Nearly 80% Of New EVs Are Leased: Dealer Data

Tax credit rules heavily incentivize leasing for many models, leading to absurdly high leasing rates for EVs sold by traditional brands.

Hyundai Ioniq 5 N, New York City

Photo by: InsideEVs

Tim Levin

By: Tim Levin

Oct 16, 2024 at 3:00pm ET

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A huge majority of EVs bought at dealerships are leased, per Edmunds data.
The "leasing loophole" is a big driver of the trend.
It could lead to a huge amount of cheap, used EVs flooding the market in the coming years.

Leasing has swiftly taken over the electric-vehicle market. Nearly 80% of new EVs bought at dealerships are now leased, according to Edmunds data cited by The Wall Street Journal.

That’s up from 16% at the beginning of last year, per Edmunds. And it’s at least triple the industry average, which sits around 20%. One caveat: since we’re talking about EVs bought at dealerships, these figures exclude direct-to-consumer EV makers like Rivian, Lucid and (most importantly) Tesla. Tesla tends to push leases less than many conventional brands, too. Since it makes the three best-selling EVs on sale, the full-market figure is likely considerably less than 80%.

Still, the rise of leasing is among the strangest dynamics in today’s EV market, and the long-term impacts could be immense.

Why Are So Many EVs Leased?

A big driver of this trend is the so-called “leasing loophole,” which allows any new EV to qualify for the $7,500 federal EV incentive if it’s leased rather than bought. To qualify for that discount, EVs that are bought outright must be assembled in North America, meet increasingly stringent battery-sourcing restrictions and fall under pricing caps. Buyers’ incomes can’t be too high, either.

Leasing lets buyers skirt those rules to unlock a seriously discounted monthly payment. Consequently, EV leasing rates started rising quickly once revised EV tax credit policies kicked in in late 2022.

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Moreover, in a time of less-intense demand for EVs, leasing has proved to be an effective method for automakers to move more cars. On top of the $7,500 incentive, carmakers have been lathering on additional discounts, making some of the deals too good to resist. For example, you can get a base-model Hyundai Ioniq 5 for $159 a month with $3,999 down. A Kia Niro EV can be had for $149 per month for 24 months with $3,999 due at signing.

Those kinds of EV lease deals are all over the place right now. Three InsideEVs staffers have jumped on cheap leases in just the last few months, for the Kia EV6, Chevrolet Blazer EV and Chevy Equinox EV.

There are some other reasons leases may be attractive to EV buyers in particular. EV selection and technology is still improving fast, so the ability to upgrade to a newer model quickly is a key benefit. Those new to EVs likely see leasing as a way low-commitment way to dip their toes into the water. Electric cars have displayed faster-than-average rates of depreciation, and leasing is a way to mitigate that.

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What Does This All Mean?

Leasing probably can't keep driving EV sales indefinitely. And it’ll be interesting to see what impact the leasing boom has on the EV market in the years to come. As all these two- or three-year leases end, we’ll see a flood of lightly used EVs hit the secondhand market. That may be a boon for any cash-conscious shoppers looking for a deal. But it could also wreak havoc on already precarious residual values.

Contact the author: tim.levin@insideevs.com