Epic Leftovers, Part 1: Grads, Lease The Outgoing Prius For $118/Month ($0 Down)

Epic Leftovers, Part 1: Grads, Lease The Outgoing Prius For $118/Month ($0 Down)

Welcome to the first of a monthlong series in which we explore deals on automotive lame ducks. Today, we'll shine a light on the third-generation (2010-2015) Toyota Prius Liftback, which will soon be replaced by an all-new design.

2015 Toyota Prius next to a 2016 Toyota Prius (consumerreports.org)

2015 Toyota Prius next to a 2016 Toyota Prius (consumerreports.org)

Why get a leftover Prius?

Well, for one, the deals are pretty good right now. Expect big discounts off MSRP. Also, cars tend to be the most trouble-free by the end of their product cycle. The third-generation Prius is a proven ride with millions of satisfied customers. It makes an excellent UberX or Lyft ride.

What are the downsides?

The fourth-generation Prius will be out in a few months, so soon you'll be left with last year's model. Once the new car comes out, the resale value of a third-generation Prius will drop. The new Prius is expected to be incrementally better in every way.

OK. What else should I know?

A short-term lease on a leftover model can make a lot of sense. For one, you won't be stuck with the car for more than two years. There's no need to worry about resale value, since the manufacturer will be assuming the risk of depreciation. Best of all, you get to take advantage of the huge discounts on leftover models, all while avoiding long-term commitment and the uncertainty of buying a potentially out-of-date car. 

So how great are the lease deals?

Pretty good—in part because the discounts are amortized over such a short timeframe on a lease. If you're a recent college grad living in the West Coast, you should be able to lease a 2015 Prius for about $118/month + tax with first month's payment and license/registration due at signing. We expect the 2016 Prius, when released, will initially cost twice this amount to lease.

Here are the factors that make this deal possible:

1. Selling Price

According to our analysis of recent transaction data, it's entirely possible to get 13 to 15 percent off MSRP, before incentives, on a Prius in the metro areas of California. Let's assume a 2015 Toyota Prius Two with an MSRP of $25,408 and a selling price of $21,950 before incentives. (There's a dealer on a popular car buying site promising that amount.)

2. Incentives

The following incentives are available in Southern California:

2015 Toyota Prius Two - Lease Incentives (November 2015)
Toyota Financial Services Lease Cash (all) $2,000
Amazon.com Gift Card (all) $500
College Grad Rebate (targeted) $750

After the $2,000 Lease Cash, a $500 down payment (you'll be reimbursed this amount in the form of an Amazon gift card), and the $750 College Grad Rebate (plus the unavoidable $650 acquisition fee), the net capitalized cost becomes $19,350

3. Lease Program

Here are the details of Toyota's lease program:

2015 Toyota Prius Two - Lease Program (November 2015)
Months Residual % Money Factor
24 65% .00001
36 55% .00001

Let's go with the 24-month program. Toyota Financial Services estimates the car will be worth $16,515 (65% of MSRP) after 24 months of use at 12,000 miles per year. Therefore the total depreciation expense is $2,835, or $118 per month.

With a money factor of .00001 (0.02% APR), the monthly finance charge is negligible—about 36 cents per month. The total lease payment? $118/month + tax.

4. Taxes And Fees

Here's what you should expect when all is said and done. We've added in Los Angeles County sales tax (9%), license/registration, and fees.

Total Drive-Off
First month's payment (after 9% tax) $129
DMV license/registration $238
Dealer document fee ($80 max. in CA) $80
Capitalized cost reduction $500*
Sales tax on incentives and capitalized cost reduction $292

*You get this back in the form of a $500 Amazon.com gift card.

Use our calculator below to customize your lease.

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% off MSRP
e.g., cash-back offers, loyalty cash, bonus cash. Most states treat customer cash rebates as a capitalized cost reduction, which is subject to sales tax.
e.g., manufacturer-to-dealer cash rebate or if you live in a state where customer cash rebates are not taxed.
I want to pay my acquisition fee upfront.
Acquisition fee, a.k.a. "Bank Fee," is set by the leasing company. Some dealers mark up this fee to make additional profit for themselves. You can negotiate the fee back to its original that we are showing here.
Not recommended
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Enroll in Mercedes-Benz Autopay to lower the MF by 0.00010
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The number of years it would take for the accumulated monthly payments to exceed the MSRP. The higher the number, the better it is to lease as opposed to buy.
Fee the leasing company charges at the end of the lease to cover the cost of selling your car. If you purchase the car or lease another car from the same manufacturer, you usually do not have to pay the disposition fee.
The total cost of leasing over the lease term, including applicable taxes but excluding registration/license fee and the refundable MSD payment.

Did you recently lease a Prius? Share your deal below.