Why Leasing is the Right Choice for Today’s Plug-In Vehicles

4 years ago by Eric Loveday 18

Current $229 Lease Offer On 2012 New Prius PHV (click to enlarge to see fine print)

Old $229 Lease Offer On 2012 New Prius PHV (click to enlarge to see fine print)

Lease or buy?

Typically, a financial expert would recommend that you buy your next vehicle.  Though it may cost you more per month, buying usually costs less overall than leasing and you’re left with something to show for it at the end of your loan term.

That’s not quite the case though with today’s plug-in vehicles.  Some still have prohibitively expensive lease rates (think Honda Accord PHEV), but most electric vehicles (especially those with enough kWh in their battery packs to qualify for the full $7,500 tax credit) can be leased for around $199 (some for even less).

Honda Released This Graphic On The Competition And Leases

Honda Released This Graphic On The Competition And Leases

At current lease rates, the slight extra expense of electric vehicles can now be fully offset by fuel savings over an average lease term (36 months).  For example, a Nissan LEAF can be had for $199 per month for 36 months with $1,999 due at signing.  If you factor the down payment into the monthly rate, then its more like $255 per month.  If your current monthly fuel costs (for the gasser we’re assuming you own for the sake of this argument) are in the ballpark of $255, then the LEAF effectively costs you only the electricity it consumes.

Yes, $255 per month in fuel costs is significantly higher than average, so let’s say it’s $120 per month.  That effectively drops the LEAF’s monthly rate to $135 plus the cost of electricity (which, unfortunately, varies widely depending on where you live).  For most US drivers, it’ll cost $30 to $50 per month to “fuel” a LEAF.  Add that back in and the LEAF is at $165 to $185 per month.

Can you go out and find a comparable gasser for that $165 to $185 price?  Maybe.  What if you add in the monthly fuel costs?  What’s the monthly rate now?

What we’re trying to get at here is that no comparable gasser exists that is cheap enough (monthly lease rate) and fuel efficient enough (monthly fuel costs) to undercut the LEAF’s $165 to $185 per month (lease + fuel) price.

If there is one, we sure don’t know about it.

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18 responses to "Why Leasing is the Right Choice for Today’s Plug-In Vehicles"

  1. Anderlan says:

    That’s not a bad deal!
    Good buy in: $2k startup, $229/mo, for $8k total over 3 years.
    Good buy out: $16,960 for Prius Plugin with $36k.

    Only good in NY/NJ/CT. Expired in April. Drat.

    1. Anderlan says:

      errr…”Good buy out: $16,960 for Prius Plugin with ***36k miles***.”

  2. Spin says:

    The problem is with leasing for me is the 10 or 12 thousand mile cap.

    1. Nelson says:

      Which is why Honda FitEV unlimited mile lease, which include car insurance is so fantastic.

      NPNS!
      Volt#671

    2. Vin says:

      Try running the numbers with a payment that includes a 15K or 18K mile cap. The Focus Electric is about $0.10/mile more to increase the cap.

      Also – most folks seem to end up negotiating better lease terms than what is advertised, at least on the Focus Electric, Volt, and Leaf. Further, the analysis in this articles doesn’t include any state incentive, so if the numbers here look good to you, chances are you can do better.

      1. Mark says:

        +1 on state incentive. Just received my IL check for $3180 for a 2013 Nissan Leaf SV. State rebate is only available for a purchased vehicle (leases do not apply). This was the main deciding factor between lease vs buy.

    3. io says:

      Yup. The title of this article, and to a good extend its content too, are quite stupid as obviously there are plenty of situations where buying is preferable. High mileage is just one of them.

      I bought my Leaf, despite driving “only” 12~13kmiles/year before. Turns out that it’s so pleasant and cheap to drive, I end up using it more (driving to friends instead of the other way around, etc): this EV has actually traveled 20k in a just over 15 months, or almost 16k/y.
      4k/y in excess mileage would cost $50/month.

      So in my case, mileage + downpayment turns “199$/month” into 9k$ over 3 years — after incentives, that’s almost half the price of the vehicle new!

      Beyond 6+ years (and assuming lease prices and incentives remain as attractive), I could have leased and have nothing at the end, or, for the same cost overall, buy and keep the car.
      Whatever it will be worth then — 3k? 5k$? 7k$? — is my gain.
      I’ll most likely keep it for much longer anyway. Sure it won’t be the latest and greatest anymore, but so what? My needs are likely to be similar, so that free used car will fulfill them just like it does today. Plus, 0$/month is a pretty sweet deal.

      Easy decision, indeed.

  3. GeorgeS says:

    I did a lease on my Volt.

    However, I wish I had done a 2 year lease instead. Things change fast in EV land.

  4. pjwood says:

    Eric, for monthly gas costs to be “in the ballpark of $255”, you are assuming this hypothetical gas car delivers 12,000/36 months, or 333 miles per month. Right? That’s ($255/333mi), or 76.5 cents/mile.

    So, even at $4 gas, you are comparing the Leaf to a car getting (4/.765), or about 5 miles per gallon.

    I think it’s time you guys push fewer articles, or maybe focus more on content? Am I being rude, or constructive?

    1. GeorgeS says:

      don’t you mean 12000 miles/yr divided by 12=1000miles/mo

      1. pjwood says:

        Thanks, George. My haste. We’re up to a little over 15mpg, where I think there is still some point to make. That’s pretty far below average, considering the types of utility cars at that mpg offer, versus Volts, Leafs, etc. Average combined is what, 23-25mpg?

        1. GeorgeS says:

          LOL I was hesitant to post what I did as I have been making so many mistakes lately. (CRS flare-ups)

  5. Acevolt says:

    I just leased a Rav4EV with the advertised $4000 down and $299 per month. One thing these lease deals don’t advertise is the taxes. In California you have to pay sales tax on the Capitalized Cost which was $1650 for me. I also went with no money down (you have to pay sales tax on the money you put down) and unlimited mileage which was an extra $30/month. So for a $299 lease I ended up paying $488. I have the option of buying the car for $19,800 at the end of the three year lease.

    Also, I have seen gas Fiat 500’s advertised for $99 which is half what the electric version is.

  6. CJ says:

    I leased my 2013 Leaf S with Charger Pkg (6.6 KW Charger, quick-charge port & RearView Monitor) for $272 per month for 24 months, 12,000 miles per year.

    No money down just gave check for first months payment. Includes tax , title and other fees plus gap insurance. Turn in fee of about $350 if I don’t lease another Nissan.

    I am very happy. I am only driving about 600-800 miles per month so no worries on going over on miles. I am happy I went for 2 years so I can see what is on the market in Feb 2015.

    I did consider the Chevy Volt it was going to be $75 more per month for 36 months lease. ( It had a few more standard options on base Volt ). I have a truck as a back up for the Leaf but without second car or truck I would have bought the Volt or Prius plug-in.

    I did consider Prius plug-in but I would have needed to fly from Dallas to Baltimore to buy or have it shipped . I decided to go local with the Volt, though with my short 12 mile round trip commute to work the Prius plug-in would be a good choice.

  7. Aaron says:

    I got my Mitsubishi i-MiEV on the $0 down/$69 per month lease. Ain’t no gasser that even comes close. (2 year lease, 12K mileage per year.)

    While I don’t expect to come even close to that in my next EV when my lease expires, the money I’ve saved during these two years will make a huge difference.

  8. Gene says:

    The article seems wrongly titled. It seems to be about “Why Today’s Plug-In Vehicles are the Right Choice for Leasing”, and makes no real arguments about leasing vs. not leasing a plug-in vehicle. The fuel-cost-saving argument certainly applies to purchased vehicles as well.

    Whether or not leasing is the right choice seems situationally dependent (e.g. some folks need a lower monetary barrier to enter the market; some folks live in areas where batteries degrade rapidly). I felt my situation fit well with a purchase, and I suspect that 24 or even 36 months after I purchased the car I will be glad I don’t have to return it and start on payments anew.

  9. Nathan says:

    A lease offers better protection if depreciation is greater than expected. Considering how many of us believe battery costs could drop significantly and capacity will increase, what affect do you think this will have on cars 3-4 years down the road? That seems like a major reason people should consider the leasing option for a plug in vehicle. Next, not needing to worry about waiting for (or fully qualifying for) the tax credits. I’m surprised this article didn’t explain this.

  10. Nathan says:

    Three ways to ‘buy’ a car.
    1) Pay in full
    2) Finance
    3) Lease.
    Most people who say they prefer buying instead of leasing, but then they actually finance. They haven’t bought the car until the last payment is made. If you finance you should always compare your best deal for the same car on a lease. Factor in:

    –How much you’ll owe in x years, with each option. Compare amortization tables, and at lease end the residual.
    –How much you make in payments over those years for each option
    –How much you can earn in savings on the payment difference between the finance option vs. the lease option
    –If the car has tax credits, factor that in according to how much you can claim

    If you love the car, you can always buy it out (or refi it) at the end of the lease. If you don’t love it, but the residual is significantly less than the private party value, buy it out and sell it.
    If it didn’t hold its value, turn in the keys and enjoy not having to worry about being upside down.

    I’ve financed more times than I’ve leased. I leased one time on a car that ended up getting rear ended fairly bad, but did not end up being totaled. The insurer repaired correctly with all factory parts, I collected a diminished value claim, and was able to turn the car back in to Honda with no fees. If I would have purchased I would have had a hard time selling for what I owed. If anyone would have asked me if it had been in an accident, I would have needed to explain it and that affected the value. If it hadn’t have been for that accident, I would have bought the car out at the end of the lease. I was glad I leased though because it made it easier to move on from it.

    Even if you have the cash to buy for the full price up front you should still compare how it compares to finance/lease. If you can earn more on return it may make sense to put the money toward something that doesn’t depreciate. A lease isn’t always better. It isn’t always worse. It depends on the car and the programs. If you don’t compare options and believe that there is only one way to do it you honestly don’t know.