Sign In or Create an Account.

By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy

Electric Vehicles

Today’s Leased EVs Are Tomorrow’s Cheap Used Cars

Which is why it’s great that so many Americans are now leasing EVs.

Used cars.
Heatmap Illustration/Library of Congress, Tesla, Getty Images

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.

Why leasing has spiked

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.

Why that’s great for the EV market

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.

Blue

You’re out of free articles.

Subscribe today to experience Heatmap’s expert analysis 
of climate change, clean energy, and sustainability.
To continue reading
Create a free account or sign in to unlock more free articles.
or
Please enter an email address
By continuing, you agree to the Terms of Service and acknowledge our Privacy Policy
Electric Vehicles

Ford’s Model T Moment Isn’t About the Car

The assembly line is the company’s signature innovation. Now it’s trying to one-up itself with the Universal EV Production System.

A pickup truck and a diagram.
Heatmap Illustration/Getty Images

In 2027, Ford says, it will deliver a $30,000 mid-size all-electric truck. That alone would be a breakthrough in a segment where EVs have struggled against high costs and lagging interest from buyers.

But the company’s big announcement on Monday isn’t (just) about the truck. The promised pickup is part of Ford’s big plan that it has pegged as a “Model T moment” for electric vehicles. The Detroit giant says it is about to reimagine the entire way it builds EVs to cut costs, turn around its struggling EV division, and truly compete with the likes of Tesla.

Keep reading...Show less
Blue
Politics

States Race to Help Renewables Beat the Tax Credit Clock

Governors, legislators, and regulators are all mustering to help push clean energy past the starting line in time to meet Republicans’ new deadlines.

A stopwatch.
Heatmap Illustration/Getty Images

Trump’s One Big Beautiful Bill Act put new expiration dates on clean energy tax credits for business and consumers, raising the cost of climate action. Now some states are rushing to accelerate renewable energy projects and get as many underway as possible before the new deadlines take effect.

The new law requires wind and solar developers to start construction by the end of this year in order to claim the full investment or production tax credits under the rules established by the Inflation Reduction Act. They’ll then have at least four years to get their project online.

Keep reading...Show less
Blue
Energy

How Tariffs and Trump Led to Orsted’s Big Stock Sale

The Danish government is stepping in after U.S. policy shifts left the company’s New York offshore wind project in need of fresh funds.

Orsted headquarters.
Heatmap Illustration/Orsted, Getty Images

Orsted is going to investors — including the Danish government — for money it can’t get for its wind projects, especially in the troubled U.S. offshore wind market.

The Danish developer, which is majority owned by the Danish government, told investors on Monday that it would seek to raise over $9 billion, about half its valuation before the announcement, by selling shares in the company.

Keep reading...Show less
Blue