How to Take Advantage of $7500 Lease Incentive in U.S.

[ntrainer]

Looks like our family has certainly fallen in love with the GV60 even though it is definitely more than we had wanted to pay for our next car. One thing that's keeping us from pulling the trigger is that it's hard to justify the extra cash we would pay vs. a completely tricked out Ioniq 6 (our other electric car option). The two vehicles' MSRPs are within spitting distance. The "Limited" trim package on an Ioniq 6 (RWD version) gets it to $51.3K, while the "Base" trim package on the GV60 (all we need, plus we want the extra range) has an MSRP of $54K.

Hyundai is offering a $7,500 incentive on the Ioniq 6, however, bringing that car well into the mid-$40K range before dealer incentives of any kind (or shopping around). They have extended that incentive to customers obtaining their vehicle in any method -- cash, lease, finance.

I'll be honest: We're cash customers. We like to purchase the car, drive it for 10+ years, and love it. We have never leased a vehicle. But Genesis is limiting a $7,500 incentive to lease customers only.

I'm having a hard time understanding the finances of leasing without getting into a long conversation with a (likely lying) car salesman, which I'd like to avoid. So let me ask those of you who have leased vehicles: What is this like? If we wanted to essentially just look at the lease as a way to capture the $7,500 incentive, but we have the cash available to purchase, how can we best work things in our favor? I can see that the customer gets to pick a lease term (e.g. 24 months, 36 months) and a down payment. Hell, I'd be happy to put down a huge lump sum, lease for a very short term, and buy out the lease ASAP so long as we can get $7,500 off the purchase price. But is that how this works in all cases? Please help me work through the details.

 

[brettb]

I have seen posts on reddit about "buying out the lease immediately" but no details. I am also interested in this.

One thing I've gleaned: Do not put down a lot on a lease. From what I gather, if there's a total loss and the current market value of the vehicle is lower than the what's owed to the lessor, GAP insurance makes the lessor whole. If you've pre-paid the lessor with a big down payment, GAP insurance doesn't cover you for that difference and you eat that loss.

I think the recommend approach is to put any upfront cash you'd want to use to reduce your payment into a money market or HYSA (or T-bills?) and pay the higher monthly payment out of that.

 

[zerocoolai]

It is going to depend on your state and how leases are taxed but yes you can capture much of the lease credit by taking a lease and buying out the car immediately (1 week-1 month later , essentially whenever your lease account gets created). By doing this you will avoid paying the rent charge "interest" for the remainder of the lease. I'm not an expert but have seen enough people do this in the leasehackr forum posts to know it is a thing that is often done with EVs.

 

[brettb]

Headed back to reddit, which referred me back here, where I search for and found:

$7500 back on a lease??

I did the lease and buyback. Here is my timeline from Genesis Chantilly: 7/24/23 Lease car 7/25/23 Login to New Account on GenesisFinanceUSA.com and request buyout 7/28/23 Get cashier's check from bank and mail to Genesis Finance. I didn't do this on 7/25 because I was waiting for the first...

genesisowners.com

 

[ntrainer]

We're talking about two different things, here, I believe... I'm just looking to pay less overall. I don't care whether the payments happen now (down payment) or later (purchase at lease's end), and/or how big the monthly payments are. What I care about is that if you take those three numbers -- (1) down payment, (2) monthly payments, and (3) purchase at the lease's end -- and you add them all together, am I able to eke out savings vs. paying cash?

I don't think the math will ever add up on that, but thought I'd check with those who have leased. In other words, I think the $7,500 "off" MSRP gets eaten up in the rest of the lease calculations. But perhaps not?

 

[brettb]

We're talking about two different things, here, I believe... I'm just looking to pay less overall. I don't care whether the payments happen now (down payment) or later (purchase at lease's end), and/or how big the monthly payments are. What I care about is that if you take those three numbers -- (1) down payment, (2) monthly payments, and (3) purchase at the lease's end -- and you add them all together, am I able to eke out savings vs. paying cash?

I don't think the math will ever add up on that, but thought I'd check with those who have leased. In other words, I think the $7,500 "off" MSRP gets eaten up in the rest of the lease calculations. But perhaps not?

What they outline in that thread is buying out the lease almost immediately. You have to wait for your HMFC account to get set up, then for the first payment to show up in your balance, and then for the $300 buy-out fee to show up as a line item in the total buy-out cost.

My understanding of leases is that they use a "money factor" instead of an interest rate for what you are borrowing. And what you are borrowing is the total capitalized cost over the term of the lease. In theory, you could pay the fees up-front with a large down payment to get your monthly cost to $0. But you're still borrowing the residual value for 3 years and part of the money you'd be fronting would pre-pay that interest.

If you do not want to borrow from the leasing company, you need to buy out the least immediately. You won't pay interest in that case but you won't get back the acquisition fee ($750?), you'll pay the buy-out fee ($300?), and depending on the state, you might be out the initial registration fee (in NJ, it's 4 years for $311). I think (in NJ) you pay for the registration but it's registering in the lessor's name so I suspect you'll have to pay another 4 year reg fee once the vehicle is titled in your name.

I haven't gotten a full formal offer on a Genesis yet (I kind of need to wait until June) but for other vehicles, the money factor / interest meant that down + 35 x monthly + residual was substantially more money than buying outright - and that was including the $7,500 incentive not available on a straight purchase. Unless there's a massively subsidized money factor, figure 7-9% equivalent interest.

So that's why those folks leased then bought it out as soon as they could. They didn't want the features of a lease but they wanted to capture the $7,500 federal EV incentive that wasn't available on a straight purchase. So after the acquisition fee, buy-out fee, etc, maybe you save $6,000 instead of the full $7,500? Still likely a better deal!

 

[gvjim]

You have to wait for your HMFC account to get set up, then for the first payment to show up in your balance

This is where I am in the process. Hopefully any day now.

The staff at the Genesis dealer were absolutely no help with this. They just had no clue, they claimed that no one else had ever wanted to do this before. Perhaps true. It would have been easier if I could have gotten a copy of the lease contract ahead of time, but they weren't able to do that - I think not maliciously, they just didn't have a clue. So that slowed down the process on the day once I finally did get the actual contract.

Once you do get your hands on it, section 23B of the Genesis Finance lease contract clearly states that you have the option to purchase the vehicle at any time. Section 22F specifies what the price will be, it's a simple linear extrapolation.

For my car, I put no cash in - in fact I still haven't. They used the $7500 rebate plus my trade in for the up front costs.

Here is a very useful thread on the Ionic forum about this. There were several people on this forum that had successfully done this.

$7500 HMF Lease Cash Available Today - 2/18

This Reddit forum also was useful.

https://www.reddit.com/r/Ioniq5/comments/12nb20a

The bottom line is that you should be able to save about $6500 by doing this. It's not $7500 because it costs about $700 to set up the lease and about $300 to get out of it. Note - I'm in California, in a few states this may not be possible. I'll report back once I've actually done the buyout, in the meantime I'm keeping my fingers crossed. (Like the original poster, I'm a "buy with cash and drive it for years" person.)

Here are some other links that were somewhat helpful.

$7500 back on a lease??

What does everybody think of this. https://www.businessinsider.com/automakers-electric-vehicles-tax-credits-commercial-vehicle-7500-2023-1?utm_medium=referral&utm_source=yahoo.com Is anybody doing it?

genesisowners.com

https://www.reddit.com/r/askcarsales/comments/182y7df

https://www.reddit.com/r/GenesisG70/comments/12229eb

Should I Buy Out My Lease? (And How?) — LEASEHACKR

In today’s market, buying out your lease could be a good alternative to leasing a new replacement vehicle, given the sky high prices of new cars due to the global semiconductor shortage. Here’s what you need to know about purchasing your leased vehicle. Is this a vehicle you want to keep? In de

leasehackr.com

https://www.caranddriver.com/auto-loans/a41686235/lease-to-own-car-buyout/

 

[noremacnova]

Just a quick question… Is the person who buys-out a lease considered to be the original owner for purposes of retaining the full powertrain warranty?

 

[gvjim]

Is the person who buys-out a lease considered to be the original owner for purposes of retaining the full powertrain warranty?

Yes.

 

[ntrainer]

This Reddit forum also was useful.

https://www.reddit.com/r/Ioniq5/comments/12nb20a

OK, perhaps I'm just unable to understand the lease documents properly since I've never leased before, but walk me through this because none of the examples here seem like they're saving these people any money off of MSRP in the end. For example, look down to Ok-Lock9945's deal sheet. It mentions he agrees to pay $4,000 down, which leaves him 38 months left in his 39-month term, at $458.06/month. Those 38 months will cost $17,406.28. Then he's got a residual amount of $29,546.10. If I take those three numbers and add them up ($4,000 + $17,406.28 + $29,546.10) = $50,952,38 on a vehicle whose MSRP was $47,655. I don't see any real discount. What am I missing??

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[brettb]

OK, perhaps I'm just unable to understand the lease documents properly since I've never leased before, but walk me through this because none of the examples here seem like they're saving these people any money off of MSRP in the end. For example, look down to Ok-Lock9945's deal sheet. It mentions he agrees to pay $4,000 down, which leaves him 38 months left in his 39-month term, at $458.06/month. Those 38 months will cost $17,406.28. Then he's got a residual amount of $29,546.10. If I take those three numbers and add them up ($4,000 + $17,406.28 + $29,546.10) = $50,952,38 on a vehicle whose MSRP was $47,655. I don't see any real discount. What am I missing??

With the immediate buyout, you aren't paying (N-1) times the full-term monthly payment plus the residual.

You pay the rest of the capitalized cost and less than a month of interest.


Lock9945 didn't take that deal, btw - the money factor (interest rate) was way too high.

MSRP was $47,655 but there was a dealer discount of $2,500 plus the $7,500 incentive. So in reality, he would have paid $50,952.38 for a $37,655 car. Terrible!

If he bought that car instead of leased it, his price probably would have been $47,655 - $2,500 (no $7,500 incentive, so $45,155 + taxes and fees. I think the t&f would have been less than the $1,693.66 in that lease deal because $650 or $750 would be the lease acquisition fee. So let's say $46,155 to buy.

In that lease situation, he got an extra $7,500 in capitalized cost reduction, taking the $45,155 down to $37,655. His $4000 covered the first month of $458.06, the fees of $1693.66, and $1938.38 an additional capitalized cost reduction.

So if my math is right (it probably isn't), I'd expect his payoff amount to be something like $37,655 - $458.06 - $1938.38 + $300 (buyout fee) or $35,558.46. Add his upfront $4,000 for a total outlay of $39,558.46.

So with a lease + immediate buyout, his total cost is $39,559 vs. $46,155 to just buy initially, so a savings of about $6,596.

Math and lease details proof-reading is welcomed, btw!

 

[gvjim]

So with a lease + immediate buyout, his total cost is $39,559 vs. $46,155 to just buy initially, so a savings of about $6,596.

That sounds about right to me.

@ntrainer, I agree that this is really confusing. I was exactly where you are. The terminology is really confusing. In general no one ever does a lease and then immediately buys it out, because why would you? The only reason is because of the gov't rebate. So it's really hard to find examples or anyone with experience with this - including dealer staff. In fact, I paid for a caredge.com coaching session from a leasing expert and THEY gave me bogus information.

I wound up doing several days of research, and wound up figuring out how to calculate it myself (I have never even looked at a lease before). I wound up with calculations like @brettb posted. I would urge you do do the research yourself and convince yourself that you understand it before pulling the trigger.

> It mentions he agrees to pay $4,000 down, which leaves him 38 months left in his 39-month term, at $458.06/month. Those 38 months will cost $17,406.28. Then he's got a residual amount of $29,546.10. If I take those three numbers and add them up ($4,000 + $17,406.28 + $29,546.10) = $50,952,38 on a vehicle whose MSRP was $47,655. I don't see any real discount. What am I missing??

I went thru the same thinking when the dealer first showed me the lease numbers. What they didn't tell me (because they didn't understand) was

* you don't pay the 458.06/month, no $17,406 is paid
* you don't pay the residual $29k at the end

Instead, you just pay the residual value at the beginning, which in the example you mention is about $35k.

 

[ntrainer]

brettb and gvjim, this is incredibly helpful. And good to know that the dealer will not likely understand how to make these calculations. I'm going to call a dealer in NJ who has the car I'm targeting and see what happens. Looks like there's a $25K limit on transactions in NJ, so I need to make sure to have a rather large down payment. Of course, that's no problem given that I'm paying the entire value of the car within a few weeks.

In fact, if I understand you correctly, the fact that I'm looking to buy and then immediately pay off the loan means that there are many terms of the loan I just don't care about. I don't care about the term. Don't care about the mileage limits. Don't care about the payment. Obviously (as in any sale) I want to check all the taxes & fees to minimize the bogus charges there. And I care about minimizing the buyout fee, as well as minimizing the capitalized cost. But that's it. Simplifies the leasing document and/or the negotiation, no?

 

[brettb]

Do you live in NJ? No sales tax is nice but it sounds like you'll still have to jump through hoops to get a payoff amount without tax added it it.

Which dealer?

Can you find the car you want on TrueCar?

I liked the sales guy that handled my test drives - I'll definitely get with him when I'm ready to buy/lease (probably June) but never talked numbers with him. I did submit an inquiry via TrueCar and that came back with a reasonable $3k dealer discount and, if I can trust the fees, a reasonable Doc fee for this area. When you do that, you get an offer directly from the sales manager, it seems.

 

[ntrainer]

I don't live in NJ, I live in VA so will have to pay the 4.15% sales tax on the vehicle. The car is at Genesis of Cherry Hill. TrueCar, eh? Better than just calling and chatting with someone, you think? Looks like this car is not on TrueCar, unfortunately, but I can obviously use the Genesis of Cherry Hill web site before calling. I just thought it might be better to have a chat.

Something else that affects my negotiation is that I don't need this car now. We'll need it in the fall, when our youngest daughter begins to (gasp) drive, and this car becomes the one my hubby takes to work every day... so we don't have to make any deals now. But I know this is the car we're targeting, if we can get the right deal. We are headed up to NJ in a week for other reasons and, you know, thought I'd take a shot. The fact that we don't need the car immediately helps my negotiating position, and might be something better brought up over the phone. If you have a sales guy to recommend, I'm all ears!

 

[brettb]

I don't live in NJ, I live in VA so will have to pay the 4.15% sales tax on the vehicle. The car is at Genesis of Cherry Hill. TrueCar, eh? Better than just calling and chatting with someone, you think? Looks like this car is not on TrueCar, unfortunately, but I can obviously use the Genesis of Cherry Hill web site before calling. I just thought it might be better to have a chat.

Something else that affects my negotiation is that I don't need this car now. We'll need it in the fall, when our youngest daughter begins to (gasp) drive, and this car becomes the one my hubby takes to work every day... so we don't have to make any deals now. But I know this is the car we're targeting, if we can get the right deal. We are headed up to NJ in a week for other reasons and, you know, thought I'd take a shot. The fact that we don't need the car immediately helps my negotiating position, and might be something better brought up over the phone. If you have a sales guy to recommend, I'm all ears!

Got it! OK, I just checked here -

https://www.reddit.com/r/Ioniq5/comments/12nb20a

- there are some states that require you to go through a dealer to buy out your lease and VA is not on this list. (PA is, though, so an added wrinkle for those on the wrong side of the Delaware.)

In the before times, it was always better to go through a "car buying service." AAA, Costco, some credit cards, etc. offered these services. It was probably often the same back end and if you went through one of these, you'd deal with the "internet department" and that was usually more pleasant and gave a solid offer right off the bat. I had similar pricing/experiences when I would request an "internet price" via some dealers' websites. TrueCar.com seems to be similar to this but no club or AAA membership required. I do not know if Costco, AAA, etc. still offer this service.

If it were me and I still belonged to Costco or AAA, I'd check their websites and see how those programs work before "walking in cold" (or "phoning in cold" to a dealer.)

The dealer closest to me is in South Brunswick. I really don't want to move on a car until June - I'm sure much to my salesperson's chagrin. He's low key and understands my situation but his sales manager really wants to know "what would it take to make a deal now." I don't want to refer another "long game" customer to him - I'm bad enough! Plus I have no idea what it's like to actually close a deal at this dealership.

Are you looking at that 2023 Sao Paulo Lime over Black Advanced at Cherry Hill? That's a bold color but a 2023 should be an even better deal than one of the 2024's they have on the lot. Looks like they have a decent range of 2024's in stock as well.

 

[ntrainer]

I'm looking at the Base model in Mauna Red, black interior. Would looooove to find a used vehicle in that combination, but of course the Base model just came out in 2024. So one thing we can do is wait over the next 6 months and just see if anybody's loaner pops up for sale... there's one right now in Atlanta but has the white interior and I'm not going to buy a car we'll get stained during the first week.

 

[ntrainer]

His $4000 covered the first month of $458.06, the fees of $1693.66, and $1938.38 an additional capitalized cost reduction.

BTW, I think your math is just slightly off, here. $4000 - $458.06 - $1693.66 = $1848.28. So that's the capitalized cost reduction in that down payment, right? Just trying to make sure I can get the math somewhat close to what we'll be facing if we take this option of grabbing a lease and then buying it out immediately.

 

[noremacnova]

Is the person who buys-out a lease considered to be the original owner for purposes of retaining the full powertrain warranty?

Yes.

You say that with confidence! Obviously, for those who want to keep the car for 10 yrs, it's a big deal to retain the powertrain warranty, not otherwise available to subsequent owners. So it would seem that the leasing company is not itself considered an "owner".

 

[brettb]

BTW, I think your math is just slightly off, here. $4000 - $458.06 - $1693.66 = $1848.28. So that's the capitalized cost reduction in that down payment, right? Just trying to make sure I can get the math somewhat close to what we'll be facing if we take this option of grabbing a lease and then buying it out immediately.

I think you are correct! Maybe I was off on my keyboard with 8->9 and 4->3? I don't see how I would have gotten $1938.28 now.