More car buyers are choosing to lease their electric vehicles in an attempt to keep their monthly payments low while the average list price remains out of reach.
As of the end of July, leases accounted for 75% of electric vehicle purchases, up from 51% of purchases in the same month a year earlier, according to data from car-buying site Edmunds. Overall, only about 25% of vehicles are leased, according to data from Experian.
Although electric vehicles still tend to cost about $10,000 more than the average car, monthly payments in July were about $160 cheaper than the industry average monthly payment, according to Edmunds.
Affordability is becoming increasingly important in the electric car market as a wave of affluent early adopters gives way to more frugal and practical buyers. Regardless of engine type, these customers are typically budget-conscious and shop based more on monthly payments than sticker price.
This is where leases come in.
Leases require less financial commitment
Leasing is a smaller financial commitment than buying a car because the lessee is only responsible for the vehicle’s depreciation over the lease term. The monthly payment is calculated by subtracting the vehicle’s residual value from its current value and dividing that amount by the lease term (plus taxes and fees, of course).
In contrast, a car loan requires the buyer to cover the entire cost of the vehicle. The monthly payment is calculated by dividing the cost of the vehicle by the term of the loan, plus the average interest rate, taxes, and fees.
“A lease is a great way for these new EV customers to test drive these cars,” Ivan Drury, an automotive analyst at Edmunds, told Business Insider.
The bumper-to-bumper coverage offered by a lease, as well as the fact that the dealer will take the car back once the lease is up, are also attractive to a new group of electric vehicle buyers who are often more hesitant to make the jump to electric.
As leasing electric vehicles has become increasingly popular, average monthly payments for these cars have plummeted. As of July, the average electric vehicle customer was paying $575 per month for their battery-powered car, about $200 less than the average monthly payment a year ago.
“A payment drop like this almost never happens. It’s a once-in-a-lifetime event, and I don’t think it’s going to last long,” Drury said. “If you’re thinking about buying an electric vehicle, now is the time.”
The flaw in electric vehicle rental
As electric vehicle buyers have become more demanding, the industry has been forced to adapt to a slower growth rate for these cars.
In addition to shifting production schedules and product plans, automakers and their dealers are trying to boost demand for electric vehicles by taking advantage of a loophole in electric-car leasing that gives customers easier access to a $7,500 federal electric-vehicle tax credit.
New restrictions on the tax credit have made it harder for buyers to get the discount, but renters aren’t held to the same standards.
Leased electric vehicles aren’t subject to the same stringent parts requirements or income caps that prevent buyers from accessing the $7,500 credit.
businessinsider
