Today's lease announcement was anticlimactic

[Robert.Boston]

I expect that by 2014 we'll see a true leasing program to address the gap that @JakeP has documented. The offered financing program will be attractive to personal buyers: the loan itself is reasonable, and the guaranteed buy-back provides comfort for people worried about battery depreciation or other unknowns. But it's not a lease and doesn't bring the tax benefits of a true lease.

 

[ModelS8794]

I expect that by 2014 we'll see a true leasing program to address the gap that @JakeP has documented. The offered financing program will be attractive to personal buyers: the loan itself is reasonable, and the guaranteed buy-back provides comfort for people worried about battery depreciation or other unknowns. But it's not a lease and doesn't bring the tax benefits of a true lease.

I still don't really see how this is the case, as the gap that JakeP documented was created by assuming payments that did not reflect a like for like comparison of the car's cost in the purchase vs lease calculus. I have no real world experience with leasing, so I am still interested in learning the implications here. But so far as I can tell, there is no difference in tax advantages over time between, one the one hand, buying a car for three years and then selling it back at a predetermined level, and on the other hand, leasing a car for three years with a residual value equal to the predetermined sell-back figure on the purchase. There are clearly advantages in one option versus the other if your interest is to move tax-savings from one year to another, but over the full period those advantages even out. And as JakeP points out, the rules and tax forms appear to be easier to deal with for leasing vs buying (though if you have an accountant dealing with it that would seem a moot point as well.)

Any solid data someone can point to would be appreciated! My google-fu must be very weak today because I would have thought this would be a topic hashed out ad infinitum on the internets by now, but thus far I have found very little of value to help me understand this topic.

 

[JakeP]

Even if the tax savings were identical between both options, the lease option is still preferable because you get the deductions evenly across all years of the lease, rather than in a big lump sum as a tax loss at the very end.

 

[JakeP]

And I also contest that the lease payment amount is that far off...like I showed as a comparison, a well-equipped 750Li x-drive is 1000/mo. for a 36 month lease. I didn't look up the MSRP, residual or the money factor, but I have to think that they are all in the same ballpark as the Model S financing package.

I just checked, the BMW 750Li x-drive for $979/mo for 36 months is based on an MSRP of $95,695.00, with a down payment of $4,500. This is almost exactly the parameters of the Model S purchase, and hence is a very realistic and reasonable comparison.

BMW 750Li xDrive Sedan - Special Offers - BMW North America


And the residual on this vehicle for MY 2013 is 53%, according to the Bimmerfest forum.

 

[ModelS8794]

And I also contest that the lease payment amount is that far off...like I showed as a comparison, a well-equipped 750Li x-drive is 1000/mo. for a 36 month lease. I didn't look up the MSRP, residual or the money factor, but I have to think that they are all in the same ballpark as the Model S financing package.

I just checked, the BMW 750Li x-drive for $979/mo for 36 months is based on an MSRP of $95,695.00, with a down payment of $4,500. This is almost exactly the parameters of the Model S purchase, and hence is a very realistic and reasonable comparison.

BMW 750Li xDrive Sedan - Special Offers - BMW North America


And the residual on this vehicle for MY 2013 is 53%, according to the Bimmerfest forum.

That BMW lease uses a 57.9% residual value, versus a 43% residual in the case of the Tesla purchase example. That certainly accounts for a big gap in total cost over three years, but has nothing to do with whether tax advantages are better for one vs. the other. If you run purchase vs lease scenarios using same cost and residual figures, you'll find the lease vs purchase options are identical over the term, though not identical year by year. There's no free lunch, and the tax rules that I've been able to understand thus far indicate that there's no advantage to one option vs the other other than whatever value you place on time value of tax savings for being able to depreciate at different speeds.

 

[JakeP]

And that is exactly what I said above. Even if your cash outlay is identical and fully deductible in both instances, the lease is financially preferable because you get to take more deductions earlier...time value of money. Beyond that, the simplicity factor is what drives the decision...leasing is just way simpler. There are volumes written on lease vs. own, and the bottom line is that you get what you negotiate (and you can negotiate even lease terms such as the money factor), and the lease eliminates variability, such as not knowing up front what your car will sell for. Note that this is exactly what Tesla's buy back 43% floor does, but fails to give the equivalent simple tax benefit. I should also note that many states do not allow as much depreciation as the Federal limits, pushing your deduction even further into the future.