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Should I lease an electric car?
Conventional wisdom says no, but there are a few reasons why you might want to say yes.
Leases are generally considered a bad deal because you’re paying for a car you’ll never own. But by taking advantage of incentives and avoiding depreciation, a lease may actually make more sense than a loan if you’re buying an electric car or hybrid.
Here are six reasons why you might want to lease an electric vehicle instead of buy it:
1. Manufacturer covers depreciation — not you
The typical car lease factors depreciation into payments, but dealerships and manufacturers are prone to offsetting the high depreciation of electric vehicles to draw in lessees. So while electric vehicles face higher-than-normal rates of depreciation, you won’t see that in your monthly payment.
They do this a couple of ways:
- Lowering the money factor rate or interest rate
- Overestimating the car’s residual value
- Offering multiple cash and sign-on incentives
- Subtracting the federal tax credit from the MSRP
2. Technology is constantly being updated
Electric motors are constantly being improved, but so are safety systems, infotainment systems and overall design. A lease gives you the ability to jump into newer cars at a lower rate, and leasing an electric car means you can take advantage of changing technology every two or three years.
Some of the newest electric cars today are boasting EPA-estimated ranges over 150 miles per charge — and this is only increasing. Battery size is also decreasing, which makes cars less heavy while also making them faster. And the less weight your car has to haul, the longer it can go on a single charge.
3. Battery problems are the dealership’s issue
Although electric cars are constantly improving, there isn’t much information available on how long batteries last. Just like your phone or computer, your car’s battery will eventually stop holding a full charge. This decreases efficiency, which may then diminish your savings on fuel.
While most batteries for fully electric cars — and all batteries for hybrids — are covered by an eight-year, 100,000-mile warranty, there’s always the risk of degradation.
With a lease, it’s not your responsibility or your loss. Battery degradation during the first two or three years should be minimal, meaning you get the most out of each charge.
4. Loyalty bonuses cut costs from multiple leases
Some manufacturers offer loyalty bonuses to retain lessees. This means the price of the car is reduced — which means lower monthly payments. And often, you may be able to score a better loyalty bonus with an electric car.
Likewise, there are manufacturers that offer bonuses for qualified lessees who drive a different brand. If you want to try out a different model, you’ll be in a strong position to negotiate a sign-on bonus that can also help reduce your monthly lease payment.
5. Manufacturer and dealership incentives abound
Beyond loyalty bonuses, manufacturers are almost constantly offering some leasing special for well-qualified lessees. We’ve frequently seen deals for low monthly payments, reduced money down and bonus mileage included on a lease.
A manufacturer is also likely to reduce the MSRP of your car by the federal and state tax credits it receives for a new electric car. This helps lower your monthly payment, making a lease that much more affordable than the higher payment you’d make on a loan.
6. Drive a luxury car for less
There’s no way around it: Electric cars and hybrids are much more expensive than their gas-guzzling counterparts. And if you want a range over 100 miles, you’ll need to turn to luxury brands — which only adds to the expense.
You’ll save money on fuel and maintenance costs, but it may take years to recoup the loss of buying an electric car. With a lease, you’ll have access to a high-end green vehicle at a much lower monthly cost.
Bottom line
While it may defy conventional wisdom, leasing an electric car may be the best choice for most drivers — at least until the technology stops improving at such a rapid rate.
If you’re new to leasing, you can get started with our step-by-step guide to leasing a car.
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