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GM as Screwge - no, you're not getting a $7500 tax credit

34K views 71 replies 31 participants last post by  Sean Nelson 
#1 ·
Not entirely new info, but may be helpful to some.

GM is NOT putting your $7500 tax credit toward your lease, not even the $6k+ like with the current Volt offer. You get $2500 off the Bolt lease, and GMAC is keeping the other $5k if you're leasing. Sorry!
F'ers.... They don't feel like they need to offer the whole carrot on the Bolt, is what I've been told.

On a 39 month lease (the "sweet spot" financially) with 15k miles/year, it's a 55% residual. 1.2% financing rate. The offer isn't likely to change much if at all through the first quarter of '17 because it's a '17 model, and depreciation won't change until after the first quarter of the year.

I put this out there, because if you want the full $7500, and you want it soon, ink that deal in the next couple of days if you can (i.e., the dealer has your car's invoice and it's on its way), and get it back on your '16 taxes. The extra $5k in your pocket, or paid down toward the financing, might make it worth it. I'll have a buy vs. lease cost comparison $ on my Bolt shortly. If the extra $5k makes it even close, not worrying about mileage might change some purchase decisions. Granted, the market might not be super hot for used EVs in 3 years, but then again, as adoption picks up, it might well be decent, and the battery is likely to be just fine in 3 years.

Not happy that GM would decide to screw the early adopters / Bolt enthusiasts, but not surprised either.
 
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#2 ·
It's a bit hard to follow, but GM is using the other $5k to inflate the residuals on leases, making the monthly payment lower but also making the car - especially the Premier - too expensive to buy when the lease ends. It may be that they will, like Nissan with the Leaf, offer discounts on the residuals for those wanting to purchase the cars. or not. In any case, it isn't the best scenario.
 
#3 · (Edited)
This. The residual on a 36 month/15k mile 2017 VOLT lease is 48%.
The residual on a BOLT is 58%. Do we really think a BOLT will have a 10% better resale value than a VOLT after 3 years? Honestly, I don't think so. I don't think GM does either. So the only other explanation is that GM is artificially inflating the residual 10 points to make leasing more attractive.

FWIW, that 10% residual boost is worth about $4,300 in lease cash if we assume the residual of a Bolt should be the same as a Volt, 48%. By reducing the lease cash offered and inflating the residual, it actually is better for a person leasing since they don't have to pay taxes on extra lease incentives. If the Bolt had the 48% residual and $4,300 extra in lease incentives, that would equal to $400 in extra tax charged to CA residents, making a lease $10+/month more expensive.

A Bolt with a 48% residual, in line with a Volt, would need about $6,800 in lease incentives to match the current lease numbers.....the Volt's lease incentives are $6,860 currently in CA and other CARB states.

If you are planning on leasing a Bolt and will NOT be buying it at the end of the lease, the lower lease cash/higher residual is actually beneficial to you.

Expect the lease numbers to improve once demand is satisfied and supply increases.
 
#5 ·
I generally agree with this position. There are more variables associated with determining whether you got a good deal when you lease. Unless you spend the time to learn what they are, and your circumstances/ownership history mesh with leasing, it's probably better to buy (and keep for the long term). Some, like bro, are proficient with leasing and know the parameters so they have eyes wide open. The majority will most likely be part of "the house always wins" segment.

One counterargument is the pace of technological changes in cars these days may favor getting out earlier (and leasing), but I think if you hold the car for a long period even this argument loses steam.
 
#6 ·
Leasing can actually be a better option than buying, and not just for EVs. WE leased a 2010 Prius II in 2010, and the total of payments made and fees, plus the residual, meant that we could have bought the car after the lease ended for virtually the same total price as buying it off the lot. We didn't do that, but we just did with the 2013 Prius PHEV that replaced it. Leasing gives you the time to make sure that you really love and want the car, before you have to buy it. Just make sure when you negotiate the lease that you have a fairly good idea whether or not you plan to buy the car.
 
#11 ·
If you lease the car and the residual is too high, just don't buy it at the end of the lease. The turned in cars will pile up at dealers, who will have to sell them for what they are actually worth.

I once leased a new model car (1991 Infiniti Q45) from Infiniti Financial that the residual was set too high. I found out I did not have to turn it in at the same dealer where I leased it. So, I went to a different dealer three months before the lease ended to try to work out a deal where I could buy the car for less than the residual. What they did for me was, cancel the lease three months early without any penalty, if I would buy the car at the residual. As I result, I avoided three lease payments, saving me about what I thought the residual pricing adjustment should have been.

Only a stubborn dealer would refuse to make some accommodation if the true market value of the three year old car was less than the lease residual. And only an over-ethusiastic customer would buy a car at the published residual, knowing the car had a much lower market value
 
#32 ·
I think a lot of buyers are going to deal with it Sean, by looking elsewhere when faced with a $489/mo lease payment on a car around the size of a Honda Fit, which currently has a $139/mo lease. That gap is ridiculous. I think we all understand that a lease is not the same as a purchase. Typically when you buy a car, you set up a financing arrangement too. Regardless, once a price is negotiated, you can buy or lease at that price, so the cash and leasing price can be roughly equivalent. In the case of the Bolt, that's typically MSRP right now. The issue as I see it is that they published ads showing the tax credit more like a discount, as if you would actually receive $7500 off the price of the car (which is misleading even if it is fairly obvious) and if you did choose to lease, gave you no where near that amount (only $2500), inconsistent with market practice, and even their own practice with their other EVs. That's shifty, and many of us are not reacting favorably.
 
#33 ·
... if you did choose to lease, gave you no where near that amount (only $2500), inconsistent with market practice, and even their own practice with their other EVs. That's shifty, and many of us are not reacting favorably.
This seems to be the big disconnect in your thinking:
That if they only give you $2500 in CCR, they are not passing on the rest in other terms of the lease.

Go get a quote on a lease from another financing company and you will find that the residual is much lower (and more in line with the likely actual value after 3 years). Then compare the payment.

And yes, the Bolt EV costs significantly more than an ICE Fit. Expecting the payment to be the same is ridiculous.
 
#35 ·
So I've been shopping around over the past couple of days in hope to get a good deal on a bolt lease. I had no clue about the way they handled the $7500 tax credit but having shopped for multiple EV car leases before, I was under the assumption while doing my math that they were doing the same thing...

Like Boltar said, I was really set back by the way GM handles this. Yes, they are inflating the RV of the car, but even that I find shady because they are well aware that their car will be worth far less than 58% after 3 years. Also, they are not doing any specific cashback rebates like a competitive lease cashback they do for all their other cars.

Overall, I ended up with a few quotes for the bolt premier, all ranging in the $400+/month for a compact vehicle that can go 200+ miles on one charge. Compare this with what you can find on the market (http://ev-vin.blogspot.com/): about half the range but at least 3 times cheaper to lease... I ended up extending my current lease while things settle down as it's clear right now that with no competition in the 200+ miles range market, the car is clearly overpriced going the lease route.
 
#37 ·
What you're missing is, GM doesn't want to move these cars at a loss right now. All those other awesome lease deals on other compliance cars and the outdated Leaf, are designed to try to move cars that very few people want, off the lot. All those other deals are to move dying liabilities before they get too stale. The GM Bolt leases are comparable with other popular cars of a similar value. The value of the Bolt is likely based true sales price and not some "after tax incentive" value.

GM is smart enough to not "pass the incentive along" because they know that with Trump and the GOP in control of the government the tax incentives could easily evaporate before year's end and they would be hosed. People like to believe that the $7500 tax credit is set in stone and money in the bank, but it is not. Come 2018 when you will actually be filing your 2017 taxes and utilizing the credit, it may well be gone. GM really doesn't want a $7500 x 10's of thousands kind of liability on a car that is of a marginal profit margin to begin with.
 
#38 ·
Aha. That explains it. i was wondering why I got a $2,500 "rebate" and no mention of the $7,500.... Now I get it. Can't wait to see what the dealership says when they attempt to explain. BTW, leasing is great if you plan on changing cars frequently. And you can get more car for a given monthly payment. At least that's what I've found...
 
#40 ·
Leases subrogate the risk of depreciation. Assuming a good Money Factor -- they are not a bad deal. Add inflated residuals and they are even better. If they don't want to play ball with the residual at the end of lease, just turn it in. Then buy it back -- it's going to be listed for sale by VIN and you know the whole story of the car.

I had a friend who traded in their clunker on a lease of an I3 a few years ago at less then $100/month. Their car needed frequent repairs and was about to sh** the transmission. The car has saved them more in gas that it cost. Meanwhile the car would have cost $40,000 new AFTER tax incentives. Comparable cars are selling at $18,000. So friend pays ~3000 in lease payments and turns the car in. They have the choice of buying it or leaving it. There's 19,000 of depreciation they didn't have to experience and they also have the flexibility of saying hey -- the 2014 I3 is pretty dated in terms of range and charging performance -- I'll just go get something else.
 
#45 ·
I had a bit of trouble with this when I leased my Bolt about a month ago. I knew that GM Financial probably wasn't going to pass along the full $7,500 federal tax credit, but I was expecting more than the $2,500 incentive being offered at the time. While sitting at the dealership during the negotiation, I found this article on LeaseHackr that breaks things down pretty well and even has a handy calculator.

https://leasehackr.com/blog/2016/11/21/bolt-ev-lease-program-announced-309-month
 
#47 ·
Lease or buy assuming $12,500 in tax credits

I just placed an order for the Bolt and will have the option of purchase or lease. I can use the $7,500 Fed credit and the CO $5,000 credit on 2017 tax bill. However, if the Bolt loses over 60-70% from MSRP in three years, I might lease for $449 and hand the car back. And whether I buy or lease, CO still gives me $5,000 in "refundable" tax credits. So, total lease would comment to around $16,200, less $5,000 or $ 11,200 over 3 years. I'm thinking it's a "no brained" for me to lease even though I won't get the full $7,500 credit?

Any thoughts fellow "Bolters?
 
#49 ·
I just placed an order for the Bolt and will have the option of purchase or lease. I can use the $7,500 Fed credit and the CO $5,000 credit on 2017 tax bill. However, if the Bolt loses over 60-70% from MSRP in three years, I might lease for $449 and hand the car back. And whether I buy or lease, CO still gives me $5,000 in "refundable" tax credits. So, total lease would comment to around $16,200, less $5,000 or $ 11,200 over 3 years. I'm thinking it's a "no brained" for me to lease even though I won't get the full $7,500 credit?

Any thoughts fellow "Bolters?
If money is not an issue, lease. In 3 years batteries will be cheaper and smaller. Cars will get better. You will have a larger selection of EV's to choose from. Although in the 50's they thought we would have flying cars by now. Of course if money is not an issue, I bet a Tesla Model X P100D would look good in your driveway too.
 
#51 ·
Fraud for GM to take the credit?

I am somewhat surprised that in 2017 there is still so much confusion on leasing vs. buying. For reference, I was previously a consumer law attorney and spent 6 years as a finance and insurance director for several large so cal car dealerships. Leasing is not rocket science. There is NO special price or discount. There are, however, ways to leverage a lease or purchase in ways that suit your needs (if you understand the choices before you). Regardless, you should ALWAYS negotiate price BEFORE you talk finance terms (lease or buy) (note to maximize your deal you should also leave out any trade value discussions for a separate part of the transaction...every piece is under your control and handling them separately keeps everything on the up and up).

Once the price is established, then you can enter discussions on lease vs. buy. Ironically this choice should be less about the #'s and more about your intended use. Without too much depth, leasing rewards those who intend to own a car for less than 3-5 years (with 3 typically being the sweet spot). Because of the rapidly evolving battery technology, multiple manufacturers efforts to bring new products to market, incredibly poor resale values for most other pure electrics, battery performance after 3 years in many models and the tax incentives, leasing is most often a better "choice" for the majority of consumers (if you leased a LEAF 4 years ago, you saved around $1500 in sales taxes, were able to leverage the tax credit into the front end of the lease and Nissan "bought" the car back from you for an highly inflated residual value relative to the market value...If you owned the LEAF, you had to wait for the tax credit (and be able to use it all), paid the entire sales tax bill and owned a car 3 years in that you most likely didn't want to own due to range anxiety (from personal experience my mom's LEAF had a 55 mile range after 3 years and 30k miles) and you could only trade it in for a fraction of the residual value that you could have had had you leased it.

When you lease you SHOULD NOT shop for a payment. You should ask for the following:
1. Capitalized Cost (this just a fancy way of saying "sales price" and the # should be the amount you negotiated BEFORE you told the dealer you wanted to lease).
2. Term and mileage limits (note that for tax rebate purposes the term MUST be > than 30 months...you can often pre-pay for additional mileage up front at a lesser rate so if you know you will exceed 15k/year pre-paying is often a good deal).
3. Drive off (this is the amount of down payment (called "capitalized cost reduction"...which, in a lease, you honestly should NEVER have, but that is more of a personal viewpoint), sales taxes on the cap cost reduction, first month's payment (you pay your payment at the start of each month, inc month 1), bank fee (if there is one), security deposit (if there is one). That is all that should be paid up front. Note that the rebate credit ($7500 and $2500 in CA for qualifying income earners, goes in as "capitalized cost reduction" which is why leasing is so favorable for electrics.
4. Money factor (a fancy term for "interest rate")
5. Residual % (AKA how much you pay for the car (plus tax) upon termination (also can be viewed as a "guaranteed future value" that the bank is offering you on termination. Note the residual value is determined from MSRP (this is the ONLY place that matters) and is usually in the range of 60% or so for a 36 month lease.)

Cost of the lease is calculated in this manner:

MSRP x Residual % = Residual Value

Cap Cost - Cap Cost Reduction = Net Cap Cost

Total amount of Depreciation = Net Cap Cost - Residual Value

Base monthly payment = Total Amount of Depreciation/term

Rent/finance fee = (Net Cap Cost + Residual) x Money Factor

Total Payment = Base monthly payment + Rent/finance fee

Total payment is plus your local (address-based) sales tax.

That is all there is to the math.

I keep reading that GM is not applying the Fed Tax credit to this deal. Not sure how that is so since it belongs to the consumer. As long as you DO NOT sign anything assigning YOUR RIGHT to the tax credit to GMAC then they will not get it. You will have a higher price (less cap cost reduction) but you can apply for the tax credits directly on your own even if you lease. I am interested in anyone's experience in this area. If GM is indeed "stealing" (IMO) the fed tax credit from the consumer that would be an interesting consumer class action suit. If I negotiate all the terms (as stated above) and then walk into finance and suddenly the cap cost reduction of $7500 is being applied to the deal that I was quoted...that is fraud and actionable...I may have to go get one myself and see about the outcome.
 
#52 ·
I am somewhat surprised that in 2017 there is still so much confusion on leasing vs. buying. For reference, I was previously a consumer law attorney and spent 6 years as a finance and insurance director for several large so cal car dealerships. Leasing is not rocket science. There is NO special price or discount. There are, however, ways to leverage a lease or purchase in ways that suit your needs (if you understand the choices before you). Regardless, you should ALWAYS negotiate price BEFORE you talk finance terms (lease or buy) (note to maximize your deal you should also leave out any trade value discussions for a separate part of the transaction...every piece is under your control and handling them separately keeps everything on the up and up).

Once the price is established, then you can enter discussions on lease vs. buy. Ironically this choice should be less about the #'s and more about your intended use. Without too much depth, leasing rewards those who intend to own a car for less than 3-5 years (with 3 typically being the sweet spot). Because of the rapidly evolving battery technology, multiple manufacturers efforts to bring new products to market, incredibly poor resale values for most other pure electrics, battery performance after 3 years in many models and the tax incentives, leasing is most often a better "choice" for the majority of consumers (if you leased a LEAF 4 years ago, you saved around $1500 in sales taxes, were able to leverage the tax credit into the front end of the lease and Nissan "bought" the car back from you for an highly inflated residual value relative to the market value...If you owned the LEAF, you had to wait for the tax credit (and be able to use it all), paid the entire sales tax bill and owned a car 3 years in that you most likely didn't want to own due to range anxiety (from personal experience my mom's LEAF had a 55 mile range after 3 years and 30k miles) and you could only trade it in for a fraction of the residual value that you could have had had you leased it.

When you lease you SHOULD NOT shop for a payment. You should ask for the following:
1. Capitalized Cost (this just a fancy way of saying "sales price" and the # should be the amount you negotiated BEFORE you told the dealer you wanted to lease).
2. Term and mileage limits (note that for tax rebate purposes the term MUST be > than 30 months...you can often pre-pay for additional mileage up front at a lesser rate so if you know you will exceed 15k/year pre-paying is often a good deal).
3. Drive off (this is the amount of down payment (called "capitalized cost reduction"...which, in a lease, you honestly should NEVER have, but that is more of a personal viewpoint), sales taxes on the cap cost reduction, first month's payment (you pay your payment at the start of each month, inc month 1), bank fee (if there is one), security deposit (if there is one). That is all that should be paid up front. Note that the rebate credit ($7500 and $2500 in CA for qualifying income earners, goes in as "capitalized cost reduction" which is why leasing is so favorable for electrics.
4. Money factor (a fancy term for "interest rate")
5. Residual % (AKA how much you pay for the car (plus tax) upon termination (also can be viewed as a "guaranteed future value" that the bank is offering you on termination. Note the residual value is determined from MSRP (this is the ONLY place that matters) and is usually in the range of 60% or so for a 36 month lease.)

Cost of the lease is calculated in this manner:

MSRP x Residual % = Residual Value

Cap Cost - Cap Cost Reduction = Net Cap Cost

Total amount of Depreciation = Net Cap Cost - Residual Value

Base monthly payment = Total Amount of Depreciation/term

Rent/finance fee = (Net Cap Cost + Residual) x Money Factor

Total Payment = Base monthly payment + Rent/finance fee

Total payment is plus your local (address-based) sales tax.

That is all there is to the math.

I keep reading that GM is not applying the Fed Tax credit to this deal. Not sure how that is so since it belongs to the consumer. As long as you DO NOT sign anything assigning YOUR RIGHT to the tax credit to GMAC then they will not get it. You will have a higher price (less cap cost reduction) but you can apply for the tax credits directly on your own even if you lease. I am interested in anyone's experience in this area. If GM is indeed "stealing" (IMO) the fed tax credit from the consumer that would be an interesting consumer class action suit. If I negotiate all the terms (as stated above) and then walk into finance and suddenly the cap cost reduction of $7500 is being applied to the deal that I was quoted...that is fraud and actionable...I may have to go get one myself and see about the outcome.
I think you need to do a little more research.
From the instructions on Form 8936:
The following requirements must be met to qualify for the
credit.
You are the owner of the vehicle. If the vehicle is leased, only
the lessor and not the lessee, is entitled to the credit.

You placed the vehicle in service during your tax year.
The vehicle is manufactured primarily for use on public
streets, roads, and highways.
The original use of the vehicle began with you.
You acquired the vehicle for use or to lease to others, and not
for resale.
You use the vehicle primarily in the United States.
Your general advice on leasing is good, but note that manufacturer subsidized leases are often less negotiable - sales price certainly is as should indeed be negotiated. Other things like MF and residual are often part of the subsidy and not subject to negotiation. This also usually true of things like acquisition and disposition fees. These leases can be a "take it or leave it" scenario. If you don't like what the subsidized lease offers, it's time to go shopping for alternative financing. Often the dealer will have multiple sources - some that specialize in less than top tier credit scores.
 
#53 ·
I'd like to add one thing to this discussion

One thing I have not seen mentioned here that I'd like to bring up is that if one goes to the Chevy website, selects a Bolt, and then goes through all the options, at the end it lets you select Lease or Finance and shows you what you would be paying. Combine this with the fact that it asks you what state you are in when you first go to the site, and I would say that its misleading at the very least that it tells you $339/month for the lease.
 
#54 ·
I just went thru this cash/lease calculation when ordering my Premier yesterday. The lease alternative was almost TWICE the cost of a straight purchase when considering a $12,500 tax credit on the cash side. Of course the assumptions are:

Cash cost virtually zero (money in savings) and lease was a quoted 2.5% rate (no CA favorable rates)
Tax credits were less than half on a lease both on Fed and State
Assuming "residual" after three years was the approximate street/resale value of the Bolt with 30-36k miles
And sales tax of 4.5% was added to the cash side and only half of it on the three year lease

Now, I realize there are other considerations like battery technology changes, where to invest and at what return on the $40k used for purchase, and ability to put unlimited miles on the Bolt is paying cash.

So, why lease if you don't live in CA?
 
#55 ·
Reasons to lease:
A) can't claim the full value of the federal tax credit.
B) Drive less than 10K/12K/15K miles a year
C) don't intend to keep the car longer than 3 years
D) unsure of battery longevity, don't want to be tied to car for more than 3 years if battery starts degrading (see reason C)
E) Something with longer range, better features, etc, will be released in 3 years (see C).

A and C seem to be the most popular reasons.
 
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#57 ·
Our son leased a $53,000 BMW i3 for $3,000 down and $330 per month, a net of $421 a month.

For the $43,000 Bolt Premier, GM wants $4,600 down and $400 a month; a net of $527 a month.

That tells all we need to know about how much the two car companies want to move their respective EVs.

The i3 has much better seats and better quality general overall materials, is quieter, some prefer the styling, has distance following and stop-and-go following, navigation and costs less to drive. The lease return 2014 i3s now available for less than $20K may be the best all-around value in EVs.

The Bolt is faster, has longer range, better regenerative braking control; worth the extra? '

jack vines
 
#60 ·
You can have the full $7500 or you can have a lower monthly payment - your choice. There are lots of companies that offer auto leasing if you don't like the GM offer.
Leasing makes sense if you are writing off mileage for business, because you can potentially write off the full cost of the lease, thus getting up to a 30-40% discount, depending on local income taxes and your bracket.
Leasing does not usually make sense for individuals without a business purpose, unless you are betting that the car will depreciate faster than the lease expects, or you demand a new car every three or so years. It's just a way of making lower payments forever, rather than higher payments for a while and then none when the car is paid for.
So get over the populist paranoia and childish corporate name calling. GM is doing what companies do - staying in business by making a profit: no profit = no company. Get it?
 
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