someone else builds a better car and the values become weak on the older cars, very possible.
as someone else noted by leasing you are shifting potential risk of the car's value plunging onto porsche.
you really have to think of leasing as renting money, not a car and then decide if the cost of that money is reasonable or if you can use your own money rather than theirs

 

[Klepper]

bingo, two scenarios are possible that makes this plausible, one is if the car is a bust and values plunge, probably will not happen and two, over the term of the lease porsche or someone else builds a better car and the values become weak on the older cars, very possible.
as someone else noted by leasing you are shifting potential risk of the car's value plunging onto porsche.
you really have to think of leasing as renting money, not a car and then decide if the cost of that money is reasonable or if you can use your own money rather than theirs

I completely agree. At the end of the day, it comes down to the interest rate charged on the lease, which generally is higher than buy rate, BUT...it may not be higher than what you could be making on investments elsewhere (if you are considering paying cash).

If you are taking out a car loan vs looking at leasing, your are really "renting" the money either way. On a lease you have no equity in the car, but you have no negative equity either. With a purchase using a bank loan, after three years, you could very well be underwater (owe more on the loan than the car is worth) i.e. negative equity.

 

[SCSEV]

I leased my Taycan basically for two reasons. 1) I’ve learned that I like to turn a car over to often really to buy it. 2) the technology is going to change so much in the next 2-3 years that I wanted the ability to change the vehicle.

 

[kort]

If you are taking out a car loan vs looking at leasing, your are really "renting" the money either way. On a lease you have no equity in the car, but you have no negative equity either. With a purchase using a bank loan, after three years, you could very well be underwater (owe more on the loan than the car is worth) i.e. negative equity.

buying the put, leasing, shields you from that scenario

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