I know the conventional wisdom for leasing vs. buying, but are the economics of an electric car significantly different than other vehicles?
asked Dec 7, 2016 at 15:56
NL - Apologize to MonicaNL - Apologize to Monica
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5My wife bought an electric (Chevy Volt) a few months ago, and it was hard for us to understand completely what it would be like until we actually had the car. Specifically, she can charge fast and for free at work (which is great!), but at home charging is a slow process unless you buy a special high-speed charger. If you live in a cold climate, you may also not know how practical the car will be in the winter until you actually drive it for a winter. These uncertainties and unknowns may improve the case for leasing.– user13722Dec 7, 2016 at 20:40
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2The new Volt is rated to charge in about 13 hours from a 120VAC socket (in contrast to 4.5 hours @ 220VAC). If you normally leave your car parked that long overnight, then the slow charging isn't really a problem. This is in contrast to a full EV, like the Nissan Leaf that takes around 20 hours for a full charge from 120VAC.– JohnnyDec 8, 2016 at 0:32
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2I think this depends on what kind of person you are. If you, like me, buy a car and keep it for twenty years until it falls apart, then that means doing your own maintenance. In that area, electric cars are somewhat of an unknown for me. Can I even do my own maintenance, or is it all complicated electronics that I'll have to pay the dealer to do? How long will the batteries last? Currently, my car (a 99 diesel VW Jetta) is nearly 18 years old (which I bought used), and there are no 18 year old electric cars. In which case I would lease.– user48477Dec 8, 2016 at 3:22
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4@Johnny: It seems silly not to install a proper charging socket. The cost should be tiny compared to the cost of the vehicle and it makes the difference between charging being convenient and being an issue that keeps you from getting where you're going when you need to.– R.. GitHub STOP HELPING ICEDec 8, 2016 at 4:34
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3@R.. - That really depends on where you live. I have a 120VAC utility outlet in my condo garage, when I talked to an electrician, he estimated around $5K to run 220VAC from my meter to the garage (which means running under a sidewalk and through a concrete wall), possibly higher depending on HOA requirements. That's why I won't get an EV, but am contemplating getting a Volt - even if it's not fully charged, it's always ready to go.– JohnnyDec 8, 2016 at 5:03
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6 Answers
There are some who argue that you should lease an electric car. These factors are in addition to all the normal pros and cons of leasing vs. buying.
The technology is still new and is advancing rapidly. In 2-3 years, the newer model may have significantly improved features, range, and efficiency, as well as lower prices. If you are the type of person to upgrade regularly to the latest and greatest, leasing can make it a smoother transition.
It is hard to predict the depreciation of the vehicles. This is both because of the above factors, but also because these kinds of cars are newer and so the statistical models used to predict their future values are less refined. The models for predicting gas car prices have been honed for decades. EV Manufacturers have in the past made some mistakes in their residual value estimations.
When you lease a car, you get essentially an option to buy the car at the future predicted residual value. If, at the end of the lease, the market value of the car is higher than the residual value, you can purchase the car at the predetermined price, making yourself some extra money. If the value is lower than the residual, you can return the car or renegotiate.
I know a relatively large number of electric vehicle owners. Most or all of the ones who got the vehicle new leased it. The rest bought used vehicles coming off lease, which can also be a good deal.
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Yeah for something like this I agree a lease would be best option for the same reasons - technological advances in this area should increase greatly in the next 10 years.– RossDec 7, 2016 at 16:37
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2+1 for a well-reasoned response. I'd always thought those first 3 years were the most costly, and buying a post leased car made the most sense. Dec 7, 2016 at 17:06
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13Some states have tax incentives for buying or leasing an EV. Georgia, for example, recently ended a $5000 tax credit which was granted whether you purchased or leased a new electric vehicle. When you factor in this credit, the amount the government pays you back could be close to 50% of the cost of the lease! If you lease a Leaf at $300/month for 36 months, after the $5000 tax credit you get the car for three years for $6000. That's a much better deal than subtracting $5000 from the purchase price of an overpriced EV. You get the same $5000 with a smaller investment– DanielDec 7, 2016 at 19:12
Electric does make a difference when considering whether to lease or buy. The make/model is something to consider. The state you live in also makes a difference.
If you are purchasing a small electric compliance car (like the Fiat 500e), leasing is almost always a better deal. These cars are often only available in certain states (California and Oregon), and the lease deals available are very enticing. For example, the Fiat 500e is often available at well under $100/mo in a three-year lease with $0 down, while purchasing it would cost far more ($30k, minus credits/rebates = $20k), even when considering the residual value.
If you want to own a Tesla Model S, I recommend purchasing a used car -- the market is somewhat flooded with used Teslas because some owners like to upgrade to the latest and greatest features and take a pretty big loss on their "old" Tesla. You can save a lot of money on a pre-owned Model S with relatively low miles, and the battery packs have been holding up well.
If you have your heart set on a new Model S, I would treat it like any other vehicle and do the comparison of lease vs buy. One thing to keep in mind that buying a Model S before the end of 2016 will grandfather you into the free supercharging for life, which makes the car more valuable in the future.
Right now (2016/2017) there is a $7500 federal tax credit when buying an electric vehicle. If you lease, the leasing company gets the credit, not you. The cost of the lease should indirectly reflect this credit, however.
Some states have additional incentives. California has a $2500 rebate, for example, that you can receive even if you lease the vehicle.
To summarize: a small compliance car often has very good reasons to lease. An expensive luxury car like the Tesla can be looked at like any other lease vs buy decision, and buying a used Model S may save the most money.
I would like to add that from my own research, a pro to leasing over buying a new vehicle would be that with the lease the entire 7,500 federal incentive is applied directly to the lease, or so they say. If you buy a new car you get a 7,500 federal tax incentive also but if you dont have 7,500 bucks in taxes this wont be as much value. It doesn't sense to me to buy used since you dont get the tax incentive and also if you're in california the 2,500 rebate only applies to buying new or leasing 30 month or longer.
I have coworker who reported that he leased a Nissan Leaf from 2013-2016 and was offered $4000 off the contracted purchase price at the end of the lease due to a glut of other lessees turning in for a lease on the newest model with greater range.
It's not clear that this experience will be repeated by others three years from now, but there is enough uncertainty in the future electric car market that it's quite possible to have faster depreciation on a new vehicle than you might otherwise expect based on experience with conventional internal combustion powered vehicles. Leasing will remove that uncertainty.
Purchasing a lease-return can also offer great value. I looked at the price for a lease return + a new battery with the extended range, and it was still significantly cheaper than buying a completely new vehicle.
answered Dec 7, 2016 at 18:23
NL - Apologize to MonicaNL - Apologize to Monica
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1One thing to keep in mind with lease returns on EVs is that the battery packs may have degraded significantly. This is especially true on the Nissan Leaf, which doesn't have an active battery cooling system like most other EVs. I wouldn't want to buy a used Leaf from Arizona, for example, because extreme weather will have affected the battery pack.– RockyDec 8, 2016 at 18:07
The good news about maintenance is that there's much less scheduled maintenance because the cars are mechanically much simpler. See the official service schedule. Most of it is just "rotate tires / replace cabin air filter". The brake and suspension systems are very similar to those of a normal car and require comparable maintenance. The bad news is the battery will decay over time and is a major component of the cost of the car. From that link:
In the UK, the LEAF’s standard battery capacity loss warranty is for 60,000 miles or five years
So you should factor your warrantied battery lifetime into the depreciation calculation. I don't think there are going to be many ten- or twenty- year old electric cars from the current crop in 2030 or 2040 as they're still improving dramatically year-on-year.
(Slightly too long for a comment, slightly too short for a proper answer)
Edit after six years: it seems electric cars have held both their battery lifetimes and their residual values pretty well, helped by a shortage of new cars over the coronavirus period. The Nissan Leaf was one of the first brands to appear in the UK; here's a 2011 (eleven years old!) one selling for about a quarter of its new price. The seller claims "eight bars left" (out of 12) on the battery, representing about 60% of the original range.
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I have read that the Chevy Bolt, for example, has been seen to degrade maybe 6% - 8% over 100000 miles, from some sources online. Do you think one would really want to trade in a car because it has only around 225 mile range instead of the original 250 or so??– NoBugsAug 12, 2022 at 7:44
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@NoBugs Note that this comment was made six years ago, the technology has improved, and the values of used cars have soared due to chip shortages!– pjc50Aug 12, 2022 at 8:00
I might be missing something, but I always understood that leasing is about managing cash-flow in a business. You have a fixed monthly out-going as opposed to an up-front payment. My accountant (here in Germany) recommended: pay cash, take a loan (often the manufactures offer good rates) or lease - in that order. The leasing company has to raise the cash from somewhere and they don't want to make a loss on the deal. They will probably know better than I how to manage that and will therefore be calculating in the projected resale value at the end of the leasing period. I can't see how an electric car would make any difference here. These people are probably better informed about the resale value of any type of car than I am.
My feeling is to buy using a loan from the manufacturer. The rates are often good and I have also got good deals on insurance as a part of that package. Here in Germany the sales tax (VAT) can be immediately claimed back in full when the loan deal is signed.
