I should probably admit that my family did not need a new car. Or even a new used car. In fact, we didn’t even need the two older used cars that we have been keeping around for the last five years, because our local life has blossomed so nicely here in the sunny, walkable oasis of Longmont, Colo., that there is really nothing outside of cycling distance, aside from the odd trip to the Denver airport.
If I were still my real retired self (circa 2005-2011), we probably would have sold these vehicles and gone blissfully car-free, combining bikes and bike trailers with car sharing, carpooling, rentals, and Uber/Lyft rides for our trips out of town, which only average twice per month. The money savings of maybe $2,000 per year would only be a minor improvement to our annual spending, but the peace of mind of a clear driveway, no maintenance or insurance, and the joy of trying something new would be worth much more.
But instead, I lead this dual life: Normal Pete, the retired dad/carpenter is in control for 90% of my waking hours, but occasionally his alter ego, blogger Mr. Money Mustache (circa 2011 to present), takes over. MMM is restless, reckless, bossy, prone to experimentation, has a surplus of blog-related income at his disposal, and has to answer to millions of people. Pete’s friends mostly live nearby and already ride bikes, but certain MMM readers are still burning millions of gallons of gasoline driving gas-powered cars on long commutes. Many of them want to know if there is a better way.
So, my online persona just bought himself a brand-new 2016 Nissan 7201, -2.39% Leaf to run a long-term science experiment and report the data back to you. Pete is a bit nervous about this shiny new toy in the driveway, but he will do his best to have some fun with it.
Why is this a valid experiment?
As I mentioned in a recent post about driving a Tesla to California, I think we’re on the cusp of a very positive change in transportation. Gasoline-powered cars are about to go the way of the dinosaurs, and they’ll be replaced by a mixture of electric cars you can drive yourself and electric cars that drive themselves.
However, this transition is just getting started. Over 99% of new cars sold in the U.S. are still gas-powered, and when I run the numbers as an engineer and car enthusiast, I find this to be preposterous. Logically, this should already be less than 50%, and by the end of this decade, it should be zero. The only thing keeping more people from ditching gasoline is that people don’t realize how freaking amazing electric cars are, and they also don’t realize you can now get one for the less than the price of a Honda Fit.
Out of a dozen or more options on the market, I chose the Nissan Leaf because in my mind, it offered the best price/performance ratio and is the most widely available on both new and used markets across the U.S. As you’ll see below, it could actually be considered a cost-effective choice despite the rapidly changing technology. (I have no affiliation with Nissan or any car dealer).
How much does this thing cost?
Now THIS is where things get interesting.
Straight off my sales sheet, this is what the car will cost me:
Sticker price (from the car window): $35,445
Dealer handling fee (aka more profit margin): +$600
Assorted discounts from dealer: (-$4,500)
Hard-to-explain discount from Nissan Finance: (-$6,000)
Federal tax credit: (-$7,500)
State tax credit, which varies by state. This is for Colorado: (-$4,653)
Sorta net price of car: $13,391
However, it’s not quite that good, because many of these discounts are taken only after you pay sales tax on the full price of the car ($31,544 in this case). In my region, sales tax is about 8.26%, so I paid $2,605 of tax. That’s about $1,500 more than you’d pay on a car that was really priced at $14,000.
So my total out-of-pocket cost with tax will be $16,000, which is equivalent to buying a brand-new car with a list price of $14,775. This is right around the price of the cheapest new cars you can get in the U.S. these days. The difference, of course, is that you get something that is fast, silent, pollution-free, almost free to refuel, carpool-lane eligible and pretty luxurious instead of an economy car.
My dirty financing secret and the strange positive cash flow
Blowing all credibility as Mr. Money Mustache, I actually financed this car.
To get that “hard-to-explain $6,000 discount” from Nissan, you have to buy the car with zero down payment and a 0% interest rate. You can then choose to pay the car off at any point, or let the free money ride over a 72-month payoff period.
I’ve bought new vehicles twice before in my lifetime, and both times I got a discount for paying cash. In this case, the incentives are reversed — apparently because of some combination of negative interest rates in Japan and the tendency of buyers to spend more money on add-ons like the overpriced service plans and extended warranty when financing a car (all of which I happily rejected).
The only downside of all this is that carrying a car loan requires me to carry at least $1,000-deductible collision/comprehensive insurance on the car, which costs me $190 per year extra at Geico. My car loan is for the full $28,000, so the insurance premium works out to only 0.6% of this balance per year — much less than I’ll earn by investing that money elsewhere. So therefore I’ll keep the loan unless it becomes a pain for some reason.
The net of all this is a very odd cash flow diagram for buying this car:
I drove the car home without paying anything at all. I just signed a few papers. Now a full month in, I still haven’t paid a dime, which feels really inappropriate.
Meanwhile, I have already sold my beloved 2005 Scion xA on Craigslist and collected $5,000 in cash, which is now in the bank. In about a month, Nissan will start withdrawing “car payments” from my bank account at $400 per month. But at tax time, I’ll collect that juicy $12,150 in tax credits we saw above. Meanwhile, there are fuel savings every month, and I get to enjoy living in the future (and promoting the joy of gas-free transport to everyone else) the whole time.
The bottom line is that at on balance, I will actually have more money sitting in investments than I would have if I had kept the old car — at least until early 2021. On top of that, I’ve placed the new car in service as a business vehicle, which will make it partially tax deductible and skew those graph lines even higher.
At the end of the graph, I put a credit to simulate what would happen if I sold the Leaf for $7,500 at that point — about $5,500 more than my projected future value of the older Scion.
Can robo advisers manage your money and emotions?
In investing, giving in to your emotions can cut your return by about 1.56 percentage points a year. Should you leave the job to an emotionless robo adviser instead?
Who knows what the year 2022 will bring? I could keep the Leaf, or perhaps switch to the latest self-driving electric car with a 400-mile range and replace my domestic air travel with sleeping in my future car while it drives me across the country at night.
Other Details: Maintenance is much simpler on electric cars, but the battery does fade gradually. The warranty is eight years, but your range might be down by 40% after a decade or 100,000 miles. The Leaf battery can easily be swapped, at which point you’ll have an almost-new car. If you’re beyond the warranty period, the current price for this upgrade at a Nissan dealership is $5,500, although with battery prices down 80% over the last 10 years, I would expect this to be much lower by the time I need one.
Is it actually a nice car?
In general, the Leaf is a spiffy vehicle, both inside and out. Interior materials are reasonably classy, especially if you get the black interior. Seats have a firm, reasonably sporty shape.The roomy 5-door hatchback design makes it easy to load and unload people and cargo, almost like a smallish crossover SUV. I can easily fit five of me into the car (6’0/185 lbs.). Or you can fold down the 60/40 rear seats and have an area big enough for two bikes or 1-2 adults sleeping (if you set up a level sleeping platform). Overnight camping (even in winter) is somewhat practical because you can run the automatic climate control overnight without running out of battery.
Finally, the Leaf’s audio system sounds quite good thanks to six speakers, including column-mounted tweeters. I filled up a 32GB USB drive with about 500 of my favorite albums in MP3 form, and plugged it into the port on the dashboard. The car navigates the folders nicely and displays the album art. So I’m set for life and never have to resort to commercial FM or satellite radio.
The Leaf is a controversial car: Some say it is ugly and drives like an econobox, while I find it looks pretty damned nice, especially with the 17-inch wheels and wide performance tires that now come on the SV and SL models.
The weight distribution is close to 50/50 and nice and low, with the battery pack way down under the floor and the electric motor between the front wheels. Combining those good tires with the reasonably tight suspension, I find you can whip this car around on a curvy mountain road and it handles it very well. Cornering and passing in the city and interstate is similarly enjoyable.
But the best part is the acceleration. Subjectively, I’d describe the typical economy car or SUV as “plenty fast”, and a midrange performance car as “way faster than you need.” The Leaf feels even faster in typical urban and suburban driving, well into the “Wow!” range only a couple of impractical notches below my impression of the Tesla TSLA, -1.45% Model S, which is so fast (and fun) it is downright dangerous.
How far can it go on a charge? (and how much does the charging cost?)
The EPA rates the car at 107 miles per charge, because they simulate typical American driving patterns (which hypermilers like me like to parody as “full throttle at all times with constant unnecessary braking, and a parachute and a sack of bricks attached to the back of the car”). So far, my lowest performance has been 115 miles (25 miles remaining after a 90 mile round trip to a far corner of Denver, mostly on the interstate at 70-80 mph with the air conditioning on). And my best is around 150 miles (city and country driving averaging about 45 mph).
“How long does it take to charge?” is usually the next question. But the idea of waiting to fuel your car as we do at gas stations is actually somewhat obsolete. With an electric car, you generally just leave it plugged in every night, you awake to a car that is totally full — so many owners never need to make a refueling stop. Much more convenient than gasoline.
Or you can charge the car from empty to full in about five hours at the typical public charging station (often for free). It takes about 30 minutes at a DC fast charging station. Nissan provides two years of free nationwide charging with new Leafs.
Public charging is starting to become pretty useful. There are more than 36,000 public charging machines in the U.S., and the number grows by over 10 per day. Since buying this car, almost 100% of my fuel has been free because there are free charging stations in the parking lot of my favorite grocery store.
Paid charging should continue to accelerate, because an eight-car gasoline pumping station costs about $1 million to build, while an eight-spot EV charger would be less than half the cost, and requires much less land (plus profit margins on electricity can be much higher than those on gasoline). Existing gas station chains, including BP, are already adding electric charging stations alongside their gas pumps. Both coasts have already set up an “electric highway” infrastructure, which is a string of the ultrafast 30 minute chargers spaced conveniently for electric cars along the interstate.
If I’m charging at home, the car holds about 30 kwh of electricity, which costs roughly $3.00 at my local electric rates. By comparison, an economy car that gets about 35 mpg would burn around $10 of gas at today’s cheap prices to go the same distance. That means the Leaf is getting the equivalent of roughly 115 mpg. This comparison gets even better when the price of gas increases.
Do I need an expensive home charging station?
In most cases, no. Just plug the car into a regular outlet whenever you aren’t using it, using the cord that comes with the car. This adds 4-5 miles of charge per hour, or 60 miles per day if you leave your car parked from, say, 7 p.m. to 7 a.m.
This car is a pretty new thing for me. As I have some fun and test it out, I’ll put the results on a permanent page on my blog called The Nissan Leaf Experiment.
Mr. Money Mustache (Pete Adeney in real life) is a Colorado family man who retired 11 years ago at age 30 after an unexceptional 10-year engineering career, and now writes occasionally about finance, business, lifestyle, technology and other topics at mrmoneymustache.com. A longer version of this article as well as updates on the Leaf experiment can be found on the Mr. Money Mustache blog.