New vs. Used Nissan Leaf, after $10,000 utility discount

[RK1451]

Our local utility company just announced that they are partnering with a local Nissan dealer to take $10,000 off MSRP for new Nissan Leafs purchased before the end of September.  My husband and I had been thinking about buying a used Nissan Leaf to use as our primary car sometime in the next year (we'd keep our current car, a paid-off and dented 2006 Subaru outback, for towing our small sailboat, use on days when we need AWD, and for occasional long trips where the range/charging of the Leaf would be a problem).

In general, I know that used cars are a far better deal - but can someone help me do the math to figure out if this $10,000 incentive makes the new one a better deal in this case?  Looks like MSRP for the 2017 Leaf S, with the quick charge port (seems like that's definitely worth having)  is $32,840.  Less the $10,000 incentive and the $7,500 federal tax incentive leaves a cost of $15,340 plus fees for the new one.  Looks like used ones in our area can be had for $10-$12K (I looked recently, and there was a 2014 Leaf with about 32,000 miles for $10,000, and a 2013 with 20,000 miles for $11,550).  We live in a snowy area that uses a lot of salt on the roads, so rust is the main killer of cars here - 13 years or so seems to be the max life before rust kills them, no matter how good the mechanicals are.

More factors that may help in advising: 
We don't put a lot of miles on our current car - My husband usually walks to work.  My commute is 14 miles RT, but I take the bus or carpool about 25% of the time, and I am working towards biking it (I haven't ridden a bike much since I had a terrible fall as a kid, so I'm practicing a bunch before I feel comfortable going out on the roads - goal is to start biking to work at least 1 day a week by the end of the summer).  Most of the rest of the car miles are weekend trips to see family- maybe about two 150 mile RT trips per month. 

Maybe we put few enough miles on the car that electric is silly...but frankly, I hate going to the gas station - it's inconvenient and I always put it off because I'm running late, and then the tank is on empty and I have to make an emergency stop for gas that doesn't fit into my trip.  It's just annoying.  We also have solar panels with net-metering, and could have some excess capacity depending on how much we use our wood stove for heat (we cut our own wood, so the cost is just our time, and my husband actually likes doing that) - if we maximize that, the electric for charging would effectively be free.  The low-maintenance of an all-electric engine (vs. a hybrid) is also really appealing. 

Second question:
If we got the new Leaf, the dealer is also offering a 0% for 72 months financing, with $4,000 cash back.  We have the funds to pay for the car outright, but with those terms does it make sense to take the financing and keep the funds in savings/mutual funds/invest the $4,000?  Again, generally I know financing is a scam...but in this case does it make sense? I've never bought a new car before, so I have no idea if there are generally extra fees for financing, even if it's 0% interest - there must be, right?  How else would they make their money?

[Laura33]

Financing first:  usually it is either a low interest rate OR cash back.  So the math is whether it serves you better to take the $4K in cash or the free loan for 6 years.  Before you commit, I would also confirm that the $4K cash back is in addition to the other $10K deal -- it could be that the local utility is just adding $6K on top of the existing $4K.

Onto the bigger picture:  usually used cars are a better deal than new cars, because new cars depreciate most quickly in the first few years, so you can get a @3-year-old car for about half the cost of new.  But it all depends on supply and demand -- some cars hold their value better than others, and other factors that affect the market can change the equation as well (e.g., I have heard a theory that the "cash for clunkers" initiative actually increased used car prices and narrowed the delta between new and used because it removed so many cheaper older used cars from the market). 

In this particular case, something like a new, temporary, large discount on a particular model can really distort the market for whatever period that incentive remains in place.  So, yeah, if you can in fact get a Leaf for $32,840-$10K-$7500K-$4K = basically $11K + TTL, that is a pretty awesome deal that is better than a used one for the same amount.

Things to beware of:  Fees:  dealers impose destination charges and document prep fees; if you finance there may be fees there as well.  Options you don't want:  dealers almost never sell a specific model with just the options you want, so that $32,840 may be $36K when you see it on the showroom floor.  Add-ons:  dealers can also add other stuff, like pinstriping and undercoating, that you probably don't want and that is basically pure profit for the dealer.  Also, if you have existing tags you can transfer over, that might save you a bit on the licensing fees.

If you want to do a fair comparison, visit the dealer or email and ask for a total out-the-door price, including all of the available incentives.  And then if you go in to sign and they add one more cent, walk.

[RK1451]

Thank you, Laura - this is really helpful.  I actually assumed when I first read it that the $4,000 cash back would be added to the balance of the 0% loan, so I wasn't even deducting it from the purchase price, but I just looked at the terms again, and it looks like it is an actual incentive.  And it looks like it's both the cash back and 0% interest on this one, not an either/or (I've pasted the terms below).  I have very good credit and it looks like the dealer has the options I want in-stock...so if this really does bring the purchase price down to $11K, maybe we should go ahead and bite before the end of the month...really, we don't need the new car for another few months (can get by on one car until then), but this does seem ridiculously good, right?

Nissan Offer Details

2017 LEAF 0.0% APR financing for up to 72 months PLUS $4,000 NMAC cash for well qualified buyers.

Subject to residency restrictions. Customer may choose (a) special APR with NMAC cash, (b) standard APR through NMAC with NMAC cash. Financing is subject to NMAC Tier 1 through Tier 2 credit approval. $13.89 per month per $1,000 financed at 0.0% for 72 months, on all new above-noted vehicles in dealer stock. NMAC cash available when you finance through NMAC and is subject to credit approval. Down payment may be required. Available on purchase. Must take delivery from new dealer stock. The delayed payment must begin exactly 90 days from the date of the contract. Accrual of interest commences from date of contract and consumer is responsible for payment of accrued interest. Delayed payments are only allowed in Pennsylvania if the APR is 0%. Subject to residency restrictions. Varies by Nissan region. See participating dealer for details. Offers end 07/31/2017.

$4,000 NMAC Cash available on 2017 LEAF . NMAC Cash valid 07/06/2017 through 07/31/2017. Available when you finance through NMAC. Subject to credit approval. Down payment may be required. Available on purchase. Must take delivery from new dealer stock. See dealer for details. Subject to residency restrictions.

[sokoloff]

That does sound ridiculously good, and I'd be inclined to jump on it. (I bought a 2015 LEAF in Dec 2014 and love it for our second car and my daily driver needs.) When we bought, the prices on used LEAFs were "too high" to have that make any sense, so we bought new.

I had the same head-scratching at the NMAC deal, where we got some smaller amount of free money, a free charger station, and 0% for 60 months if we went through NMAC. It has worked out exactly as the terms indicated; there was no Nissan-sourced "catch" to it. The only real "catch" is that when you have a loan on a car, the finance company will insist you carry collision insurance, which I otherwise wouldn't carry, so for me, the true cost of the 0% financing is whatever the surplus cost of collision insurance is over the true value to me (which isn't $0 either). There is no pre-payment penalty, so at some point in the future if I want to drop collision insurance, I just have to pay off the loan first.

[Laura33]

Customer may choose (a) special APR with NMAC cash, (b) standard APR through NMAC with NMAC cash.

Wow.  Yeah, I read it like you do, too.  Shoot, maybe I need a Leaf!

Although the above option makes me laugh: you can choose a 0% rate with cash back, or a regular rate with cash back.  Hmmmmmm, let me think about that a bit. . . .  ;-)

[Bicycle_B]

Have you read MMM's articles about his similar purchase?

Original analysis, including many financing details:
http://www.mrmoneymustache.com/2016/10/04/so-i-bought-an-electric-car/

Update, including some unexpected poor results and service (just so you're informed, could still be good):
http://www.mrmoneymustache.com/the-nissan-leaf-experiment/

[RK1451]

Just wanted to update this - we visited the dealership today, and the $11K+TTL was too good to be true - they wouldn't combine the $4000 cash back/zero percent financing with the $10,000 utility discount.  They did take a little off MSRP, getting it to $16,048 including taxes and fees (and after the tax credit), which is about what MMM's post says he paid for the 2016 model.  This was for the 2017 S model, with charge package.  I think we would have gone for it, but the salesman blew us off in the end (We had left the dealership and called him back to ask a couple more questions.  After saying he would call us right back, he apparently just went home).  So that has me feeling kind of miffed and not sure I want to give this dealership my business.  Oh well, maybe I'll buy the $900 bike I've been eyeing instead :-)