Sunday, August 10, 2014

Prius versus Corolla with leases.

Question:  Under what circumstances if any does it make economic sense to lease a Toyota Prius instead of a Toyota Corolla?

Previous Work:  

One previous post analyzed potential fuel savings from the purchase of a Prius instead of a Corolla.




A second previous post examined the costs (purchase costs and fuel costs) of owning four different cars. 



Background Information: 

I searched the web for some information on lease terms for the Toyota Corolla and the Toyota Prius.     Information is below.


Sites with information on lease deals for Toyota Prius and Toyota Camry





Lease Terms for Corolla and Prius
Corolla
Prius
Difference
MSRP
$16,800
$24,200
($7,400)
A two year lease
Amount Down
$1,800
$2,550
($750)
Monthly Payment
$149
$229
($80)
Mileage Without Penalty
12000
12000
0
Lease at Purchas Option
$13,176
$19,811
($6,635)
A three-year lease
Amount Down
$1,650
$2,400
($750)
Monthly Payment
$159
$249
($90)
Mileage Without Penalty
12,000
12,000
0
Lease ad Purchas Option
$11,346
$17,059
($5,713)



Analysis:   The purchase of the Prius compared to an alternative makes sense if it is driven a lot.  However, the lease creates penalties on the driver when the car is driven over 12,000 miles.  (I presume the penalties would be avoided if the driver purchases the car at the end of the lease.)

Leasing a Prius could makes sense when virtually all driving is in city rather than in highway. 


Fuel Efficiency in miles
 per gallon
Toyota
Prius
Toyota Corolla
City
51
30
Highway
48
42



Note from above that the gap in miles per gallons (Prius – Corolla) is 21 in city and 8 in highway. 


Let’s assume that all 12,000 miles occur in city. 

The owner of the Prius buys $235 gallons of gas per year.   (12,000/51).

The owner of the Corolla buys 400 gallons of gas per year.  (12,000/30).

I am going to solve this problem at $4.00 gas. 


Gas Payments -- See Assumptions
Corolla
Prius
Difference
Annual Gas Bill
$1,600
$940
$660
Monthly Gas Bill
$133
$78
$55




The gas savings from the Prius in this example are fairly large because of my assumptions --  (1) $4.00 gas and  (2) all miles driven are in city.


Even with these assumptions the Corolla is more economical than the Prius. 



NPV of Corolla Cost - Prius Costs
Two-year lease
Three-year lease
Difference In Down Payment
($750)
($750)
Difference in Monthly Lease Payments
($80)
($90)
Difference in Monthly Gas Payments
$55
$55
Difference In Monthly Payments
($25)
($35)
Net Present Value of Difference in Monthly Payments
($569.85)
($1,167.80)
Net Present Value All Payments
($1,319.85)
($1,917.80)




Bottom Line: 

Even under a scenario that assumes generous gas savings from the lease of a Prius the lease of the Corolla is substantially more economical.    Savings from leasing the Corolla are around $1300 under a two-year lease and $1900 under a three-year lease



#Prius
#Corolla
#Lease
#fuel efficiency

No comments:

Post a Comment