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Which is why it’s great that so many Americans are now leasing EVs.
The new way to buy an electric car is not to buy one at all.
Just three years ago, four out of five EV drivers had financed their car or paid in cash, while only 21% had leased the EV, according to data from TransUnion. But by the second quarter of this year, leasing had become the top choice: 48.7% of people leased their new electric vehicle versus 34.7 percent who financed and 16.6% who paid in cash.
That’s a sea change in the way people shop for EVs, and it could be great news for the electric car market — just think of all the gently used cars that will flood the market when those leases end.
There are numerous factors behind leasing’s ascendance, starting with money matters. Electric cars still cost more than fossil fuel-burners, but the monthly payment on a lease is almost always less than what you’d pay per month to finance the full cost of a vehicle. In that way, leasing brings EVs within reach for budget-minded drivers — Joseph Yoon, consumer insights analyst at Edmunds, recently told me there are great leasing deals aplenty on EVs because dealers want to move them off the lots.
A tweak to the federal tax credits helped, too. It got more complicated to buy an EV outright this year after the government restricted the benefits to vehicles with a minimum amount of domestic manufacturing. But the same rules don’t apply to leased vehicles, giving those who lease an EV the option to get a discount on a car that wouldn’t necessarily be eligible if they financed it.
There are other hypotheses about the rising popularity of the lease. A bigwig at one of the credit bureaus told InsideEVs that leasing reflects buyers’ comfort with the subscription model that has taken over our economy at large. The data also shows that the total number of first-time lessees has actually declined a little since 2019, which suggests to me that perhaps a lot of people who always lease their vehicles decided over the past few years that it was time to go for an EV.
Leasing is also simply an attractive choice given the current state of electric vehicle offerings. Most of today’s most popular models haven’t been on the road long enough to tell us much about how they’ll age — or what might go wrong when they’re eight or 10 or 12 years old. Lease-holders don’t have to worry about any of that. They need not worry about the battery range inevitably fading, either.
For this reason I’ve begun, from time to time, to second-guess my own decision to buy my EV. Rather than watching its battery diminish as the years go by, I could have leased it, returned it after three years, and gotten into a cool new EV that didn’t exist when I bought mine. Then again, I’m closing in on the last monthly payment rather than being locked into the cycle of forever payments that comes with leasing. So I got that going for me, which is nice.
The jump in leasing is having a clear impact on the shape of the electric vehicle market, where carmakers in the U.S., in particular, are still having trouble putting out affordable EVs that buyers want. Luxury buyers, on the other hand, have always favored leases as a way to keep themselves in a shiny, new-ish car, and to avoid the unpleasant experience of owning an out-of-warranty BMW, Mercedes-Benz, or Audi. Around 90% of those three companies’ EVs are leased, a number that has helped the Germany luxury brands get a foothold in the electric car market (especially considering the staggering MSRPs of most of their electric offerings).
And then there’s what happens to all those leased vehicles. Once a typical three-year agreement expires, its driver must give back the vehicle to the dealership, presumably in the undamaged, low-mileage condition that’s specified in the terms of the lease. From there, the vehicle goes on to start its second life as someone else’s brand new used car — which is why it’s good news that lots of people are leasing EVs.
While leasing is one way to work around the high sticker prices of EVs, buying used is another. Used vehicles have long been a better deal because somebody else suffered the financial penalty of buying a new car and seeing its value plummet the moment they drove it off the lot. (In fact, what you’re really paying for when you lease a car is the severe depreciation it undergoes during its first few years of life. The dealership has to get that money from lease customers because they’ll get much less for the vehicle when it returns from its lease as a three-year-old and they resell it as a used car.)
The used EV market, though, hasn’t been particularly robust to date. For one thing, there just aren’t that many vehicles on the market since EV sales really only took off in the past few years. Further limiting supply are the plummeting prices of used EVs, which appear to be depreciating much faster than gasoline cars or hybrids. Since owners would recoup so little from selling their EVs, more of them are hanging onto their cars.
That’s why the rise in leased EVs could be good news for everyone else. In a few years, all of those electric vehicles will return to the lot where many will become gently used, certified pre-owned cars that sell for much less than new vehicles. And though the fate of the federal tax credits after this year’s election are uncertain, used EVs currently also qualify for a tax break.
Used electric vehicles have their own set of concerns. Their drivers won’t enjoy the full driving range that the battery offered when new. They’ll be responsible for the longer-term repairs if they want to keep the car running indefinitely. But used EVs with 80% or 90% of their original range are plenty useful, and given those prices and tax breaks, they’re a steal, too. And with a lot of leased EVs soon to enter the secondary market, you might even be able to find one.
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Almost half of developers believe it is “somewhat or significantly harder to do” projects on farmland, despite the clear advantages that kind of property has for harnessing solar power.
The solar energy industry has a big farm problem cropping up. And if it isn’t careful, it’ll be dealing with it for years to come.
Researchers at SI2, an independent research arm of the Solar Energy Industries Association, released a study of farm workers and solar developers this morning that said almost half of all developers believe it is “somewhat or significantly harder to do” projects on farmland, despite the clear advantages that kind of property has for harnessing solar power.
Unveiled in conjunction with RE+, the largest renewable energy conference in the U.S., the federally-funded research includes a warning sign that permitting is far and away the single largest impediment for solar developers trying to build projects on farmland. If this trend continues or metastasizes into a national movement, it could indefinitely lock developers out from some of the nation’s best land for generating carbon-free electricity.
“If a significant minority opposes and perhaps leads to additional moratoria, [developers] will lose a foot in the door for any future projects,” Shawn Rumery, SI2’s senior program director and the survey lead, told me. “They may not have access to that community any more because that moratoria is in place.”
SI2’s research comes on the heels of similar findings from Heatmap Pro. A poll conducted for the platform last month found 70% of respondents who had more than 50 acres of property — i.e. the kinds of large landowners sought after by energy developers — are concerned that renewable energy “takes up farmland,” by far the greatest objection among that cohort.
Good farmland is theoretically perfect for building solar farms. What could be better for powering homes than the same strong sunlight that helps grow fields of yummy corn, beans and vegetables? And there’s a clear financial incentive for farmers to get in on the solar industry, not just because of the potential cash in letting developers use their acres but also the longer-term risks climate change and extreme weather can pose to agriculture writ large.
But not all farmers are warming up to solar power, leading towns and counties across the country to enact moratoria restricting or banning solar and wind development on and near “prime farmland.” Meanwhile at the federal level, Republicans and Democrats alike are voicing concern about taking farmland for crop production to generate renewable energy.
Seeking to best understand this phenomena, SI2 put out a call out for ag industry representatives and solar developers to tell them how they feel about these two industries co-mingling. They received 355 responses of varying detail over roughly three months earlier this year, including 163 responses from agriculture workers, 170 from solar developers as well as almost two dozen individuals in the utility sector.
A key hurdle to development, per the survey, is local opposition in farm communities. SI2’s publicity announcement for the research focuses on a hopeful statistic: up to 70% of farmers surveyed said they were “open to large-scale solar.” But for many, that was only under certain conditions that allow for dual usage of the land or agrivoltaics. In other words, they’d want to be able to keep raising livestock, a practice known as solar grazing, or planting crops unimpeded by the solar panels.
The remaining percentage of farmers surveyed “consistently opposed large-scale solar under any condition,” the survey found.
“Some of the messages we got were over my dead body,” Rumery said.
Meanwhile a “non-trivial” number of solar developers reported being unwilling or disinterested in adopting the solar-ag overlap that farmers want due to the increased cost, Rumery said. While some companies expect large portions of their business to be on farmland in the future, and many who responded to the survey expect to use agrivoltaic designs, Rumery voiced concern at the percentage of companies unwilling to integrate simultaneous agrarian activities into their planning.
In fact, Rumery said some developers’ reticence is part of what drove him and his colleagues to release the survey while at RE+.
As we discussed last week, failing to address the concerns of local communities can lead to unintended consequences with industry-wide ramifications. Rumery said developers trying to build on farmland should consider adopting dual-use strategies and focus on community engagement and education to avoid triggering future moratoria.
“One of the open-ended responses that best encapsulated the problem was a developer who said until the cost of permitting is so high that it forces us to do this, we’re going to continue to develop projects as they are,” he said. “That’s a cold way to look at it.”
Meanwhile, who is driving opposition to solar and other projects on farmland? Are many small farm owners in rural communities really against renewables? Is the fossil fuel lobby colluding with Big Ag? Could building these projects on fertile soil really impede future prospects at crop yields?
These are big questions we’ll be tackling in far more depth in next week’s edition of The Fight. Trust me, the answers will surprise you.
Here are the most notable renewable energy conflicts over the past week.
1. Worcester County, Maryland –Ocean City is preparing to go to court “if necessary” to undo the Bureau of Ocean Energy Management’s approval last week of U.S. Wind’s Maryland Offshore Wind Project, town mayor Rick Meehan told me in a statement this week.
2. Magic Valley, Idaho – The Lava Ridge Wind Project would be Idaho’s biggest wind farm. But it’s facing public outcry over the impacts it could have on a historic site for remembering the impact of World War II on Japanese residents in the United States.
3. Kossuth County, Iowa – Iowa’s largest county – Kossuth – is in the process of approving a nine-month moratorium on large-scale solar development.
Here’s a few more hotspots I’m watching…
The most important renewable energy policies and decisions from the last few days.
Greenlink’s good day – The Interior Department has approved NV Energy’s Greenlink West power line in Nevada, a massive step forward for the Biden administration’s pursuit of more transmission.
States’ offshore muddle – We saw a lot of state-level offshore wind movement this past week… and it wasn’t entirely positive. All of this bodes poorly for odds of a kumbaya political moment to the industry’s benefit any time soon.
Chumash loophole – Offshore wind did notch one win in northern California by securing an industry exception in a large marine sanctuary, providing for farms to be built in a corridor of the coastline.
Here’s what else I’m watching …