Update: A California study* has found that “71% of the sample of 3,800 PEV owners who acquired their car after February 2012 buy the car and only 29% lease it. Out of the three main models, Volt owners have the highest lease share of 38%, the Leaf lease share is 31% and the Plug-in Prius lease share is 18%.”
This is probably something that crosses the minds of most people looking to go electric — “Should I buy or lease an electric car?” I’ve thought about it many times, and I’ve come to the conclusion that I would lease one, but I’d love to receive more feedback on the pros and cons of buying versus leasing if you have some to offer.
(This image is available for republishing and even modification under a CC BY-SA license, with the key requirement being that credit be given to Zachary Shahan / EV Obsession / CleanTechnica, and that those links not be removed.)
The thing that triggered this article was actually a comment from a redditor on why he leases his Chevy Volt: “I hate owning cars vs leasing. (that’s my preference though) To me, I buy things that appreciate in value and rent/lease things that depreciate. (I know that doesn’t apply to everything, but you get my point.)”
That sounds logical. So, that’s the first reason on my list of 4 reasons to lease rather than buy an electric car, but check out the remaining 3 and the big retort, and then tell me if you think I’m an idiot or if you think my conclusion makes sense.
4 Reasons To Lease Your Electric Car
- Cars depreciate in value rather fast, especially electric cars. So, unless you plan to keep your car for a while before selling it, leasing the car rather than buying it might be a smarter move.
- Electric car batteries are coming down in price fast, and so are electric cars as a whole. In two to three years, you might be able to get a much better deal on an electric car, so leasing until then seems like a pretty good idea.
- Electric car batteries and overall electric car range are projected to get much better within the coming few years. Again, you might get a lot more car for the money if you wait two to three years to buy, and simply lease until then.
- Tesla is supposed to be coming out with an “affordable” electric car with at least 200 miles of range by 2017. Don’t hold off on going electric until then(!), but maybe save your money for that one. (Of course, this is assuming you aren’t in the market for the Model S or Model X.)
1 Reason To Buy Your Electric Car
But, wait a second, when I do some math, I notice that the 3-year savings from leasing rather than buying aren’t that big, and I’d actually spend more money leasing over the course of 5 years.
If I was in the market for a Nissan Leaf, even if I didn’t pay for it all up front but financed and paid it off over the course of 60 months (5 years), the price would come to $30,360 (before the $7,500 federal tax credit). At the 39-month leasing rate provided next to that same quote ($583 a month), I’d spend $30,360 leasing the car in under 52 months (about 4¼ years). Unless I really don’t want to drive the same car for 4 years, why in the world would I lease the car rather than buy it?
I Would Lease
Going against my tendency to buy rather than lease, I would actually lease in this case for a few reasons:
- I think that electric cars will improve enough in the next few years that I’d want to upgrade in two or three years’ time.
- Assuming the cars do improve a lot and costs continue to come down, I think it’ll be hard to get much money back for a used, 2013 or 2014 electric car.
- We are currently a 0-car family. We live in the city center of a fairly large European city, so we have almost no need for a car (ever). If we moved and did decide a car would be useful, I definitely don’t think we’d get two — we both love bicycling for transportation, and we’re cool riding transit (I actually love it). So, if we decided after two or three years that we wanted to ditch the car again, it seems we’d be better off financially if we leased than if we tried to get our money back on a used EV.
However, that said, it would be quite a tough decision to lease rather than buy when I’d pay the same amount leasing in just about 4 years as I’d pay buying.
If I’m missing something here, please clue me in — I’ve never given much consideration to leasing in the past, since I’ve always thought it made much more sense to eventually own what you are paying for.
*The study noted in the update is: “Studying the PEV Market in California: Comparing the PEV, PHEV and Hybrid Markets.”
I tell people never buy an electric car, Lease it. They change so fast and prices have been dropping. Some batteries lose capacity very quickly but not fast enough to get replaced under warranty. So until we have 5-10 years of stable batteries and designs we should lease.
A perfect example was the 2013 LEAF. It was $8K less than 2011-12 models, had a twice as fast on board charger 6.6kW vs older 3.3kW. Plus the original batteries lost capacity very fast. They even have a new Heat Tolerant battery (Lizard). Plus an even more efficient Heater/Air Cond heat pump.
Only a Tesla could be the exception to the LEASE rule since they are so far ahead of EVeryone. Always gets the Super Charging option on the S60 and maybe GEN III. Even a few trips a year will pay off.
The decision of whether to buy or lease depends on several variables.
Does the vehicle have a good warranty that covers both car and battery?
Does the lease agreement allow you to turn in the car before the end of the lease without a large penalty?
Will the lease payments be lower than the loan payments if you financed the car over the same time period as the lease?
If the lease payments are lower, will the amount of money saved by leasing exceed the projected trade-in value of the car at the end of the lease period?
There are other factors to consider, but in my opinion, the last question would determine whether I buy or lease. If payments on a 36 month lease are $50 per month lower than the payments on a 36 month loan/finance, I would only save $1800 on the lease. Most three year old electric vehicles will be worth much more than $1800, so buying would make more sense. If you decide that you want a new, improved car, your can trade your current car in on the new one. The trade-in value would exceed the amount you would have saved by leasing, which saves you money.
If you are leasing a vehicle, you are still bound to that vehicle for the duration of the lease. If a new version comes out that is less expensive, better equipped, and more advanced, you will have to pay a large penalty to return your vehicle and lease/buy the newer version. If you have financed that same vehicle, you will use it as a trade-in. The difference between the loan payoff and the trade-in value usually results in a similar loss. In this situation, the advantage between buying and leasing will depend on the details of the lease or loan agreement and the trade-in value of the car. It is a toss up as to which would come out ahead.
I rarely find lease deals that are better than purchasing, but I usually keep cars several years. For me, it just doesn’t make sense to make three or four years of payments, then just give the car back to the dealer and have to find another car. I like knowing that I will have some equity in my car at the end of the finance period, and that I can make that last payment and still have a vehicle to drive.
As with any buy vs. lease decision, it’s basically a question of how long you want to keep the car. If you want to keep it a long time, you buy it. If you want to change cars every few years, you lease it.
All the rest of the factors are really questions of *how long you want to hold on to the car*. If technology is moving fast, that’s a reason to change cars every few years, for example.
Way to boil it down to its essence.
As with any buy vs. lease decision, it’s basically a question of how long you want to keep the car. If you want to keep it a long time, you buy it. If you want to change cars every few years, you lease it.
All the rest of the factors are really questions of *how long you want to hold on to the car*. If technology is moving fast, that’s a reason to change cars every few years, for example.
Assuming a $30,000 car. I think about it in terms of costs for the vehicle per year. An electric car lease in the U.S., depending on the kWh of battery, will include the $7,500 tax credit (max). Let’s keep it easy math and say that a lease will be $300/month (or $3,600/year). At this rate, the car is costing you $10,800 over three years, usually maintenance included but before gas, etc. If you buy, let’s say your car payment is $500/month. You’re at $18,000 in three years – but you get the $7,500 at tax time in year one so you’re at $10,500 in three years (or $3,500/yr). You still have another $12,000 to pay, so years 4, 5, and 6 your $4k/year. If you compare at 3 years, buying is $300 less than leasing. If you compare at 6 years, buying is $12k more – but, assuming you leased another vehicle at $10,800 over three years, at 6 years buying will cost you $1,200 more overall…. but you have a car that you can sell – whereas with leasing, you get nothing. With buying, you also don’t have to worry about over mileage. I think the best formula, assuming you buy a decent car, is to own a vehicle for 6 years – take good care of it, and sell while value is still relatively high and maintenance issues haven’t come up.