The eternally great dilemma: Buy vs Lease! - 2018 Honda Clarity Forum
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post #1 of 5 (permalink) Old 08-15-2019, 03:01 AM Thread Starter
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The eternally great dilemma: Buy vs Lease!

Hello ladies and gentlemen,
I'm in NorCal/SF Bay Area, and need a car soon. I'm interested in Clarity PHEV due to its low operational cost. I checked with one dealer for the lease for base model, and I was quoted 2000 down + 35 installments of 491 (includes tax) each for 36mo/12k miles per yr. So that's 17.6k total cost after applying 1.5k CVRP rebate, assuming it pans out this year. This apparently is the least expensive lease deal in all of Bay Area; thanks to Chevy Volt dying, prices of clarity FCEV have gone up, or you can say the deals have dried up, especially when compared to what were available in summer of 2018.

I then asked the dealer for purchase price, and he quoted 27k for the base model. Roughly adding 15% for TTL, the OTD comes out to 31k. Apply Federal and CVRP rebates, the total price comes down to 22k. This is less than 5k more than the total price of the lease. And I'll have a car on hand at the end of 3 years.

Now comes the question of which route I should take --- buy or lease, as there're other factors beyond just dollars. With technology evolving so fast, there's a high chance that the depreciation will be massive, ergo resale values will plunge. Given that Honda pulled Clarity PHEV out of northeast, I'm not sure if they'll continue with this model; I hope they do. And third is my personal life changing; if family grows, then I may need a bigger vehicle. Leasing protects against all these, as the car will be off my hands in 3 yrs automatically.

If I buy, then I'll have a car to show at the end of 3 yrs. And if I can sell it for more than 5k then I come out ahead as compared to the leasing.

For those of you who have bought the car, what was your line of thinking? What about those who have leased? Thanks in advance.

-TC
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post #2 of 5 (permalink) Old 08-15-2019, 10:14 AM
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OP: Can you tell me if Honda is currently offering the $7500 tax incentive as an immediate credit for leases ???

I had to go thru the similar math when I got mine in 2018 in So Cal...
I too was unsure if this model would be a good long term buy or a short term lease....

LEASE:
At that time, Honda was kicking back the $7500 federal tax incentive back to the consumer in the form of an immediate cap cost reduction. The dealer also kicked in $3,000 off MSRP. And I had a $500 Honda state of CA employee discount applied.
Total "discount" was $10,800.
Monthly lease is $282 + 9.5% monthly tax lease. With a $14,100 lease end value (Residual Value), the cost to refinance this balance if I opt to buy it out at the end of 3 years would be affordable with a 2 year loan at $28,800 total.
Applying the $1500 CA CVRP and $1000 SCE utility checks I have received since.
Effective cost of the vehicle would be around $25,500 after 5 years.

FINANCE:
Honda was only giving out $1,000 purchase offer and the dealer offering $3,000 discount as well as the CA state discount. Honda also had 0.9% rate for 5 years which made the monthly around $550 with $1000 out of pocket.
Total price of the car after financing it for 5 years: $38,500.
Apply $2500 post sale rebate and my effective cost of the car after $7500 tax incentive applied is $27,000 total cost after 5 years.

I figured if this brand new model year Clarity turns out to be a lemon, I can always just turn her back in at the end of 3 years and wash my hands off.
However, if I love the car (which I do so far), I can buy her out at the end of lease - finance the residual and keep her...
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post #3 of 5 (permalink) Old 08-15-2019, 07:14 PM
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People forget to calculate the time value of money when comparing leases to purchases ($100 cash in hand today is worth more than a promise for $100 a year from now). The lease is almost never the best deal. Leases make sense for two possible reasons. 1 You want a new car every three years and you are willing to always have a car payment and have a new downpayment every 3 years to support that. 2 you want more car than you can really afford and the lease has a smaller cash flow in the short term. If you care about the best deal, then buying a car and keeping it for a long time, is by far the best deal.

One thing can make a lease go from a bad deal to a terrible deal and that is putting lots of miles on it. My commute adds up to 16,000 miles per year. A lease would suck for me.

In this case, since the $7500 fed tax credit does not apply for leases, so the lease is a terrible awful deal. The lease and the purchase would cost nearly the same and with the lease in three years you have diddly squat to show for it.
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-Mike

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post #4 of 5 (permalink) Old 08-16-2019, 09:15 AM
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Quote:
Originally Posted by ukemike View Post
People forget to calculate the time value of money when comparing leases to purchases ($100 cash in hand today is worth more than a promise for $100 a year from now). The lease is almost never the best deal. Leases make sense for two possible reasons. 1 You want a new car every three years and you are willing to always have a car payment and have a new downpayment every 3 years to support that. 2 you want more car than you can really afford and the lease has a smaller cash flow in the short term. If you care about the best deal, then buying a car and keeping it for a long time, is by far the best deal.

One thing can make a lease go from a bad deal to a terrible deal and that is putting lots of miles on it. My commute adds up to 16,000 miles per year. A lease would suck for me.

In this case, since the $7500 fed tax credit does not apply for leases, so the lease is a terrible awful deal. The lease and the purchase would cost nearly the same and with the lease in three years you have diddly squat to show for it.
I know some people are not a fan of leases, but to others, it makes sense.

For some, a lease makes perfect sense:

New car every couple years, business use tax deduction, low miles driven per year, uncertainty of future depreciation (value), GAP insurance (optional for financing), and very low (sometimes zero) money out of pocket.

As for the $7500 federal tax credit, I got mine immediately applied against the cap cost.
Honda Financial who "owns" the lease and receives that credit normally, passed it onto me which I call "immediate gratification".

Now if the car performs well like it is now - until the end of the lease, which Honda normally does well, I will buy her out and keep her for the the long term...
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post #5 of 5 (permalink) Old 08-28-2019, 05:52 PM
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Originally Posted by tremorchrist View Post
Hello ladies and gentlemen,
I'm in NorCal/SF Bay Area, and need a car soon. I'm interested in Clarity PHEV due to its low operational cost. I checked with one dealer for the lease for base model, and I was quoted 2000 down + 35 installments of 491 (includes tax) each for 36mo/12k miles per yr. So that's 17.6k total cost after applying 1.5k CVRP rebate, assuming it pans out this year. This apparently is the least expensive lease deal in all of Bay Area; thanks to Chevy Volt dying, prices of clarity FCEV have gone up, or you can say the deals have dried up, especially when compared to what were available in summer of 2018.

I then asked the dealer for purchase price, and he quoted 27k for the base model. Roughly adding 15% for TTL, the OTD comes out to 31k. Apply Federal and CVRP rebates, the total price comes down to 22k. This is less than 5k more than the total price of the lease. And I'll have a car on hand at the end of 3 years.

Now comes the question of which route I should take --- buy or lease, as there're other factors beyond just dollars. With technology evolving so fast, there's a high chance that the depreciation will be massive, ergo resale values will plunge. Given that Honda pulled Clarity PHEV out of northeast, I'm not sure if they'll continue with this model; I hope they do. And third is my personal life changing; if family grows, then I may need a bigger vehicle. Leasing protects against all these, as the car will be off my hands in 3 yrs automatically.

If I buy, then I'll have a car to show at the end of 3 yrs. And if I can sell it for more than 5k then I come out ahead as compared to the leasing.

For those of you who have bought the car, what was your line of thinking? What about those who have leased? Thanks in advance.

-TC

Any updates, what did you do ?



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