I've seen countless articles which say that 80% of EV drivers lease and that leasing an EV is the smartest way to go. However, it seems like there is a "smarter" way to get into an EV: buy it using dealer discounts/EV tax credits, then sell it 1-2 years later right before the residual value equals what you paid for it. What I'm wondering though is whether this "smarter" way is actually smart, or if I've overlooked something and this way is actually quite dumb.
Here's an example of what I mean: according to Edmunds, the residual value of a Honda Clarity PHEV (base) after 36 months and 15K miles a year is 44% or $15,087.60. While depreciation is certainly not linear (it happens faster in the first year than subsequent years), that's an average annual depreciation of 18.67% (56% depreciation/3 years) or $6,400.78 per year. So, let's say that one were able to buy a 2018 Honda Clarity PHEV right before the end of the 2018 model year for $30,000. In the New York City area, the math would work like this:
$30,000 x 1.08875 (8.875% combined state and local sales tax) = $32,662.5
- $1,700 NY State EV rebate = $30,962.50
-$7,500 Federal EV tax credit = $23,462.50 total
At this price, it would take 1 year and 8 months of average annual depreciation for the value of the car to drop to its purchase price.
So my question then is: instead of leasing, why not buy the Clarity, then sell it 18 months later for slightly more than you paid for it? Or sell it 20 months later for the exact same amount you paid for it? Then just use that money to buy the next EV/PHEV of your choice, and rinse and repeat until the government turns off the tax credits/rebates? In effect, this seems like a way to lease an EV/PHEV for free every 18 or so months.
By the way, the math seems to work similarly for the VW e-golf and Chevy Bolt. Either by using the Edmunds residuals for the e-golf and Bolt, or the KBB projected depreciation for these cars, or by just looking at the KBB value of a 2016 e-golf or 2016 Volt, it seems that if 1.) you can get a decent dealer discount, and 2.) you qualify for the federal tax credit and state tax rebates, then you can buy these cars and sell them 18-24 months later for the same amount or slightly more than you paid for them.
Would this be wrong? Would this be fraud? Would this be stupid?
You'd be increasing the amount of EVs in circulation.
There appears to be no limit to the number of times you can claim the federal EV tax credit.
If there's an ethical/political problem with "stealing" other working people's tax dollars, my response would be that we should just raise taxes on Goldman Sachs to pay for it (or better yet, cancel the massive corporate tax give away that occurred in December).
The 1% buys a new car every year. This way, "the people" can too.
In all seriousness, the reason I'm thinking about this is not because I'm trying to game the system or get a free car, but because I want to get an EV or PHEV, but there are none available right now that I feel would be a wise 10 year investment. PHEVs: my suspicion is that after the 5th year of ownership their elegant double-powertrains become very expensive. EVs: high sticker prices, rapid depreciation, often no or poor thermal battery management. So the car you buy today is a fraction of the car you own 5 years from now. And if you wait 5 years to sell it, good luck getting anything close to a decent sized down payment towards your next car. Hence my recent thinking that the way to do it is to just buy and sell an EV every one to two years.
If this plan is stupid, that won't hurt my feelings - I'd like to know. My backup plan is to buy a used Leaf or Chevy Spark for 7K, use it only as a commuter car for 5+ years, and resign myself to the idea of taking my wife's CRV everywhere else....
Here's an example of what I mean: according to Edmunds, the residual value of a Honda Clarity PHEV (base) after 36 months and 15K miles a year is 44% or $15,087.60. While depreciation is certainly not linear (it happens faster in the first year than subsequent years), that's an average annual depreciation of 18.67% (56% depreciation/3 years) or $6,400.78 per year. So, let's say that one were able to buy a 2018 Honda Clarity PHEV right before the end of the 2018 model year for $30,000. In the New York City area, the math would work like this:
$30,000 x 1.08875 (8.875% combined state and local sales tax) = $32,662.5
- $1,700 NY State EV rebate = $30,962.50
-$7,500 Federal EV tax credit = $23,462.50 total
At this price, it would take 1 year and 8 months of average annual depreciation for the value of the car to drop to its purchase price.
So my question then is: instead of leasing, why not buy the Clarity, then sell it 18 months later for slightly more than you paid for it? Or sell it 20 months later for the exact same amount you paid for it? Then just use that money to buy the next EV/PHEV of your choice, and rinse and repeat until the government turns off the tax credits/rebates? In effect, this seems like a way to lease an EV/PHEV for free every 18 or so months.
By the way, the math seems to work similarly for the VW e-golf and Chevy Bolt. Either by using the Edmunds residuals for the e-golf and Bolt, or the KBB projected depreciation for these cars, or by just looking at the KBB value of a 2016 e-golf or 2016 Volt, it seems that if 1.) you can get a decent dealer discount, and 2.) you qualify for the federal tax credit and state tax rebates, then you can buy these cars and sell them 18-24 months later for the same amount or slightly more than you paid for them.
Would this be wrong? Would this be fraud? Would this be stupid?
You'd be increasing the amount of EVs in circulation.
There appears to be no limit to the number of times you can claim the federal EV tax credit.
If there's an ethical/political problem with "stealing" other working people's tax dollars, my response would be that we should just raise taxes on Goldman Sachs to pay for it (or better yet, cancel the massive corporate tax give away that occurred in December).
The 1% buys a new car every year. This way, "the people" can too.
In all seriousness, the reason I'm thinking about this is not because I'm trying to game the system or get a free car, but because I want to get an EV or PHEV, but there are none available right now that I feel would be a wise 10 year investment. PHEVs: my suspicion is that after the 5th year of ownership their elegant double-powertrains become very expensive. EVs: high sticker prices, rapid depreciation, often no or poor thermal battery management. So the car you buy today is a fraction of the car you own 5 years from now. And if you wait 5 years to sell it, good luck getting anything close to a decent sized down payment towards your next car. Hence my recent thinking that the way to do it is to just buy and sell an EV every one to two years.
If this plan is stupid, that won't hurt my feelings - I'd like to know. My backup plan is to buy a used Leaf or Chevy Spark for 7K, use it only as a commuter car for 5+ years, and resign myself to the idea of taking my wife's CRV everywhere else....
... just saying this is an auto category that may defy prediction.