By: Alan Meincke
Pretty high at the top of my list of financial “no-nos” was the idea of leasing a new car. Dave Ramsey and Clark Howard both generally say to stay away from this potential money pit (the former being much more adamant than the latter). The dealer will kill you on junk fees, it’s better to keep a car for as long as possible, etc.
Here in the great state of Georgia, however, there exists a little extra incentive to change the cost analysis. Georgia residents get a $5,000 tax credit for buying or leasing an electric vehicle! The theory of leasing in this instance is that the technology is changing so quickly that you’re better off not being stuck with an older model two years down the road. Notably, the Nissan Leaf has an increased range by about 10 miles each model year.
Lots of folks have written about how you can drive a “free” car on a two year lease based on this tax credit. That is a misleading statement because those writers never account for electricity usage and car insurance – although those costs are fixed no matter what type of vehicle you drive (obviously I’m talking gas if you’re not driving an EV).
A few caveats:
1) The $5k tax credit is only applied to your state tax liability. Drivers are also not going to be able to get the money from the tax credit until they actually file their tax return for that year. You don’t get a check for $5,000. For example, if my Georgia tax liability is $4,000 for 2014 and I paid in $4,500 over the course of the year through my payroll, only $4,000 of the $4,500 liability refund is due to the EV credit (assuming you have no other deductions).
2) The tax credit can be spread out over 5 years. So, if I cannot take all of it on my 2014 tax return, I’d claim the remainder the next year, which certainly makes the credit less beneficial short-term.
3) There may be some federal tax liability for the credit you receive. *Ask a CPA about all of this to be sure!
4) The state legislature tried to kill the tax credit last year, but the bill did not pass before the end of the session. It is likely to go down in the future.
5) There is a non-negotiable $395 return fee at the end of the lease. They will also dock you for any wear and tear on the car. I happened to accidentally run over something that put a pretty good scrape on the bottom edge of our car, so I’m not really sure how that will play out at the end. There may be some wiggle room here if you leased another vehicle or bought another car from the dealer.
6) If you plan to use the trickle-charger (the 20′ cord that comes with the car that you plug into a regular wall socket), it takes 20+ hours to reach a full charge.
Now, for my wife and I, the lease made good sense. I confirmed we would be able to capture most of the tax credit next year based off of our 2013 state tax return. We were also spending approximately $250 a month to maintain and gas up my 14-year old Volvo, so we could basically cash flow the lease payment without missing a beat. Additionally, we avoided driving my old car on most weekends because it was so expensive to maintain. I also got a quote for car insurance so I knew exactly how much it would increase (for me, about $3 extra per month).
1) See if you qualify for the vehicle purchase program (VPP) through your employer. This program enables you to get an additional discount.
2) Buy at the end of the month. We got a great deal since the dealer was trying to hit sales goals on the last day of the month.
3) Be realistic. Understand you cannot road trip in a vehicle that has an 85 mile range. 90% of our driving around town is close enough this hasn’t been a real issue. The Leaf probably couldn’t be your primary vehicle unless you were willing to rent another car for road trips.
4) Check out plugshare.com. This app/website enables you to lookup public chargers near where you live.
So, there you have it. If you have an older vehicle, the Nissan Leaf may be a good car option. Three months in, there have been a few hitches here and there for my wife and I to plan our trips around the battery life, but overall it has been great to spend the same amount of money (or less, including the tax credit) to have a new car as opposed to an older car that risked major repairs at any time.
- Alan wants to throw off stereotypes by putting “NRA” and “Impeach Obama” stickers on his Nissan Leaf, but he has yet to do so.