The Chevy Volt Lease and Why it’s so Cheap
Recent headlines have proclaimed that getting a Chevy Volt lease is a spectacular deal. Getting a 2013 Volt lease is in fact quite appealing, though the math behind how it works is actually not that complicated. Below you’ll see how a Chevy Volt lease breaks down and why it makes a lot of sense.
First off some basic definitions for the uninitiated, an auto lease is basically like a pre-arranged contract for you to “buy the car new, finance it, and agree to sell it back at a pre-determined time and price”. Another way people have described it is that you are paying for the depreciation of the car for the period of the lease (+financing charges on it). In the purest terms, a 36 month lease is no different than you buying the car new, financing most of the value of the car, and then selling it at the end of 36 months.
Of course, there are actual specific differences to leasing a car like the Chevy Volt. First, because the lease pre-determines the future selling price, you as the lessee are not subject to the risk of the car’s residual varying. Also, a lease typically has limits on the mileage you can put on the car so as to make sure that you don’t return a car that’s been run into the ground after 3 years.
But perhaps the biggest reason to lease a car like the Chevy Volt is the availability of $7500 worth of federal tax credits. Typically, to take advantage of the credit, you need to make sure that you will owe at least $7500 in taxes and also that you don’t run into other tax issues like AMT. Some would-be buyers of the Volt cannot take full tax advantage of the Volt for various reasons, so in that case leasing is an excellent option. Why? Because the leasor takes the federal tax credit and deducts it from the cost of the car. It’s as if the federal tax credit were the down payment on the car. See below how the math for a typical Chevy Volt Lease breaks down (numbers rounded and simplified for ease of reading).
If you want to know the nitty gritty of lease calculations, there are many good calculators out there that explain leasing in greater detail, but the simple assumptions for leasing a Volt are below. I’ve ignored taxes even though that is a substantial cost for simplicity’s sake, so make sure you “add” that in as well when you do your calculation – which is part of the reason why you’ll notice differences in specific lease prices. Also, additional options obviously increase the cost of a lease.
Price of the Chevy Volt: $40,000
Typical Down Payment: $2,000
Federal Tax Credit: $7,500
Financed Cost (Also called capitalized cost) = $30,500
Residual Value % (36 month) of the Volt for common lease terms = 59%
Depreciation of the Car: = $40,000 x 41% = $16,400
Interest Rate/Money Factor: 3.3% / 0.0014
Total Monthly Payment = $266.05 : use a lease calculator with the above values to get this
Compared to even a regular car like a Camry or Accord, you commonly see lease payments around $200 /month. So for just $60-100/more a month, you can own a very nice car like the Volt for 3 years! Plus, with the fuel costs you save, the car can practically pay for itself compared to another typical vehicle.
The main reason why the Chevy Volt lease is so attractive is that while the federal tax credit is in place, it is as if Uncle Sam put down $7500 towards the Chevy Volt for you on top of the $2000 you put in. This, and also the presence of record low interest rates is really what makes the Chevy Volt lease so appealing. By the way – if you lease in the state of California for a minimum of 36 months, you can also get another $1500 from the state! See the Chevy Volt Incentives and Rebates page for more.
There are also stories of folks leasing Volts (albeit for 24 months only) for as little as $200 a month! This was in August of 2012 when GM was running a special with very low financing rates and additional cash contribution. Sorry – that deal is gone. But if you can negotiate a lower price with the dealer, you can also drive down the cost of the lease even more.
Did you lease your Volt? If so how did you make out? Probably better than me as I bought the car day 1 for MSRP