Published June 25, 2012
By Jeff Cobb
Is a Chevrolet Volt lease through Ally Financial “too affordable” not to pass up?
For certain consumers, this may be the case, and one reason why GM expects to sell 20,000 units this year, offers Motley Fool writer, Chris Baines.
“Despite Fox News' protests, perhaps the Chevy Volt is not a completely overpriced hunk of metal after all,” says Baines.
How so? By a confluence of factors, the $369 starting lease price for a $40,000 Volt is only $80 per month more than an also-economical $22,095 entry level Toyota Camry.
Minimizing the fact that the Camry is a mid-size car and five-seater, the compact but spacious four-seater Volt is a way cooler ride, costs nearly twice to purchase, but its lease price is not nearly so much more, meaning leasing one is a screaming deal.
Further – goes the napkin sketch approach to personal finance punditry – operating costs for the Volt using only electricity assuming under 40 miles a day could mean total outlay would be cheaper for the Volt compared to a Camry that only runs on gasoline.
Of course consumers will want to take a closer look at their actual considerations, but the realities for this uniquely situated car could mean one theoretically beats the system – or at least one could wind up feeling that way.
One unique factor for the Volt's lease is that Ally was faced with pinning a residual value on the new technology Volt – which some have reported as too low – but Baines suspects the residual may prove too high – thus it helps reduce the monthly lease payment.
Not quite explicitly explained in the article is a leasing company is entitled to collect the full $7,500 federal tax credit and so the Volt’s effective base selling price is cut to $31,645.
Thinking like an investor, the investment advice writer opines that leasing further makes sense for the Volt as lease makers are hedging their bets as to where the technology – and potentially used car value – will go.
In one extreme example, if GM comes up with a substantially improved next generation Volt, a leased first-gen example could see its resale value crash and burn – not unlike any other outdated piece of consumer electronics. But if that happens, no problem, just turn it in, and let Ally absorb that loss, says Baines.
Or, goes the possibility thinker, the Volt could be a total flop and GM stops making them, in which case clean used examples could even have collector’s value. Under this scenario, one could buy the Volt at the fixed end-of-lease buyout price, and have made a wise purchase below market value.
Baines says he suspects GM too has effectively hedged its bets at taxpayer expense. Not only is it effectively capitalizing on the federal tax credit to offer a pain-free discount on its new technology, it only owns 9.9 percent of Ally, so guess who loses if the Volt does?
Right, you the taxpayer do, or rather the federal government does not to put too fine a point on it. Ally is 73.8 percent-owned by the U.S. Treasury, so as it bets on the winds of the future, less predictable risk could work either against it – or in its favor – and only time will tell.