dgkhn
Well-Known Member
- First Name
- David
- Joined
- Nov 17, 2024
- Threads
- 10
- Messages
- 154
- Reaction score
- 149
- Location
- New Hampshire
- Vehicles
- 2024 Macan 4 (Volvo XC60 PHEV, Subaru Forester ICE)
- Thread starter
- #1
These questions come up repeatedly. Disclaimer: the below is based on my current best knowledge. I am not a lawyer, I do not work for Porsche or a dealer in any way, and I am not qualified to give financial advice. DO NOT TAKE WHAT I SAY BELOW AT FACE VALUE. LOOK AT YOUR OWN SPECIFIC LEASE AGREEMENT TO CONFIRM THAT THIS APPLIES TO YOU. Also, the below applies to PFS leases in the United States. I know nothing about leasing in other counntries. The below is to the best of my knowledge and belief as of the moment I write this. I am sure others here can correct me if anything I say below is incorrect. "PFS" below refers to Porsche Financial Services. I say the below as someone who has leased a number of cars, and I have a 2-year lease on my current Macan 4 (which I may or may not buy out early; I'm waiting a bit to see what the real-world depreciation rates look like.)
This is long, because it's reasonably thorough as an overview IMHO, but if you are wondering about leasing, and don't feel you know everything you might need to know, read it! I know this is a lot, but there are potential benefits to leasing your Macan EV and IMHO it's worth knowing what they are.
First of all, very useful (and I believe someone on this forum originally posted this link): This calculator can calculate all the details of your lease deal, and unlike others I have seen, will also lookup the PFS lease terms (origination fee, money factor and residual) for you. Even if you don't use the calculator, you can see what the money factor and residual for your chosen Macan Electric is. (Note, typically this information is difficult to find for free if the dealer won't tell you. IMHO, the dealer should tell you; if they won't that might make you wonder why not. Most of the numbers described below do have to be disclosed in your final lease agreement, but by then it's late in the game).
Forgive me, because some of this is leasing 101, but this stuff is obscure to many people. AGAIN, DO NOT TAKE WHAT I SAY BELOW AT FACE VALUE. LOOK AT YOUR OWN SPECIFIC LEASE AGREEMENT TO CONFIRM THAT THIS APPLIES TO YOU.
If you lease from PFS, with all the Porsche leases I have seen, the below would apply. Also, everything I say below ignores your state sales taxes, which can complicate the logic in some cases, as some states charge tax on each payment, some charge you the total tax based on the payments up front, and I believe a couple of states tax you on the whole car (which makes the below logic mostly moot). When looking at lease numbers, be sure you understand where tax is being included and where it is not being included:
1. When you negotiate a lease, start by negotiating the price of the car as if you were buying it outright for cash. Do not discuss leasing at first. (You don't have to hide that you might want to lease, just say that you haven't decided yet). Get the price you are comfortable with as the purchase price. This price then becomes the Gross Capitalized Cost when you negotiate your lease.
2. As of today, January 10, 2025, PFS will deduct the $7500 Federal EV Tax Rebate from your Gross Capitalized Cost when the lease is calculated.
3. PFS will charge an origination fee (I believe currently $1095.00) for all PFS leases. (So, at best, you are starting out your lease $7500-$1095=$6405 ahead of the game relative to buying.)
4. Again, speaking only about PFS leases (though this applies to most OEM leases, not necessarily all): people think of leasing as renting. That's not quite true; in most cases, it's really just a different way of financing the car, because the lease company has agreed that you can buy the car at the end of the lease for a fixed value, which gives you full control over the lease. This fixed value is the Residual Value. This value is set by PFS in each case and cannot be negotiated (but the dealer also cannot change it). What most people don't realize is that you typically can also buy out the lease early without paying a penalty other than approximately the interest (= "rent charge") you've already paid plus the origination fee. See number 8 below.
5. Your lease payment consists of two pieces: a. A depreciation payment, which over the term of the lease is simply paying down the value of the car periodically (usually monthly) from the net capitalized cost down to the residual value. The residual value is simply the value that you can buy the car for at the end of the lease, so there is nothing magical about this. b. A rent charge (analogous to the finance charge on a loan). This charge is calculated based on the interest rate (money factor). This money is lost to you as you pay it (except in the case of one-pay leases, which I won't get into here). However, if you buy the car out early, you will not have to pay the future unearned rent charge. How this is all calculated is a little obscure (using the calculator above, e.g., can help you) but not really that complicated. In the end you are simply paying down the depreciation plus the interest. If the residual value is relatively high, then you will pay less depreciation monthly, but the car would cost more at the end if you chose to buy it. If the residual value is low, then you are paying more each month but you would pay less at the end if you chose to buy the car out. (By the way, the interest you are paying is basically being paid on the average value of the car during the course of the lease (essentially how much money PFS is lending you). Even if you prepay the lease, or have a one-pay lease, PFS is still lending you the value of the residual value at that point, so you are still paying interest on that).
6. In the case of EV's, a prime motivation for leasing is that you get the rebate (while it still exists). Another reason, however, is you are shifting the depreciation risk to PFS, in that they have agreed to sell you the car at lease end for a named value. If the car is worth less than that value at the end of the lease, you can walk away (or if it's troublesome, or had collision repair done, or you just don't like it). If the car is worth more than that end value, you might decide to buy it and you will come out ahead.
7. Porsche money factors are typically relatively high (compared to say, the financing rate for an auto loan of comparable duration). This means that even with the $7500 rebate, if you choose to buy out the car at the end of the lease, you will likely have paid more, and in many cases, significantly more, than if you had bought the car outright. In the case of my two-year lease, I figure when the rebate is taken into account, if I bought out the car at the end of year one, I would be about even. After that, I will have paid more interest than the net benefit of the rebate. The base money factor (interest rate) is set by PFS in each case. This is called the buy-rate money factor. The dealer is permitted to mark this up. You want to get the dealer to commit to charging you the buy rate money factor and to put that in writing.
8. You can buy the car at any point after the lease is finalized by PFS (a month or so). You will always have paid the first month payment upfront, but after that, you can buy the car for essentially the net capitalized cost minus the amount of depreciation you've already paid (again, ignoring taxes). PFS discloses this value each month on your statement. (The lease describes the buyout value differently, essentially as the residual value plus the remaining payments, minus the unearned rent charge, which as far as I can see, works out to be the same or roughly the same.) Your car dealer earns compensation for sending you to PFS. I don't know the details, but basically if you pay off the car too soon (usually understood to be before you have made three payments), PFS will claw back some or all of that compensation from the dealer. This is not really your problem, but keep it in mind if feel you want to be nice to the dealer. Some dealers misrepresent, and claim you cannot pay off the car for some arbitrary period. People on this forum have said that their dealers have told them, for example, that they would lose the $7500 rebate or incredibly, that paying the lease off early is "illegal." The dealers are saying that because they don't want to lose their compensation. My suggestion is to get anything a dealer says in writing.
I hope this points some of you in the right direction.
This is long, because it's reasonably thorough as an overview IMHO, but if you are wondering about leasing, and don't feel you know everything you might need to know, read it! I know this is a lot, but there are potential benefits to leasing your Macan EV and IMHO it's worth knowing what they are.
First of all, very useful (and I believe someone on this forum originally posted this link): This calculator can calculate all the details of your lease deal, and unlike others I have seen, will also lookup the PFS lease terms (origination fee, money factor and residual) for you. Even if you don't use the calculator, you can see what the money factor and residual for your chosen Macan Electric is. (Note, typically this information is difficult to find for free if the dealer won't tell you. IMHO, the dealer should tell you; if they won't that might make you wonder why not. Most of the numbers described below do have to be disclosed in your final lease agreement, but by then it's late in the game).
Forgive me, because some of this is leasing 101, but this stuff is obscure to many people. AGAIN, DO NOT TAKE WHAT I SAY BELOW AT FACE VALUE. LOOK AT YOUR OWN SPECIFIC LEASE AGREEMENT TO CONFIRM THAT THIS APPLIES TO YOU.
If you lease from PFS, with all the Porsche leases I have seen, the below would apply. Also, everything I say below ignores your state sales taxes, which can complicate the logic in some cases, as some states charge tax on each payment, some charge you the total tax based on the payments up front, and I believe a couple of states tax you on the whole car (which makes the below logic mostly moot). When looking at lease numbers, be sure you understand where tax is being included and where it is not being included:
1. When you negotiate a lease, start by negotiating the price of the car as if you were buying it outright for cash. Do not discuss leasing at first. (You don't have to hide that you might want to lease, just say that you haven't decided yet). Get the price you are comfortable with as the purchase price. This price then becomes the Gross Capitalized Cost when you negotiate your lease.
2. As of today, January 10, 2025, PFS will deduct the $7500 Federal EV Tax Rebate from your Gross Capitalized Cost when the lease is calculated.
3. PFS will charge an origination fee (I believe currently $1095.00) for all PFS leases. (So, at best, you are starting out your lease $7500-$1095=$6405 ahead of the game relative to buying.)
4. Again, speaking only about PFS leases (though this applies to most OEM leases, not necessarily all): people think of leasing as renting. That's not quite true; in most cases, it's really just a different way of financing the car, because the lease company has agreed that you can buy the car at the end of the lease for a fixed value, which gives you full control over the lease. This fixed value is the Residual Value. This value is set by PFS in each case and cannot be negotiated (but the dealer also cannot change it). What most people don't realize is that you typically can also buy out the lease early without paying a penalty other than approximately the interest (= "rent charge") you've already paid plus the origination fee. See number 8 below.
5. Your lease payment consists of two pieces: a. A depreciation payment, which over the term of the lease is simply paying down the value of the car periodically (usually monthly) from the net capitalized cost down to the residual value. The residual value is simply the value that you can buy the car for at the end of the lease, so there is nothing magical about this. b. A rent charge (analogous to the finance charge on a loan). This charge is calculated based on the interest rate (money factor). This money is lost to you as you pay it (except in the case of one-pay leases, which I won't get into here). However, if you buy the car out early, you will not have to pay the future unearned rent charge. How this is all calculated is a little obscure (using the calculator above, e.g., can help you) but not really that complicated. In the end you are simply paying down the depreciation plus the interest. If the residual value is relatively high, then you will pay less depreciation monthly, but the car would cost more at the end if you chose to buy it. If the residual value is low, then you are paying more each month but you would pay less at the end if you chose to buy the car out. (By the way, the interest you are paying is basically being paid on the average value of the car during the course of the lease (essentially how much money PFS is lending you). Even if you prepay the lease, or have a one-pay lease, PFS is still lending you the value of the residual value at that point, so you are still paying interest on that).
6. In the case of EV's, a prime motivation for leasing is that you get the rebate (while it still exists). Another reason, however, is you are shifting the depreciation risk to PFS, in that they have agreed to sell you the car at lease end for a named value. If the car is worth less than that value at the end of the lease, you can walk away (or if it's troublesome, or had collision repair done, or you just don't like it). If the car is worth more than that end value, you might decide to buy it and you will come out ahead.
7. Porsche money factors are typically relatively high (compared to say, the financing rate for an auto loan of comparable duration). This means that even with the $7500 rebate, if you choose to buy out the car at the end of the lease, you will likely have paid more, and in many cases, significantly more, than if you had bought the car outright. In the case of my two-year lease, I figure when the rebate is taken into account, if I bought out the car at the end of year one, I would be about even. After that, I will have paid more interest than the net benefit of the rebate. The base money factor (interest rate) is set by PFS in each case. This is called the buy-rate money factor. The dealer is permitted to mark this up. You want to get the dealer to commit to charging you the buy rate money factor and to put that in writing.
8. You can buy the car at any point after the lease is finalized by PFS (a month or so). You will always have paid the first month payment upfront, but after that, you can buy the car for essentially the net capitalized cost minus the amount of depreciation you've already paid (again, ignoring taxes). PFS discloses this value each month on your statement. (The lease describes the buyout value differently, essentially as the residual value plus the remaining payments, minus the unearned rent charge, which as far as I can see, works out to be the same or roughly the same.) Your car dealer earns compensation for sending you to PFS. I don't know the details, but basically if you pay off the car too soon (usually understood to be before you have made three payments), PFS will claw back some or all of that compensation from the dealer. This is not really your problem, but keep it in mind if feel you want to be nice to the dealer. Some dealers misrepresent, and claim you cannot pay off the car for some arbitrary period. People on this forum have said that their dealers have told them, for example, that they would lose the $7500 rebate or incredibly, that paying the lease off early is "illegal." The dealers are saying that because they don't want to lose their compensation. My suggestion is to get anything a dealer says in writing.
I hope this points some of you in the right direction.
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