Leasing Versus Purchasing an Electric Car
Thinking about a new electric car, but not sure where to begin? After considering what type of electric vehicle makes sense for your needs, we’d suggest deciding whether you want to purchase or lease your new plug-in vehicle.
Leasing cars is more popular than ever - currently about 30% of new vehicles are leased. Plug-in vehicle leasing is even more prevalent, claiming almost half of all new Vermont electric vehicle registrations in the first quarter of 2020. There are several benefits to leasing plug-in vehicles:
- Deals – the federal income tax credits for plug-in vehicle purchases can be rolled into the lease arrangement, greatly simplifying the ability of consumers and businesses to benefit from this program. Many automakers also offer additional incentives to further reduce the price for special lease deals.
- Depreciation – The plug-in vehicle market is rapidly developing as more models come to market, battery range increases, and other improvements are made to the vehicles. Leasing allows drivers to try out an EV for their household for a few years without the risk of higher depreciation than expected as technology evolves. This is especially true for all-electric vehicle models with less than 200 miles of range.
- Maintenance – Leasing a vehicle for 2-4 years means that in most cases any major maintenance issues would be covered by manufacturer warranties.
These are great benefits and have persuaded many electric car purchasers to lease their vehicles. On the other hand, there are some drawbacks: you may end up paying more out of pocket for a lease than purchasing and owning a new car for many years. Also, if you travel well over 12,000 miles a year in your car you may be better off purchasing than paying additional mileage fees. Leasing typically sets an annual cap on miles of 10,000-15,000 miles depending on the lease. Also, the leased vehicle needs to be returned in good condition at the end of the term, so if you have kids or pets then you’ll want to keep this in mind – we recommend seat protectors to keep the interior in good shape! Getting out of a lease contract before the end of the term can be difficult, so if you are contemplating a move or other life changes which could necessitate using a different vehicle it may not work well for you.
Steps to Leasing your New Plug-in Vehicle
- Vehicle Selection and Lease Terms – decide which vehicle(s) you are interested in and determine what mileage allowance you will need. The recommended lease term is usually 2-3 years to ensure the vehicle is completely covered by comprehensive manufacturer warranties. Check with your insurance company to get a quote on your selected vehicle.
- Special Offers – visit manufacturer, industry and local dealer websites to see if there are any special lease deals on offer. Edmunds.com’s Car Incentives resources are a convenient source for this information, although they may not have every option on offer listed. Some automakers may offer additional specials based on where you work. To get an idea of what a good EV lease deal looks like the EV-VIN blog compiles a monthly national snapshot of EV lease prices and Green Energy Consumers Alliance Drive Green program includes EV lease deals on their website covering dealers in MA and RI.
- Dealer Negotiation – contact or visit a dealer to discuss your interest. If you are not taking advantage of a pre-arranged lease deal you should start by negotiating the purchase price, called the “capitalized cost” in leasing. TrueCar, Edmunds, Kelley Blue Book, Consumer Reports and other sources can provide information on dealer invoice costs and what others are paying as a useful starting point. Keep in mind that most industry sources recommend a lower down payment than you may be used to since you may lose this if your vehicle is wrecked and the insurance company is only obligated to reimburse the lease financing company for the loss. The Lease Guide resource linked below has helpful guidance on negotiating vehicle leases.
- Reap the Rewards - Regardless of whether your purchase or lease your new electric car, you should save on fuel costs compared to a gasoline vehicle while enjoying great performance and reduced emissions.
Car Leasing Resources
- Lease Guide - Introduction to Vehicle Leasing and Negotiating a Lease
- Vermont Attorney General's Office - Vehicle Sales and Service Consumer Resources
- Consumer Reports - Why Leasing an Electric Car May be Best
- Consumer Reports - Pros and cons of leasing a car
- Edmunds.com - Quick Guide to Leasing a New Car
- Wall Street Journal - How to Lease a Car and Get the Best Deal