Something To Consider -- Leasing -- There's A Reason California Is Called Fantasyland

Updates

June 22, 2013: 93% of folks who obtained an electric car in 4Q12 leased, did not buy -- WSJ

The sticker price for most of the electric cars is north of $30,000 and even with a hefty $7,500 federal tax credit, the monthly payment is hundreds of dollars a month higher than for a lease. Tesla Motors Inc. earlier this year began offering a lease-like financing deal aimed at dropping the monthly payments for its $70,000 and up Model S sedans.

Leasing an electric car also insulates the customer from long-term costs associated with replacing tired batteries. A lease represents a bet that in three years, electric car batteries may offer longer driving range at a lower price.

There’s also another financial disincentive to owning an EV – that same tax credit for $7,500 degrades the residual value of a financed vehicle very quickly.

The National Automobile Dealers Association said earlier this week that the expected trade-in value this year for a model-year 2011 Chevrolet Volt was $21,235  or 49% of the original price and for the Nissan Leaf it was $14,792, or just 42%. Those figures are well below the 62-63%  residual of similarly-sized, gasoline-powered compact sedans over that period.

Consumers who lease electric cars don’t have to worry too much about the resale value. But auto makers and finance companies that are offering discounted lease deals do. The low residual values of the leased vehicles could result in losses when the vehicles come back and are resold at auction, depending on the size of the gap between the value estimated when the lease contract price was calculated and the actual value at auction.

This certainly looks like it will end badly for the manufacturer or the dealer, or the finance companies, I guess. I suspect consumers have figured this out. At the end of three or four years, a lot of batteries will need replacing. 

Original Post

Yesterday, while waiting to have "my" Honda Civic serviced, I noted that the dealer was leasing the Honda Civic for $139/month.

Compare that price with the rate quoted in The LA Times: $169.

Shoppers have pushed leasing to a record 25.6% share of new-vehicle sales in the first quarter of this year, up from just 16.3% in 2004, according to Edmunds.

Leasing attracts buyers such as Jerry Festa, a Pacific Palisades insurance agent who likes the "simplicity and convenience."

"I go down, pick out the car that I want. I drive it for a few years and give it back," said Festa, who leased two hybrids from Santa Monica Ford in the past month. "I don't have to worry about selling the car. I don't ever put a brake pad on a car, I don't ever put a tire on a car."

But:

The drawback? Never getting rid of the car payment. But Festa figures that's a fair price for always having a new car under warranty.

Okay. Seriously. Has anyone with a family ever gone a month in his/her life after the age of 35 without having a car payment? 

I assume many, many, many folks have gone months and years without a car payment. I assume I might have, but I honestly cannot remember when. I would assume my average monthly payment when owning a car has been twice what the Honda Civic lease quotes are.

If I don't get "my" Honda Civic back when I move to Dallas (from San Antonio), I may just have to lease.  Imagine: $139/month. Never putting on a new brake pad.

What a great country.  For many folks, $139/month is less than what they pay for Starbucks and Apple iTunes each month. And for that, they get a new car every two or three years.

In fact, leasing opportunities will get even better in the out years when car companies will be forced to lease EVs to get them off the lot and meet California's law for number of EVs that must be sold in Fantasyland. Can hardly wait.

***********************

A Note To The Granddaughters

Writing about cars and California brings back fond memories. After college, I went to graduate school in southern California. It was my first extended stay outside of the Dakotas. From age 21 to 25 I was in southern California. The best years of my life. The freeways.

I never liked this song, but it's one I could never ignore.

LA is a great big freeway. Put a hundred down and buy a car...

Does Anyone Know The Way To San Jose, Dionne Warwick

Every line in that song speaks to me. Even more than this:

California dreaming:

California Dreamin', Mamas and Papas

Over those four years, lots of car stories.

I, the passenger, reading John Steinbeck's East Of Eden out loud to the "first" love of my life who was doing the driving from LA to San Francisco.

Four years later, meeting my wife-to-be, she driving a lemon yellow, convertible, MG, and living on Military Avenue (an omen). One year later we were starting our 30-year relationship with the US Air Force.

Hunter S Thompson's California doesn't exist any more. But the memories will last forever. Some more than others.

HST --> Jefferson Airplane, but this speaks to me on this bright, sunny day ... 

Born To Be Wild, Steppenwolf

It is incredible to think that was from 1969 [Warning: clicking on that link requires high-speed internet; anything less will result in disruption of your internet experience. Trust me.]

From wiki: The song, Born To Be Wild, was initially released in 1968, but it was subsequently included in many compilation albums and soundtracks. The first of these was the soundtrack for the movie Easy Rider, released in 1969. Unlike the album When the movie was in production, Born to Be Wild was used simply as a placeholder, since Peter Fonda had wanted Crosby, Stills and Nash to do the movie's soundtrack. Eventually, it became clear that the song was well suited for the movie.

Enough of this rambling; off to soccer.