5 Reasons To Lease, Not Buy, Your Next Electric Car

White 2018 Nissan LEAF driving

APR 11 2018 BY STEVEN LOVEDAY 34

Though leasing isn’t the best choice for every car buyer, it should be a serious consideration for those planning on investing in an electric car.

The above statement may seem a bit counterintuitive since we often talk about the fact that the U.S. federal EV rebate doesn’t necessarily benefit lessees. However, we’ll touch more on how that works later.

Just keep in mind that the rebate won’t be available forever and many people aren’t even able to qualify for it at tax time. Counting on as much as $7,500 many months after your car purchase – only to find out that you can’t partake – is not a situation anyone would enjoy dealing with.

READ ALSO: TOP 7 PLUG-IN CARS LISTED BY PRICE PER MILE OF ELECTRIC RANGE

According to Bloomberg New Energy Finance, a whopping 80 percent of new electric cars are leased. This excludes Tesla since lease data is unavailable and most people buy. Compare this number to only 30 percent for new car sales as a whole. So, why are people leasing EVs and why might it be a solid choice? Below are five reasons, in no particular order of importance.


 

Chevrolet Bolt

Bank on manufacturer and dealer incentives

Automakers offer plenty of cheap lease deals and special incentives that change every month. Some include really low monthly payments and others feature a low down payment. Still, others offer special perks to returning lessees (lease loyalty) or competitor discounts (if you return your car and choose a new manufacturer. So, if you have the option to secure a new deal every few years, it may be advantageous.


 

Orange and Black BMW i3 sport model

Take advantage of upgrades

Sure, if you’re leasing a current ICE car and the new model gets standard Apple CarPlay, it’s nice to be able to move up to that model sooner. This is also true of electric cars, but in addition, upgrades to range, battery tech, efficiency, and charging technology can be a much more substantial benefit.

EVs are a fairly new technology and are constantly (and quickly) evolving. Rather than getting stuck in a car with a small range and lack of features, leasing allows you to move up to the automaker’s current offering more often.


 

Steer clear of depreciation

As soon as you drive any car off the dealer lot, you’re flushing money down the toilet. This is even more true for most electric cars. Data from reputable car review websites like Edmunds cites an average of over 50 percent depreciation in the first year of EV ownership.

Even though these cars depreciate quickly, dealers tend to “play with the numbers” so that leasing is less expensive. As a side note, since we’re talking about depreciation, buying a used EV is another stellar consideration. The huge depreciation means that you can get many used electric cars on the cheap.


 

White 2018 Nissan LEAF driving

First year models and new technology aren’t necessarily trouble-free

As far as we’re concerned, EVs cost significantly less to maintain, and encounter fewer problems than their ICE counterparts. However, for many automakers, this tech is brand new. Many of these cars haven’t been on the road long enough for us to have a clear picture of what the future may bring. There are also concerns about battery degradation (especially related to some brands over others), and the huge costs associated with battery replacement.

EV warranties are different from traditional ICE car warranties, mostly due to the battery. If you lease an EV for two or three years, you shouldn’t have to worry about any out-of-warranty issues.


 

2017 Chrysler Pacifica Hybrid

The U.S. federal EV tax credit can be a lessee’s friend

Yes, we are well aware (as noted above) that the consumer can’t take advantage of the tax credit when leasing. This is also true of many state and local credits. However, there’s a catch.

When you buy an EV, the tax credit is not automatic, nor is it immediate. You have to qualify for the tax credit based on your individual financial situation and then wait until tax time to get it. It’s a sticky situation, and we don’t claim to be tax experts. So, you should have a long conversation with your tax advisor.

This means if you finance an EV (and they’re definitely considerably more expensive than gas-powered cars), you’ll be financing the full amount up front, which means a high monthly payment. Then, you wait as much as a year or more (depending on when you made the transaction) to get the potential credit on your taxes. Many people simply can’t fit a large payment in their budget.

Below is a napkin-math example:

Financing a $40,000 car over six years, even at zero-percent, approaches a whopping $700 per month. Obviously, this doesn’t account for taxes, upgrades, down payment, or your credit rating. These are all factors that can push the payment up or down to some degree. But still, with automakers advertising crazy lease prices (usually for ICE cars) of less than $200 per month, $700 seems nuts!

Though you don’t personally get most tax credits when you lease, the leasing company/lender benefits from the incentives. In many instances, this can positively impact the lease deal. It also gives you some extra bargaining power, since you’re well aware that they’ll be getting a nice kickback from your deal.

To top it off, you won’t have to worry about qualifying for the credit or waiting until tax time to benefit from it.  Also, you won’t have to pay some $700 per month for six years on a car that has depreciated hugely and may sell for pennies on the used market.


 

What do you think?

What are your experiences with leasing or purchasing an EV? If you purchased, were you able to get the full credit? How did the tax incentive impact your lease deal? Which of the above reasons do you feel is most compelling?

Share your experiences in the comment section below or start a thread on our Forum so that we can all learn from one another’s insight and experiences.

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34 Comments on "5 Reasons To Lease, Not Buy, Your Next Electric Car"

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gary
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gary

The first half of the article tend to call the Federal incentive a rebate, which it is not. The second part correctly identifies it as a Tax Credit.

Re: Leasing and the Tax Credit
1) If you will qualify for the entire amount, you can adjust your withholding to get a bigger paycheck every month instead of waiting to get a refund when you file. Some calculation is needed to know how much to adjust, and you need to remember to re-adjust back to your “normal” level.
2) Some people on forums don’t seem to understand that the way the Tax Credit is structured, the leasing company is entitled to it. If the entire $7,500 is not shown as a CCR (Capitalized Cost Reduction), they scream about the leasing company “STEALING MY TAX CREDIT!!!!”. The lease deal is often structured in ways that reduces the monthly payment by adjusting other factors in the lease structure – this is often not beneficial for those looking for a way purchase an EV and realize the entire Tax Credit that they would otherwise not be entitled to.

Ziv
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Ziv

I leased my Volt in 2013 because I wasn’t entirely certain the packs would last 8 years with acceptable remaining levels of AER. Criswell in Maryland structured the lease so that the credit worked in my favor and reduced the monthly payment by a large amount. Pretty much dollar for dollar I got the $7500 credit.
By 2016 it was pretty obvious my earlier concerns were groundless so I bought out the lease at a number that was substantially below what US Bank claimed they would need to get. I don’t regret leasing at all.

SJC
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SJC

With the tax credit going to the bank, the lease should be very favorable.

Spunkie
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Spunkie

I have leased two electric vehicles and they are the only leases I have ever had in my 30 years of car ownership. First lease was a Smart EV, loved it for what it was, and only cost $120 a month. When that lease ended I opted for a Ford Focus EV. That’s $175 a month. In both cases all the credits Fed and state were taken by the dealers and taken off the top of the price to me keeping my lease cost really low. The technology is changing fast and I wanted to experience an EV without getting stuck with it if it did not work out. It is working for me and my next cycle comes due in 2020. By then I may consider purchasing if reasonable price parity happens and battery replacement cost if $5K or less. If those conditions are not met then leasing may still be an option for one more cycle. I agree with Ziv, I don’t regret leasing at all even though I never considered it for an ICE car.

John
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John

New CA HOA sticker rule means sticker is only good for 3.x years, making lease the only valid option if you cares about carpool lane access after 2019.

Mikael
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Mikael

Why are there 6 oversized pictures in this article that has absolutely no function what so ever?

Why are there so many oversized pictures at all? Make them small and integrated into the text, if I want to see big pictures I can click them myself.

Mark.ca
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Mark.ca

I have a beef with your depreciation claim. I stated many time on this forum that for most ev this depreciation is non existent. I know the eGolf so i will use it as an exemple. On cars.com, in LA right now you can buy a blue loaded eGolf for $14888. That was about $34k at that time in 2015. The person that leased this car got at least $10k in credits and rebates which you need to account for in your calculations as it’s money in your pocket. So you have a real price of $24k and a rv of 14888 resulting in a 3 year depreciation of under 40%. Now compare that to any ice and realize how great of a deal this is!
My personal example: base eGolf, msrp $28k, sale price $23600, got $10450 in credits, $11600 end of lease buy option, $4200 in total lease payments===> 27% real depreciation. Even at full msrp the real depreciation is only about 36%.
There are other very legit reasons to lease but depreciation i think is not one.

Tom
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Tom

To add to what you are saying, the 2017 Leaf was getting $20,000 right off the top in some cases. The federal tax credit, CA tax credit, then $10,000 discount off a base price of $30,000. The price of a used 2016/2017 Leaf has effectively no depreciation at all when measured against what many paid for the vehicle. I see used 2016s for about $12-15,000.

ERIC LIGHT
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ERIC LIGHT

It’s funny. The one EV you can’t lease is pictured in the article. Chrysler will not lease the Pacifica Hybrid and take the incentive. It is a buy only which is silly on their end. Huge missed opportunity.

vin
Guest

Chrysler has been advertising a lease offer for the Pacifica Hybrid since last year. I’ve been tracking it. Currently they are offering a Touring + for $435/mo + tax, $3649 + tax+ lic at signing. Just go to their website.

I’ve also found three dealers this week that are publishing lease offers online. Links are on my blog (click on my name to get there).

You are correct, I believe, that the fed tax credit doesn’t seem to be applied, which for most folks makes it more attractive to buy rather than lease.

zzzzzzzzzz
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zzzzzzzzzz

ERIC LIGHT,

There are third party leases. Some credit unions do it, even if it is more obscure product than regular autoloan. You would better shop for best financing/leasing deal anyway instead of just taking what a dealer offers for extra markup.

F150 Brian
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F150 Brian

In Ontario Canada, the rebate applies to leasing too (up to $14K for a 3 year lease!)
Residual values have been set accordingly so the lease is still more per month than on a 5 year finance plan.

Here are some highlights on the program which was updated LAST WEEK (sorry Tesla Model S or X or loaded Model 3 buyers, no rebate for you):

Incentives of up to $14,000 will be provided for eligible Hydrogen Fuel Cell Vehicles (HFCVs);
Incentives for eligible battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) are now determined based on each vehicle’s all-electric range and seating capacity. The updated incentives vary from $5,000 to $14,000;
Incentives will no longer be provided for PHEVs or BEVs with a Manufacturer’s Suggested Retail Price (MSRP) of $75,000 or more; and
Incentives will no longer be provided for PHEVs or BEVs leased for less than three years.

F150 Brian
Guest
F150 Brian

Oh, and this is a rebate in Ontario, processing started at the time of purchase / lease, independent of tax status

Re-Volted
Guest
Re-Volted

Question…. I get that there’s probably a financial penalty for turning in a lease early, but what about trading up for a new GM lease way early? Ads talk about current leasees coming in to trade, but does that need to happen near the end, or does it matter?
My Volt is a great car that seems to be holding value fairly well, but I don’t need the ICE, so Bolt makes sense.
Also, if the price of EVs does fall, that impacts depreciation, making lease deals safer than buying. Chrysler PT Cruiser screwed me on that one.

William
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William

There are more options available to those currently in an existing lease, other than “turning in a lease early”, and the obvious “trade up”.

Check out Lease Trader.com, among some other interesting and compelling options, currently available to those looking for a better vehicle to fit their particular needs.

Windbourne
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Windbourne

Tesla is the ONLY car I would buy. All others would be better to lease. The reason is that Tesla’s are made for easy updating, and more importantly, tesla does.
The other EVs are far too limited, and do not offer enough value for the $.

Joy
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Joy

You can lease a Volt in the “socialist paradise” of California this month for around $205-215 per month (including taxes, license, etc) with no down if you own an Asian car. On top of that you get a $1500-3500 CVRP state rebate (depending on your income) and another $500 from your utility company. This could bring your monthly payment down effectively to around $95. No way buying is worth it versus getting such a lease deal given how the tech is changing every year. A lot of manufacturers pay big bonuses to Cali dealers who lease or sell above a set quota of EVs to help meet CARB requirements.

Nick
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Nick

Socialist paradise? I guess I’ve not kept up with the news! Time to move to California!

California does have all the good EV deals due to CARB, but the income inequality is unreal.

God/Bacardi
Guest
God/Bacardi

Don’t even need an Asian car, you just need an Asian lease statement from someone in your state, you say you live there and you get the discount…

Dan
Guest
Dan

I paid off 5 year’s car loan just recently. Received my title yesterday. Not going to buy another car for 10 years. Too much compromise from what EV market can offer anyway right now anyway. Expect good offerings in 2020~2025 which may meet my minimum requirements.

Wraithnot
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Wraithnot
We financed a 2013 Tesla Model S and leased a 2014 BMW i3 BEV. I’ve been very happy with both decisions. The Model S has been our primary vehicle for over 5 years and has 110,240 miles at the moment. This kind of mileage would have incurred some monstrous penalties if we had leased the car. On the other hand, the BMW i3 was my wife’s commuter car and ended up way under the mileage limit when we returned it to the BMW dealer late last year. I figured it would be foolish to buy the BMW because I thought the 81 mile range would make it obsolete by the time the lease was up and I assumed the car would be worth much less than the residual value on the lease. But the Model S is now paid off and will probably remain our primary road trip vehicle until the unlimited mile battery and drive unit warranty is up in 2021. And I bet we’ll keep the Model 3 that replaced the BMW i3 well past the time I part ways with the Model S. The tl;dr version is that how long you plan to keep the car and… Read more »
a-kindred-soul
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a-kindred-soul

I bought a second hand Kia Soul EV in France. It was one year old and costed € 18.750. The depreciation after that seems zero, because I can still sell it for that price and it is now 1,5 years later.

I’m happy and this beats every lease option. The only negative point, of course, is that I’m stuck with a 27 kWh (usable) battery. However, since more and more fast chargers come online, my car gets more practical with time.

God/Bacardi
Guest
God/Bacardi

There are always “good” leases and there are “bad” leases…

In addition to PHEVs, the Vette has best lease its possibly ever had since allowing their captive lender of GMF to lease them (they usually punt leasing to U.S. Bank which often requires 48 month long out of warranty leases to be remotely affordable)…Vette, if you qualify for everything, the dealers includes some “flex cash” and you go for a base, $0 out of pocket in which the first month payment is absorbed to the remaining 35, you can find $590/mo (or less) including L.A. County tax…

400hp Infiniti Red Sports are $0 down $450-ish/mo

Hellcats are $650-ish/mo…

PHEVfan
Guest
PHEVfan

You guys just keep on leasing. You are paying the depreciation for those like me who buy used 2 years later. My ’15 PHEV bought in 2017 fresh off a lease was 50% of its new price.

Timmy
Guest
Timmy

On my third Leaf lease, and it has the best terms of all (after incentives): a 2017 SV with quick charging for effectively nothing down+$99/month. There are counties in CA (San Juaquin, eg) where a low-income resident could have leased this same vehicle for free, or even *made* a few $ last year. (The Air District was offering a $3,000 cash rebate, the state $4,500 for low-income, PG&E $500, and Nissan was trying to empty their lots.)

William
Guest
William

My 2016 Leaf SV Lease is effectively a total of $99.00 a month, for 3yr/45k miles. $1,600. down for the extra 9 k miles over the typical 36k Lease. I hope the new 2018 Leaf eventually gets down to somewhere in this price range next year, when I return my Lease.

Thanks to Vinny at http://ev-vin.blogspot.com/?m=1

You can save a lot on EV Leasing, with a little research.

lungdistance
Guest
lungdistance

I have an extreme commute. Distance is long enough for most EVs on the market (2017+ MY EVs, BMW i3 REX and Teslas), but way too long for a lease. I’m not even sure if a dealer will negotiate my yearly driving into a lease. 24,000 + miles.

Leasing seems to not be an option. I’d love to though. Until then, it’s CPO or just buy.

TheLostPetrol
Guest
TheLostPetrol

“Financing a $40,000 car over six years, even at zero-percent, approaches a whopping $700 per month.”

When I divide 40,000 dollars by 72 months I get 555 dollars per month. What am I doing wrong?

Benjamin
Guest
Benjamin

HOV stickers expire after 3 or 4 years without renewal, at least in California.