Lease vs Purchase

[chrengel]

I'm new to this thread...first post, but looking for some feedback. I've been test driving several EV SUVs to include the Lucid Gravity, Hummer EV, and of course a few different Rivians. I've narrowed my interest to the Rivian Quad and put a deposit on one being delivered in a few weeks.

As I finalize my financing decision, I need to decide between leasing vs purchasing. I know the pros/cons of each, but my question is really around the projected value of these vehicles in 3 years (if I were to leave the lease or buy the vehicle then) and 5 years (if I were to purchase the vehicle and then decide to trade in for something else). There's also the concerns around Rivian's valuation/longevity, whether or not parts will be available down the road if an accident warranted replacement parts, and so forth.

Any thoughts on leasing for 3 years and potentially buying an R1S at the end of the lease, walking away from the lease to get something else, or purchasing the vehicle from the start?

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[ETNLandCruiser]

I just went through this on leasing an R1S Dual Standard that I am picking up next week. I'm not sure how the math looks on the quad, but Rivian looks to be using a fairly optimistic residual on the Dual Standard so my expectation is that it will not make sense to buy at the end of the 3-year lease.

I also had the same concerns around longevity and given the potential advancements in technology decided that a lease was right in my situation. I figure I can make the decision to purchase at any point in the next 3 years if it makes sense. If not I'll turn it in at the end of the lease and lease/buy another.

 

[CharonPDX]

Depends entirely on your use case and desired ownership period.

If you're going to be driving low miles, in "not likely to cause damage to the vehicle" conditions (aka: you don't go off-roading,) and only plan on having the vehicle for a few years, lease makes perfect sense.

If you drive tons of miles, do a lot of off-roading, and plan on keeping the vehicle until it falls apart decades from now, purchase.

In between? Only you can decide which aspects of lease-vs-buy tip the scales each direction to you.

 

[RMSko]

While I have historically purchased my cars, I would not at this time purchase an EV. I just don’t see any upside. Even in the use case sited above (“If you drive tons of miles, do a lot of off-roading, and plan on keeping the vehicle until it falls apart decades from now, purchase”), I still strongly believe it makes more sense to lease. With leasing you retain the optionality and protect yourself against changes in technology as well as in your own personal situation (you may think you will be keeping the car but leasing allows you to more easily change your mind). EVs are rapidly changing and depreciate way more than gas cars. If at the end of the lease you want to keep the car, you can always just exercise the purchase option at that time. Sure you will pay an extra small fee, but it’s de minimus and worth it in order to maintain the optionality. The only risk I see is interest rate risk, i.e., if rates are substantially higher at the end of your lease term and you want to finance the purchase at that time, your monthly cost could be higher. But to me, that’s not a risk I would factor into my decision.

 

[ndmiller]

Assuming you can afford either, it's simple. Do you want to tie up the cash/loan on a purchase? Or pay over time giving you the choice at the end to purchase or leave.

If you're stretching to afford the purchase, leasing is the way to go.

 

[RMSko]

How are you reaching this conclusion? Leasing factors are quite low and if you lease you always have the option to buy the car at the end of the lease. In fact, buying makes no sense for an EV.

 

[emoore]

While I have historically purchased my cars, I would not at this time purchase an EV. I just don’t see any upside. Even in the use case sited above (“If you drive tons of miles, do a lot of off-roading, and plan on keeping the vehicle until it falls apart decades from now, purchase”), I still strongly believe it makes more sense to lease. With leasing you retain the optionality and protect yourself against changes in technology as well as in your own personal situation (you may think you will be keeping the car but leasing allows you to more easily change your mind). EVs are rapidly changing and depreciate way more than gas cars. If at the end of the lease you want to keep the car, you can always just exercise the purchase option at that time. Sure you will pay an extra small fee, but it’s de minimus and worth it in order to maintain the optionality. The only risk I see is interest rate risk, i.e., if rates are substantially higher at the end of your lease term and you want to finance the purchase at that time, your monthly cost could be higher. But to me, that’s not a risk I would factor into my decision.

Disagree. I think it makes sense for people that want to have a new car every 3 or 4 years. I like to keep my cars 10+ years so I purchased my R1T. I'll be fine for the next 10 years with the charging speed and range of my current Rivian. And when I buy a new one in 10 years it will be a huge upgrade vs. 3 years which is more of an incremental upgrade.

 

[Time2Roll]

Lease gives you an exit option if the vehicle does not work out the way you like or simply change your mind. Does come at a cost. Up to you to calculate what that premium will be including any mileage or other use fees at trade in.

My other lease advice is to put the very minimum down and accept the related higher payments. Any down payment is subject to loss if the vehicle becomes totaled. Insurance pays off the lease not the down payment.

 

[Zorg]

We leased ours last quarter to benefit from all the incentives. It gives us options. If we don't keep the car, then our depreciation is locked in. Plus in California we only pay sales tax on the leased portion, not the residual, which is a good chunk of change saved if we don't buy the car out.

 

[DD4ST]

There is another thread in this forum about leasing vs buying. The OP ended up putting together a great tool for decisions that he shared with anyone who wanted it. You should suss that out. Bottom line, you need to do your homework on the actual numbers and then figure in the intangibles like Rivian’s health and the future value of EVs. In my case I leased in 2024 because of the tax incentive with lease only and the lease cost being almost zero. Because I leased, I am earning ~$10K over the lease life in interest and dividends on the money I did not have to pay up front. This was added to the $7500 (plus some stuff like PTC Rivian threw in). So it was a no-brainer for me. But there is a cross over where leasing is more expensive than buying. I also considered Rivian being a riskier (new) car company and that led me more to leasing. The downside to leasing is if you drive a lot of miles or want to do aftermarket modifications. As for resale values, I was suprised my Rivian (Gen 1 R1T) held its value pretty good and only really saw somewhat of a steeper decline recently. I’m thinking the Gen 2’s will be in better shape. IMO there may be a little more decrease in value but I don’t see Rivians cratering. But you’ll have to see what residual value Rivian (Chase) wants to give you and do your homework.

 

[Jeff M]

I agree with leasing makes no sense for private parties. And, private parties do not qualify for depreciation on their assets. Depreciation is an accounting and taxation expense. Utility and value are more appropriate for private parties. Buying provides a residual value when selling

 

[CrazyOne]

Do the Math. Leasing and then purchasing is better, but usually costs more than buying. However it gives an option to walk away, if the car is in an accident and isn't totalled, or if its a lemon or if Rivian goes bust etc. I bought mine, because it was the only option at the time. I bought my other car, because the lease interest rate was 10% while the purchase interest rate was 2%. We keep try to keep cars for 10 years or more. Second car becomes a city car after 5-7 years.

 

[Rade]

I had done years of research and knew I wanted the Rivian R1T. When the 2nd Gen came out, I placed the order and entered in with a lease; the expectation that I would buy out the vehicle when the lease came to term. Financially, I am retired and have investments and savings; figured I could bank the buyout on the lease and invest it for the three years on the note. Then about 4 months in (March of this year), the markets became wildly volatile, and I began to see my portfolio drop. I pushed the button and requested a payout on the lease and bought my R1T outright. I do not regret the effort.

Leasing got me into the vehicle for a much lower monthly payment than financing (even with a substantial down payment). The buyout actually came in less by several thousand dollars than what was stated in the lease agreement. My only hit came with the state Sales tax at the time of transferring the title and registration from JPMC to me, but again, I had that banked. It also got me a lower auto insurance premium.

In September, my husband just began a lease on a Tesla Model Y. It is his daily driver to get back and forth to work (about 70 miles a day, he has several years before he hits retirement). We have a reservation in on a Rivian R2S, and his idea is to run the MY to term of the lease then go into the Rivian; by then the architecture will be a little more "baked in"; perhaps into a gen refresh. And yes, we had looked hard into the R1S, but it is just WAY more vehicle than either of us would ever need.

 

[TriMo]

The Residual value of any luxury EV in US is a Bomb! A lease is way safer than buying.

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