Finance vs. Lease the R2 -- the math

[Gen(R3)Xer]

I have a bold prediction... R2 will not have a tri motor version and the R3X will be a dual performance model.

Hm… I think their X or even RAD nomenclature is going to take the place of their Tri or Quad-motor offerings. RJ even dropped hints of a potential R2X in the future. This might be the route they take if R1 sales really fall off.

Sponsored

 

[AlphaSnowbordergirl]

When the R2/R3/R3X was revealed, RJ said the R3 would start around $10k cheaper than the R2. Since the R2 has pretty much remained exactly priced as they said 2 years ago, I'd guess the R3 pricing will be accurate and will start around $35k. If we scale up the R3 Premium and Performance similar to the R2, thats $44k and $48k. I'd guess the R3X would start around $52-$53k.

I swear he said 37k in a video with one of the influencers on reveal day, but I cannot remember whose video it was.

 

[Jeremy3292]

Maybe ignorant on my part, but I would imagine R1 has a lot of manufacturing and BOM inefficiencies based on how they are speaking about R2. I bet they could get R1 costs down in Gen3. Seems like there is a lot of room for improvement

 

[Gen(R3)Xer]

How much do we think R2X will be? $70k? Very pricey. R1 territory.

I think it depends on how well the R1S continues to sell. I think it will be Gen 2 R2, Gen 3 R2, R3X, R3, Gen 3 R1S, and maybe a Gen 3 R1T if a luxury EV truck market continues to exist. There are way more R1S sold than R1T.

If an affordable smaller EV truck market appears thanks to Ford, Slate, Telo, etc. then I could see Rivian moving forward with the R2T, but they won’t be the first to market, like they were with the R1T. I think they need to stop talking about the R4 already. They’re going to Osborne themselves even more than they already have with the R3.

Again if I were them I’d sink everything into the R2, just like Tesla did with the Model Y. That’s the segment that sells. Milk it for all it’s worth.

 

[NoEquity]

Don't forget that the "One, Big, Beautiful Bill" (OBBBA) allows you deduct new car loan interest regardless of if you itemize or take standard deduction until the end of 2028. Does not apply to leases.

For me I'll be taking out a 36-month auto loan in the low 4s from my local credit union until this OBBA deduction ends then pay off the remainder of the car in full at the end of 2028 unless I can get a lower rate to refinance into. Doubtful though.

 

[DuoRivian]

Maybe ignorant on my part, but I would imagine R1 has a lot of manufacturing and BOM inefficiencies based on how they are speaking about R2. I bet they could get R1 costs down in Gen3. Seems like there is a lot of room for improvement

They renegotiated a lot of the initial contracts when they did Gen 2 as well as some simplification. Other than a full redesign I don’t expect any further major cost reductions.

 

[Eric9610]

Don't forget that the "One, Big, Beautiful Bill" (OBBBA) allows you deduct new car loan interest regardless of if you itemize or take standard deduction until the end of 2028. Does not apply to leases.

For me I'll be taking out a 36-month auto loan in the low 4s from my local credit union until this OBBA deduction ends then pay off the remainder of the car in full at the end of 2028 unless I can get a lower rate to refinance into. Doubtful though.

AGI for single filers is $100k and $200k for jointly.

 

[NoEquity]

AGI for single filers is $100k and $200k for jointly.

Ah right - good detail to add. I'm still eligible, but this won't apply to everyone.

 

[fratpack]

Yeah, definitely. Toyota/Subaru seems to be taking EVs a little more seriously these days and they’re priced competitively. I honestly hope they do well, because without competition the buyer always loses.

I think one of the things that Rivian is hung up on is that they want to continue to sell their R1 line. If I were them I would go all in on the R2 and just let it cannibalize the Gen 2 R1T/S. Then a few years down the road, after the release of the R3, turn around and release a Gen 3 R1T/S that has all of the upgrades from the R2 and then some starting at a more reasonable price. That way you could potentially upsell all of your R2 owners who need more space, more capability, etc.

Or there’s always the option of an R2X along side the R3X to capture more of the upscale market while staying on the same platform. There are many ways Rivian could go, but I hope they chose wisely and continue to grow, expanding into markets like the UK and Europe where EVs are really taking off.

I think Rivian has their whole focus on quickly delivering as many vehicles as possible to turn their losses to profits. They are on a good run now with the R2 as folks who are getting them are loving them. The only way the lease prices and financing will go down is if people stop buying them. I don't see that happening soon. As far as Subaru and Toyota goes...Both companies have very deep pockets so $5 billion loss to them is a drop in the bucket. What I am thinking about is folks are buying the R2's as soon as they pop out of the assembly line. I hope Rivian builds they're service centers as quickly as they are selling the R2's. Once I get mine, I don't want to call a service center and be told there is a 2 month wait for service or that parts are unavailoable. One other item I am looking at is how much the insurance is going to cost. I have a Genesis GV70 Electrified. My insurance went up about 10%. But they are saying a brand new company with a brand new product is a different story and insurance will be a lot higher. We will soon see.

 

[cwq93r]

Don't forget that the "One, Big, Beautiful Bill" (OBBBA) allows you deduct new car loan interest regardless of if you itemize or take standard deduction until the end of 2028. Does not apply to leases.

For me I'll be taking out a 36-month auto loan in the low 4s from my local credit union until this OBBA deduction ends then pay off the remainder of the car in full at the end of 2028 unless I can get a lower rate to refinance into. Doubtful though.

So would it be beneficial to take out the longest loan possible for maximum interest deduction? There’s no prepayment penalty once the loan is refinanced after 2028, but the lower payments for 3 years is a benefit.

 

[ribuck97]

So would it be beneficial to take out the longest loan possible for maximum interest deduction? There’s no prepayment penalty once the loan is refinanced after 2028, but the lower payments for 3 years is a benefit.

IMO, no... Per chatGPT (you know, cause its always right!!):

"
One interesting takeaway is that the 84-month loan generates more tax savings because you pay more interest, but you're not actually coming out ahead financially. In your example:

• The 84-month loan saves about $260 more in taxes during year 1.
• But it costs roughly $1,100–$1,300 more in interest during year 1 than the 60-month loan.

So even after the deduction, the shorter 60-month loan is usually the cheaper option overall unless you specifically need the lower monthly payment.
"
Cost above is cost in terms of interest paid to the bank which of course is variable vs the tax savings.

One should not be buying a car or using OBBB to determine which loan term to select. Do what is best in your situation and choose to buy along witth the term/rate that makes sense for you. Ignore current or future OBBB existence.


OBBB is designed to trigger buyers who shouldnt be buying cars to, in fact, buy them... thus lining pockets of the rich. Often this pushes buyers into the higher loan terms...

The 36mo loan to just try and take advantage of the OBBO don't add up...

 

[cwq93r]

IMO, no... Per chatGPT (you know, cause its always right!!):

"
One interesting takeaway is that the 84-month loan generates more tax savings because you pay more interest, but you're not actually coming out ahead financially. In your example:

• The 84-month loan saves about $260 more in taxes during year 1.
• But it costs roughly $1,100–$1,300 more in interest during year 1 than the 60-month loan.

So even after the deduction, the shorter 60-month loan is usually the cheaper option overall unless you specifically need the lower monthly payment.
"
Cost above is cost in terms of interest paid to the bank which of course is variable vs the tax savings.

One should not be buying a car or using OBBB to determine which loan term to select. Do what is best in your situation and choose to buy along witth the term/rate that makes sense for you. Ignore current or future OBBB existence.


OBBB is designed to trigger buyers who shouldnt be buying cars to, in fact, buy them... thus lining pockets of the rich. Often this pushes buyers into the higher loan terms...

The 36mo loan to just try and take advantage of the OBBO don't add up...

I asked Gemini. Guess it all depends on if you’re trying to lower the principal quickly or keeping payments low while still getting the tax deduction on interest:
At an interest rate of **4.12%**, your monthly payment for a **$55,000** loan over **84 months** will be **$754.83**.
Here is the exact breakdown of the interest you would pay in each of the first three years:
* **Year 1 Interest:** $2,136.27
* **Year 2 Interest:** $1,845.65
* **Year 3 Interest:** $1,542.83
### Summary for the first three years:
* **Total Interest Paid (Years 1–3):** $5,524.74
* **Total Principal Paid (Years 1–3):** $21,649.03
* **Remaining Loan Balance at the end of Year 3:** $33,350.97


If you shorten the term to a **60-month loan** (keeping the principal at **$55,000** and the interest rate at **4.12%**), your monthly payment will increase to **$1,015.89**, but you will pay less interest overall.
Here is the breakdown of the interest for the first three years:
* **Year 1 Interest:** $2,076.43
* **Year 2 Interest:** $1,651.76
* **Year 3 Interest:** $1,209.26
### Summary for the first three years (60-month vs. 84-month):
* **Total Interest Paid (Years 1–3):** $4,937.45 *(compared to $5,524.74 with the 84-month loan)*
* **Total Principal Paid (Years 1–3):** $31,634.62 *(compared to $21,649.03 with the 84-month loan)*
* **Remaining Loan Balance at the end of Year 3:** $23,365.38 *(compared to $33,350.97 with the 84-month loan)*
By choosing the 60-month option, you pay **$587.29 less interest** in just the first three years, and you build equity in the vehicle much faster because your principal is paid down more aggressively.

 

[Zathras]

The price of used Rivians seems to be going up a lot recently. I just got an email from Carvana (I recently checked the potential trade in value of my Subaru Crosstrek PHEV) and it's gone up $1,000 since last month.

Add to that the US strategic reserves are very low, I doubt the prices go down that fast, but who knows? I'm ready to jump the second my invite to order comes in so I can take advantage of whatever's going on right now. Not to mention I just want to get in an R2 asap.

 

[tivoboy]

So would it be beneficial to take out the longest loan possible for maximum interest deduction? There’s no prepayment penalty once the loan is refinanced after 2028, but the lower payments for 3 years is a benefit.

Its still JUST a DEDUCTION, not a CREDIT.. so you will only save on taxes to the extent of your EFFECTIVE tax rate.. so will be certainly less than ones MARGINAL tax rate.

If you have a larger loan with more interest expense, you're only getting ~ 10-20% of the finance amount in taxes saved and you're still paying all the interest.

 

[ribuck97]

I asked Gemini. Guess it all depends on if you’re trying to lower the principal quickly or keeping payments low while still getting the tax deduction on interest:
At an interest rate of **4.12%**, your monthly payment for a **$55,000** loan over **84 months** will be **$754.83**.
Here is the exact breakdown of the interest you would pay in each of the first three years:
* **Year 1 Interest:** $2,136.27
* **Year 2 Interest:** $1,845.65
* **Year 3 Interest:** $1,542.83
### Summary for the first three years:
* **Total Interest Paid (Years 1–3):** $5,524.74
* **Total Principal Paid (Years 1–3):** $21,649.03
* **Remaining Loan Balance at the end of Year 3:** $33,350.97


If you shorten the term to a **60-month loan** (keeping the principal at **$55,000** and the interest rate at **4.12%**), your monthly payment will increase to **$1,015.89**, but you will pay less interest overall.
Here is the breakdown of the interest for the first three years:
* **Year 1 Interest:** $2,076.43
* **Year 2 Interest:** $1,651.76
* **Year 3 Interest:** $1,209.26
### Summary for the first three years (60-month vs. 84-month):
* **Total Interest Paid (Years 1–3):** $4,937.45 *(compared to $5,524.74 with the 84-month loan)*
* **Total Principal Paid (Years 1–3):** $31,634.62 *(compared to $21,649.03 with the 84-month loan)*
* **Remaining Loan Balance at the end of Year 3:** $23,365.38 *(compared to $33,350.97 with the 84-month loan)*
By choosing the 60-month option, you pay **$587.29 less interest** in just the first three years, and you build equity in the vehicle much faster because your principal is paid down more aggressively.

Yes…. Correct, one issue is the likelihood you find 60 and 84 month loans at the same interest rate is slim. Higher term loans carry more risk for the lender and thus, will carry higher rates. The end result is much higher values in interest paid In the 84.

Sponsored