Rivian Lease Buyout Guide: Comprehensive Slide Deck

[Zorg]

That's some strong opinion for someone who can't do basic math.

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[DD4ST]

You can make almost $11K in interest with the 90K over 36 months if you don't buyout the lease immediately.

Exactly! I leased my 23 R1T in early 2024 when there were crazy lease deals. I built my own spreadsheet to compare options and also to convert lease nomenclature to an effective APR as if I was financing. Unfortunately, it was not so neat as JonKohler did so I never posted it. But I included all the factors Rivian provided before actually signing paperwork INCLUDING investment gains from having my money earn for 36 months (decremented by a monthly payment each month). At the time my expected overall investment gain was 6.3% per my investment advisor. Plus I had an effective APR of near zero (roughly $50 “rent” over the lease term). This turned into a $10K windfall that made leasing and holding to term the cheapest option. I did not include any electric company EV incentives and did not use them. But the key point here is one MUST understand how much the lease money factor vs investment gains. There is a crossover point with higher money factors where all the investment gains are wiped out and immediate buyout is warranted. But this is a critically significant missing piece of JonKohler’s analysis.

Also, a minor correction: my Chase app uses the term ”See purchase option”, rather than payoff.

 

[RandomMcRandomFace]

You really need to research this as you are wrong. Like 100% wrong - the credit plus other lease incentives saves a ton over buying outright. So why would people not take advantage of this?

 

[JacobAZ]

Clarifying a couple points in this thread. By leasing verses purchase and keeping $94k invested at 4% will not result in $11k dollars of interest in your pocket. Keep in mind that each month you are paying the lease, lets say $1,100 and drawing down the investment, so each month the interest earned is less. Also, you need to pay income tax on the interest. So, if you are in the federal tax bracket of 22%, your effective interest rate on the investment is 3.12%. Bottom line after 3 years you would have around $7,200 interest in your pocket, less depending upon state, you may also have had to pay state income tax.

Second point, depending upon state, sales tax can come into play. In Arizona when you pick up your Rivian you most likely picked it up in Tempe. In Arizona on a lease you pay a piece of the sales tax incrementally each month during the lease at the tax rate where the vehicle was picked up. When you buy out the lease you pay sales tax on the buy out price using the tax rate where the vehicle will be registered. SInce the sales tax rate where I live and R1 is registered is much lower than Temp I saved about $1,000 in sales tax buying out lease at 2 weeks rather than 36 months. Of course, this can work the other way if you live in a higher sales tax rate area.

 

[JonKohler]

Exactly! I leased my 23 R1T in early 2024 when there were crazy lease deals. ... Plus I had an effective APR of near zero (roughly $50 “rent” over the lease term).

Thanks for taking the time to step through all of this, I appreciate it. You've hit the nail on the head that if you have a near zero rent charge, then why not take free money in the form of leasing because you are getting that cash float for effectively free.

In that case, I would absolutely, 7 days a week and twice on Sunday, always take 100% lease and not buy it outright, because you're getting free financing. There's absolutely no question about that. "Those were the days" With the ZAPR deals, can't beat it.

Unfortunately, gone are the ZAPR days

But the key point here is one MUST understand how much the lease money factor vs investment gains. There is a crossover point with higher money factors where all the investment gains are wiped out and immediate buyout is warranted. But this is a critically significant missing piece of JonKohler’s analysis.

Agreed 100%, and I think in general, this is a great educational point for anyone doing car transactions (and just managing finances).

Thanks for the prompt. I've improved the spreadsheet with my original numbers and added the analysis you're talking about, using both simple interest as well as a Google Sheets FV() analysis to look at compounding values, and then contrast that with "paying the lease from that bucket."

See tab "Break Even Analysis: Money Factors, Investments" where I use my own numbers. For simplicity, here is the table recreated:

Break Even Analysis with Money Factors vs Investments	Values	Notes
Money Factor for my lease	0.003520	Money Factor = Lease Charge / [( ADJUSTED Capitalized Cost + Residual Value) * Lease Term]
Converted to APR	8.45%	APR = Money Factor * 2400 (*24 here to have google sheets use the % calculator)
Cash you could hold if you otherwise DID NOT buy out the lease	$ 63,284.58	For simplicity, let's just say that you did not select the purchase option and instead held all of the cash that you would have used for the buyout
Target investment return rate (i.e. APR/APY)	4.00%	NOTE: For the sake of basic analysis, I'm just using a basic HYSA rate of 4%, and not accounting for taxes incurred over the period, as a HYSA interest would be taxable for me
Simple interest calculation	$ 7,594.15	Simple Interest = Principal Amount × Interest Rate × Time NOTE: Does not include the marginal tax rate of what those interest gains would have been taxed on
Sanity Test 1: Delta of Rent charge vs Simple Interest	$ (8,196.83)	Basic sanity test: Will I get more in basic interest (not compounding, just super basic) vs the lump rent charge If positive: We are getting more interest than we're paying in Rent Charge <- GREAT for holding the lease! If negative: We're getting less interest than we're paying in Rent Charge <- Good for buyout
Future value with no withdrawls: Using FV (Future Value) calculation in google sheets, assuming you just take the cash and save it	$ 71,338.93	NOTE: The FV function (Future Value) is ideal for calculating the future value of an investment with compound interest, particularly when you have periodic payments or a lump-sum initial investment.
Compound interest calculation based on no withdrawls	$ 8,054.35	Future Value - intial cash NOTE: Does not include the marginal tax rate of what those interest gains would have been taxed on
Sanity Test 2: Delta of rent charge vs compound interest	$ (7,736.63)	Basic sanity test: Will I get more in compound interest vs the lump rent charge If positive: We are geting more interest than we're paying in Rent Charge <- GREAT for holding the lease! If negative: We're getting less interest than we're paying in Rent Charge <- Good for buyout
Future value WITH withdrawls to pay the lease: Using FV (Future Value) calculation in google sheets, assuming you just take the cash, save it day 1, but then pay the lease out of that bucket, what would we be left with at the end of that period	$ 53,396.27	NOTE: This is exactly like the FV calculation above, but assumes you will use your investment/high yield savings/whatever to pay the lease, so we decrement the "Total Lease Payment" every single month NOTE: Does not include the marginal tax rate of what those interest gains would have been taxed on
Sanity Test 3: What if we just paid the lease from the investment, held to the end of the lease period, how much would we be short for buying out the car at the end?	$ (9,888.31)	If this is positive, that means holding my cash was a great idea, because now I'm right side up If this is negative, that means I'm still in the hole and need more money to buy this asset

 

[JonKohler]

The credit plus other lease incentives saves a ton over buying outright. So why would people not take advantage of this?

Thanks, and I agree. Everyone's financial situation is different. This approach is very specific for folks who were going to buy it straight out anyway.

In that case, this is straight-up free money, assuming the taxes and such in your locality don't penalize this approach

Now, I 100000% agree with others in this thread that if we want to optimize overall cash flow, there is an analysis for that, and I suspect such folks would not have just bought it straight up anyway, which is fine. Perhaps they are doing creative things, like leasing through a business for a write-down or other creative financial measures. That is far and above the average Joe here.

I've provided the analysis with my number in the table above and how I've approached it. Happy to take feedback on that, but this is creeping into the advanced financials / cash flow optimization. Not a bad thing, I'm happy to engage on this stuff. IMHO the more folks learn about the details of how to optimize, the better!

 

[RandomMcRandomFace]

Roger - any purchase vs. finance decision has to factor in the deployment of cash (and loss of return) vs. the cost of financing. That I certainly agree with.

 

[mkg3]

So, @JonKohler, after all the analysis, discussion and inputs is it your decision to buy it outright?

 

[JonKohler]

So, @JonKohler, after all the analysis, discussion and inputs is it your decision to buy it outright?

TLDR, yes, via the Lease first, then buy that out immediately

For me, I like to fully own at lease one vehicle, and loan/lease another. My wife has a loan on hers, so I was going to buy it straight up anyways. This was just a way to buy it with less cash flowing out the door.

The alternative, for me / the wife, was to simply cut them a check and use the "Pay in full" option.

 

[JonKohler]

Based on all of the chatter here, I've taken my lunch break to fully refactor the "Calculator" Porition of the spreadsheet.

Here are the highlights for this revision:

• Cleaned up "What you see in the Payment Estimator" to be in the exact same order that you see them on the screen, which makes it easier to follow
• Cleaned up "What you need to consider outside of estimator" to group all of those types of things together
• Refactored "Lease Internals" section to align directly with how the lease contract, Section 11 "our Lease payment is determined as shown below" content looks, so it should be easier to map my calculator with the lease contract Rivian/Chase will send you, to keep me/these numbers honest!
• Important: I added a Money Factor calculator, as this is not in the Estimator or the Lease Contract (at least the one I got in December).
• Advanced: Added a "Lease Buyout Cash Flow Analysis" example, where I take a look at what it would be like if you leased and simply "held" that cash. In my example, I used a simple high-yield savings account rate of 4% as a placeholder. The TLDR of that entire section is about visualizing how alternative cash flow choices might look

To use this:

1. Download/clone the spreadsheet
2. Enter your own numbers, as they appear in the Payment Estimator on Rivian's website into "Lease Calculator Helper" cells B4 through B17
3. Enter your tax rate in cell B20
4. The spreadsheet will calculate the rest for you

 

[mkg3]

TLDR, yes

For me, I like to fully own at lease one vehicle, and loan/lease another. My wife has a loan on hers, so I was going to buy it straight up anyways. This was just a way to buy it with less cash flowing out the door.

The alternative, for me / the wife, was to simply cut them a check and use the "Pay in full" option.

We used to do the same. We didn't want two car payments at any given time.

We did buy our R1S outright using the Rivian's Plaid ACH. It was done all online and no cashier's check needed.

 

[JonKohler]

We used to do the same. We didn't want two car payments at any given time.

We did buy our R1S outright using the Rivian's Plaid ACH. It was done all online and no cashier's check needed.

Great! That works too. I edited my previous comment for clarity. When I said buy outright, I meant the end result is "I own it". The path I took to get there was lease for less than 1 month, and then buy the lease

In short, your result and my result are the same, although I was able to capture some discounts via the lease credits

 

[JacobAZ]

[/QUOTE]

Simple interest calculation

$ 7,594.15

Simple Interest = Principal Amount × Interest Rate × Time NOTE: Does not include the marginal tax rate of what those interest gains would have been taxed on

You need another tweek to the model. This interest total would only be true if you never made lease payments ... in which case the car is likely repo. To get a valid interest number you need to remember to subract your monthly lease payment each month from to $63,284. For example if your monthly lease payment was $400, after 36 months you would have received about $6,882 interest at 4%.

 

[JonKohler]

Simple interest calculation

$ 7,594.15

Simple Interest = Principal Amount × Interest Rate × Time NOTE: Does not include the marginal tax rate of what those interest gains would have been taxed on

You need another tweek to the model. This interest total would only be true if you never made lease payments ... in which case the car is likely repo. To get a valid interest number you need to remember to subract your monthly lease payment each month from to $63,284. For example if your monthly lease payment was $400, after 36 months you would have received about $6,882 interest at 4%.

I already catered for that with "Future value WITH withdrawls to pay the lease"

That gets you compounding interest properly + withdrawls every month.

The simple interest is just a basic "is it dead" test, if that is miserable, there is no need to look further

TLDR, "Future value WITH withdrawls to pay the lease" already does this.

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