Taxes and Leases

[Morphine]

I recently received notice that my R1T delivery is being scheduled in March 2024... a full 2+ years of waiting

I made the conversion to the Binding Purchase Agreement back in 2022 before the new tax rules were implemented. I see that a folks here have been successful in submitting revised 2022 claims and some even received the money. I have a couple of Tax and Lease questions... I'm hoping someone can help.

1. If I purchase and submit a revised 2022 return will I be subject to the new income rules (no credit if over $300K)? IRS site makes it sound like you are subject to the current income limits. It sounds like folks are able to get the full $7500 credit and not the revised $3750 credit?

2. For a Lease does Rivian use the current MSRP of a similarly specced R1T (e.g. $93K) or do they use our early reservation holder price (e.g. $75K) to calculate the residual value? They have told me that the $7500 is applied as a Cap Cost Reduction... true?

Thanks in advance for any help!

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[Electrified Outdoors]

If you lease you can't claim the tax credit. The 7500 is given to you by Rivian in the form of a cap cost reduction.

As far as the calculations for the lease you need to ask Rivian about your pre price hike reservation status. I haven't heard of any pre price hike folks converting to lease.

Let us know what happens. If you can get pre price hike price, residual on current MSRP, plus a 7500 cap cost reduction it should be a very inexpensive lease.

I wouldn't count on that though. As you probably know the cost of the lease is basically the difference between the price you pay and the residual at the end of the term plus the rent charge (interest charges) on the lease.

Good luck.

 

[Morphine]

Thanks and will let you know.

"I wouldn't count on that though. As you probably know the cost of the lease is basically the difference between the price you pay and the residual at the end of the term plus the rent charge (interest charges) on the lease."​

IMHO, that seems like some shaky accounting grounds for Rivian to take. It's my understanding that Leases should have the same amount as the MSRP to calculate the residual. Discounts, or premiums, increase or decrease the Cap Cost Reduction and the subsequent payment. That is, if I pay a premium on the vehicle's acquisition cost (not uncommon a year ago) my residual didn't go up based on the "dealer premium". I would just eat that with a higher CCR or bigger payments. The same car *should* have the same residual, otherwise residual value is meaningless.

Any thoughts on what IRS rules are in effect (am I subject to the income limits)? Rivian's FAQ on the website seems to imply that the 2022 rules are all that matters with no income limits.

 

[Morphine]

FWIW... ChatGPT agrees with me


You
Are residual values in auto leases calculated based on the MSRP or the amount paid for a vehicle?


ChatGPT
Residual values in auto leases are typically calculated based on the MSRP (Manufacturer's Suggested Retail Price) of the vehicle, not the amount paid for it. The residual value represents the estimated value of the vehicle at the end of the lease term, and it is used to determine the monthly lease payments.

Lease payments are generally based on the difference between the vehicle's initial value (MSRP) and its residual value, with the lessee paying for the depreciation (the difference between these two values) over the lease term, along with any applicable fees and finance charges.

The amount paid for the vehicle (e.g., through a down payment or trade-in) can influence the lease terms, such as the capitalized cost (the negotiated selling price of the vehicle) and potentially the monthly payments, but it does not directly affect the calculation of the residual value.

 

[vshark]

IMHO, that seems like some shaky accounting grounds for Rivian to take. It's my understanding that Leases should have the same amount as the MSRP to calculate the residual. Discounts, or premiums, increase or decrease the Cap Cost Reduction and the subsequent payment. That is, if I pay a premium on the vehicle's acquisition cost (not uncommon a year ago) my residual didn't go up based on the "dealer premium". I would just eat that with a higher CCR or bigger payments. The same car *should* have the same residual, otherwise residual value is meaningless.

I think OP is suggesting that the effective cost of a lease is the MSRP - (any capitalized cost reductions, including incentives, down payment, etc)

So, from that perspective, my guess is they mean that if you were able to get pre hike pricing, it would reflect in the form of a capitalized cost reduction, because the bank would be able to acquire the car at the pre hike price.

If that was true, and residual stayed constant (as it should) - it would be a fantastic lease proposition. Especially, as nobody knows what the market rate of the car is in 3 years. If it's higher than residual, buyout the lease and keep it, or sell the car yourself. If it's lower, you can just walk away, and get a new lease.

TLDR: I think you both are basically in agreement.

 

[MidnightRivian]

5 pages of back and forth just to get to the conclusion that pre price hike is not eligible for leasing.


@Dark-Fx said it best in his post below


https://www.rivianforums.com/forum/...ce-hike-prices-for-reservation-holders.23530/

Well, you aren't the one purchasing the vehicle, so why would they offer a discount to the leasing company? They've never allowed the transfer of the reservation before, why now?

 

[vshark]

5 pages of back and forth just to get to the conclusion that pre price hike is not eligible for leasing.


@Dark-Fx said it best in his post below


https://www.rivianforums.com/forum/...ce-hike-prices-for-reservation-holders.23530/

While this makes sense. It also makes sense to allow it if they are trying to sell inventory ASAP.

It all depends on what they feel is best for them as a company, it isn’t unreasonable.

What I’m more curious, is to hear from Rivian directly, why they won’t just do the lease. Who is saying no? Leasing lender? Rivian? Is it a system error? Or they want to cull pre price hike orders?

Theoretically it shouldn’t make a difference to them. And it makes sense to not allow reservation transfers to prevent price gouging, or people trying to sell their pre orders (which is totally understandable).

 

[SANZC02]

While this makes sense. It also makes sense to allow it if they are trying to sell inventory ASAP.

It all depends on what they feel is best for them as a company, it isn’t unreasonable.

What I’m more curious, is to hear from Rivian directly, why they won’t just do the lease. Who is saying no? Leasing lender? Rivian? Is it a system error? Or they want to cull pre price hike orders?

Theoretically it shouldn’t make a difference to them. And it makes sense to not allow reservation transfers to prevent price gouging, or people trying to sell their pre orders (which is totally understandable).

It kind of makes a difference for Rivian. If people leasing do not want to buy then it raises the ASP for the vehicles they are selling through the lease program.

They do risk losing the sale if the people just opt out and do neither but that sale is at the discounted price so impacts units sold more than bottom line. Clearly at this point that is a calculated risk they are willing to take.

 

[vshark]

It kind of makes a difference for Rivian. If people leasing do not want to buy then it raises the ASP for the vehicles they are selling through the lease program.

How does it raise the ASP. Anyways, isn’t a higher ASP good for the company?

I think I’m misunderstanding something.

 

[SANZC02]

How does it raise the ASP. Anyways, isn’t a higher ASP good for the company?

I think I’m misunderstanding something.

Yes a higher ASP is good for the company.

The ASP would go up because the leased vehicles are selling at current list price compared to the lower price protected value. This is only true for pre-March price reservation holders who would opt to lease instead of purchase at the discounted price. For the non-price protected reservations there is no difference to ASP between purchase and lease transactions

 

[Morphine]

@MidnightRivian Interesting that the pre-March (Early Reservation Holder) price is not eligible for Lease per the thread you linked (thanks!). I asked my Guide if the $7500 EV Tax credit would be part of the CCR and he said yes if I lease it would be knowing full well I was a reservation holder. He didn't say I couldn't do a lease. I'll go back and ask specifically if I'm eligible to Lease from them being an early reservation holder.

BTW... that thread escalated quickly

 

[MidnightRivian]

@MidnightRivian Interesting that the pre-March (Early Reservation Holder) price is not eligible for Lease per the thread you linked (thanks!). I asked my Guide if the $7500 EV Tax credit would be part of the CCR and he said yes if I lease it would be knowing full well I was a reservation holder. He didn't say I couldn't do a lease. I'll go back and ask specifically if I'm eligible to Lease from them being an early reservation holder.

BTW... that thread escalated quickly

Confirm if you can lease and still keep your price protection In place or you have to choose lease with EV credits or price protection with whatever you EV credits you qualify for ($3,750 2024 credit or $7,500 binding agreement).

 

[Morphine]

As noted in the other thread... NO LEASE for price protection buyer.

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