Plug-In Vehicles: Lease…Don’t Buy

4 years ago by Eric Loveday 28

Lease Me

Lease Me

The argument in favor of leasing over buying for today’s plug-in vehicles continues to grow, especially as automakers routinely slash prices on plug ins.

2014 Model Year Chevrolet Volt Lease Offer

2014 Model Year Chevrolet Volt Lease Offer

As the Associated Press reports, “For drivers enticed by the possibility of dramatically reducing their reliance on gasoline, the discounts on plug-in electric cars — particularly when leasing — are worth considering.”

John O’Dell of Edmunds.com told the Associated Press this:

“You can drive around in a plug-in hybrid for next to nothing if you were already spending $200 a month on gas.”

And here’s why the Associated Press thinks leasing is the way to go:

“Although leasing sometimes gets a bad rap, when it comes to electric cars, it’s the way to go — assuming the typical 10,000-12,000 mile per year limit fits your needs.”

“A big reason is electric car technology is evolving. That means if you own a car for several years, your trade-in value will be limited because of the availability of more efficient and advanced models. Plus, there is concern that electric car batteries will degrade over time and charge at diminished levels after several years. Leasing for three years, for example, allows you to avoid this issue altogether.”

The Associated Press even quotes Jesse Toprak, senior analyst for TrueCar.com, as saying:

“We’re sort of in the middle of a perfect storm for leasing.”

We too believe that leasing is the best option with today’s plug-in vehicles.  Technology is emerging so quickly in the plug-in segment that today’s tech soon becomes so last year.

Leasing offers you a way to stay near the front in terms of technology and that attractive monthly rates are hard to pass up.

Source: Associated Press via ABC News

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28 responses to "Plug-In Vehicles: Lease…Don’t Buy"

  1. Taser54 says:

    “You can drive around in a plug-in hybrid for next to nothing if you were already spending $200 a month on gas.”

    Trying to understand this quote. It appears to exceed the mileage limit on the leases they put forth that people should pursue by 5000miles PER YEAR. $200/$3.50/gallon = 57gallons fuel *25 mpg = 1425 miles/month * 12 months = 17100miles.

    At the end of your 3 year lease, what’s 15000 extra miles gonna cost you?

    1. Mark H says:

      Correct Taser54. You still have to stay inside the constraints of the mileage even with EVs. The next guy quoted handled that. Many can do that making the lease the most attractive still.

      Combined with the HEV success with batteries and statements made by the American Chemical Society, a well managed battery is going to last well beyond the warranty of the EV so if you are not a person that has to look hip in the latest, you can still make out buying an EV as well.

      It’s all good as long as you pay attention.

      1. Bonaire says:

        Two vehicles have no mileage limit. Honda Fit EV and Toyota Rav4 EV. A lease without mileage limit would be a great move for Nissan to offer as well.

    2. Mint says:

      They said “next to nothing”, not absolutely nothing.

      Don’t compare apples to oranges, either. What are you paying for extra mileage on your current gas car? How much are you paying for maintenance and depreciation with that extra mileage?

  2. Bloggin says:

    Actually buying a plug-in vehicle today is like buying a $40k iPad, knowing in about 8 months where will be a more powerful version available for the same price or less. And the one you own will be depreciate by 10% or more.

    Also….that Nissan Leaf deal is $169/mo for 39 months with $2999 Down.

    The base S nationwide lease is $7164+$1999 = $9164 or $254.55/mo for 36 months

    The lower lease is $6591 +$2999 Down = $9590 or $245.89/mo for 39 months.

    So it’s really just an $8/mo lower lease than the nationwide lease deal on the base S.

    1. Dave R says:

      End the end, manufacturers have to take into account the residual value of the car when factoring in leasing terms.

      After all, if you return the car instead of buying it for the residual, they have to sell the car to someone else.

      If they can’t sell it for close to the residual, lease rates will go up to make up for it.

      The benefit of leasing here is that it does put all the risk of guessing the residual value on the manufacturer – you know exactly what you will have paid for the vehicle at the end of lease terms.

      If residuals are higher than expected – buy the car and either keep it or sell it and make a profit.

      If residuals are lower than expected – walk away and let the dealer deal with it.

  3. pjwood says:

    “1900 down”, failing to predict higher resale, saving less gas money on limited miles all make leasing a bad idea.

    Tesla’s lease customers are making a big mistake. Just look at used prices.

    1. Bonaire says:

      Tesla isn’t really a lease. It is a five year lease-purchase deal where you can turn it in after three years for a 50% ensured value.

      1. Bonaire says:

        And I believe that tesla lessees can get the tax credit. Correct me if i am wrong. I am Gonna check on that one.

        1. pjwood says:

          I believe that’s right, but the 50% is a 3 year value, based on the entry-level car, and regardless of whether you paid up for an 85kwh, P+, etc. ~36k (plus 43% of options value).

          While so cheap a resale back to Tesla is unlikely wise, you are correct they aren’t technically leasing the vehicles out. I should have said “those taking Tesla’s repurchase price”.

        2. Pooty says:

          Actually, last I checked, the fine print said you forfeit the $7500 tax credit if you buy into the magic math Tesla lease numbers.

  4. Suprise Cat says:

    When you lease, communism wins.

    1. Aaron says:

      For my $0 down, $69/month car lease payment, I’m all for communism!

  5. Huffster says:

    My understanding is If you lease, you don’t get the tax credit.

    1. EV says:

      You don’t get, but dealer will get and will reduce MSRP

      1. Nate says:

        Or the leasing company gets the tax credit. That is how mine was structured, and thought it was how it was typically done. Also, the leasing company, or whoever owns the contract, may keep the adjusted cap cost the same but raise the residual. This makes for a low lease payment but make it more likely it will make sense to turn the car in at the end of the lease. In my case I’m going to want next generation plug in technology 3 years from now anyway, so that works for me.

    2. One of the reasons the lease is a great deal is that the fed tax credit is taken off the MSRP (cap cost reduction). So instead of waiting to get a credit back at the beginning of the next year (IF you qualify to get a $7,500 credit) you get lower payments.

      In California, you also get $2,500 check (not tax credit) from the state, even on a 36 month lease. So it’s a bargain if you consider that you get to appt that entire $2,500 to just a fraction of the purchase cost (larger cost reduction).

      Also, keep in mind that you can always buy more miles cheap up front – as low as $0.05 per mile for the Leaf, and about $0.10 per mile for the Ford Focus Electric and many others. So for example, I bought an 18,000 mile lease on my FFE and really do save over $200 per month. With the Calif rebate, this is very nearly a free car.

      It’s astonishing more people don’t realize how good of a deal driving electric is.

      1. pjwood says:

        …and when they attempt to politically rail you for the subsidies leading to your “free” car, be sure to bring the 500+ billion dollar defense bill up which subsidizes theirs. The sum total of all State and Federal battery tax credits is probably <5 billion. Not a half million have sold (~10k ea.), and unlike the "national security" (subsidy) of oil, the EV tax-credit EXPIRES.

        Just considering how some people, I'm sure, would interpret your post.

        1. Good point, pjwood. I usually point out that California is incentivizing zero emissions vehicles. The state (community) wants me to drive a car that does not contribute to the neighborhood kids asthma, the retiree’s COPD, or the 15,000 premature deaths in California attributed to substandard air quality.

          These externalities are not paid for at the pump, or on the dealers lots.

  6. EV says:

    100% electric in anything other than a Tesla means you dont have the freedom to drive wherever you want, Volt is the perfect car for daily commutes, short to medium on all electric and then has a 300 mile gas tank for the long trips or extended commutes canceling the worrying range effect, and your driving in style compared to an ugly leaf

  7. Thomas J. Thias says:

    On February 28, 2012, when the National Lease Payment on the Chevy Volt EREV stood at $359.00 a month I published the Ally/US Bank Net Cost to Drive (NCD)Lease break out.

    Now as the Chevrolet National Lease payment for MY 2014 Now stands at $299.00 the argument that I posted then, now has more merit.

    Google “Volt NCD” 1st hit
    or-

    Link Goes to GM-Volt

    http://gm-volt.com/forum/showthread.php?11367

    Best-

    Thomas J. Thias

    -Reference: Chevy Volt MY2014 National Lease Payment- $299.00, at participating Chevy Dealers-
    MY Chevy Volt- $269.00, at participating Chevy Dealers-
    http://www.chevrolet.com/volt-electric-car.html

    1. Aaron says:

      How much for the Volt PHEV?

  8. Justin W. says:

    Leasing an EV is a fantastic option for those who don’t drive an insane number of miles each year like I do. Trying to purchase additional miles up front didn’t pencil out for me. The end cost was just too high. I generally recommend leasing EVs until we have a better idea of their long term reliability and the iPhone issue described above. Technology is evolving much faster with EVs than traditional vehicles and we are at a critical stage for mass adoption viability.

  9. scottf200 says:

    Leasing what a great way to have a perpetual “car payment” and extend your time until retirement. Not something we should be teaching our kids!

    1. Jay Cole says:

      I the same opinion as you Scott, but I’ve learned to keep that to myself (except for now, lol). For myself its a personal choice, I have bought all my cars.

      Explaining nothing – if you qualify to receive back the $7500, the BEST option is always buy an EV in September, flip that same EV 12 months later. Bar none. (well except for a Model S, lol)

    2. Mint says:

      An auto loan puts people in debt for the whole value of the car instead, which isn’t any better of a lesson.

      Leases shift risk to the manufacturer for a fairly minimal fee. You can still buy/finance your car at the end of your lease if you have the means to make that commitment and you like it.

      Leases are only bad if the manufacturer is ripping you off with high interest or fees.

    3. Nate says:

      You should compare your options. There isn’t one magic rule for all situations. If that were the case, we’d all be driving the same car.

      If you decide to get a new car, you have 3 choices of how to go about doing it.

      1. Paying 100% up front.

      2. Finance. Many people confuse this with buying.

      3. Lease.

      Before making a decision, gather all information and make the best choice. Compare the amortization table of the load for your best finance option vs. where you would be at with at your best lease rate. If finance rates are low, you may be able to lease or finance and come out ahead of the person who pays 100% up front, because you may be able to invest . A car is a depreciating asset, so it may be smarter to put your money if you can invest it at a higher rate.

      People who stick with one rule, and don’t compare there options, eventually pay to much at some point and don’t even realize it.

  10. @Scott – I used to feel the same way and with conventional leases that may be the case. But if you run the numbers, you’ll see that these low cost EV leases are a deal.

    Consider a scenario where you put the $300-400 per month (or more) you save into a savings or investment plan. That’s $11k -$15k. EV’s are almost certainly going to get cheaper over the next 3 year compared to their sibling ICEs.

    When prices are going up, it makes sense to buy. When prices are going down, it makes more sense to rent.