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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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Did a battery plant disaster in California spark a PR crisis on the East Coast?
Battery fire fears are fomenting a storage backlash in New York City – and it risks turning into fresh PR hell for the industry.
Aggrieved neighbors, anti-BESS activists, and Republican politicians are galvanizing more opposition to battery storage in pockets of the five boroughs where development is actually happening, capturing rapt attention from other residents as well as members of the media. In Staten Island, a petition against a NineDot Energy battery project has received more than 1,300 signatures in a little over two months. Two weeks ago, advocates – backed by representatives of local politicians including Rep. Nicole Mallitokis – swarmed a public meeting on the project, getting a local community board to vote unanimously against the project.
According to Heatmap Pro’s proprietary modeling of local opinion around battery storage, there are likely twice as many strong opponents than strong supporters in the area:
Heatmap Pro
Yesterday, leaders in the Queens community of Hempstead enacted a year-long ban on BESS for at least a year after GOP Rep. Anthony D’Esposito, other local politicians, and a slew of aggrieved residents testified in favor of a moratorium. The day before, officials in the Long Island town of Southampton said at a public meeting they were ready to extend their battery storage ban until they enshrined a more restrictive development code – even as many energy companies testified against doing so, including NineDot and solar plus storage developer Key Capture Energy. Yonkers also recently extended its own battery moratorium.
This flurry of activity follows the Moss Landing battery plant fire in California, a rather exceptional event caused by tech that was extremely old and a battery chemistry that is no longer popular in the sector. But opponents of battery storage don’t care – they’re telling their friends to stop the community from becoming the next Moss Landing. The longer this goes on without a fulsome, strident response from the industry, the more communities may rally against them. Making matters even worse, as I explained in The Fight earlier this year, we’re seeing battery fire concerns impact solar projects too.
“This is a huge problem for solar. If [fires] start regularly happening, communities are going to say hey, you can’t put that there,” Derek Chase, CEO of battery fire smoke detection tech company OnSight Technologies, told me at Intersolar this week. “It’s going to be really detrimental.”
I’ve long worried New York City in particular may be a powder keg for the battery storage sector given its omnipresence as a popular media environment. If it happens in New York, the rest of the world learns about it.
I feel like the power of the New York media environment is not lost on Staten Island borough president Vito Fossella, a de facto leader of the anti-BESS movement in the boroughs. Last fall I interviewed Fossella, whose rhetorical strategy often leans on painting Staten Island as an overburdened community. (At least 13 battery storage projects have been in the works in Staten Island according to recent reporting. Fossella claims that is far more than any amount proposed elsewhere in the city.) He often points to battery blazes that happen elsewhere in the country, as well as fears about lithium-ion scooters that have caught fire. His goal is to enact very large setback distance requirements for battery storage, at a minimum.
“You can still put them throughout the city but you can’t put them next to people’s homes – what happens if one of these goes on fire next to a gas station,” he told me at the time, chalking the wider city government’s reluctance to capitulate on batteries to a “political problem.”
Well, I’m going to hold my breath for the real political problem in waiting – the inevitable backlash that happens when Mallitokis, D’Esposito, and others take this fight to Congress and the national stage. I bet that’s probably why American Clean Power just sent me a notice for a press briefing on battery safety next week …
And more of the week’s top conflicts around renewable energy.
1. Queen Anne’s County, Maryland – They really don’t want you to sign a solar lease out in the rural parts of this otherwise very pro-renewables state.
2. Logan County, Ohio – Staff for the Ohio Power Siting Board have recommended it reject Open Road Renewables’ Grange Solar agrivoltaics project.
3. Bandera County, Texas – On a slightly brighter note for solar, it appears that Pine Gate Renewables’ Rio Lago solar project might just be safe from county restrictions.
Here’s what else we’re watching…
In Illinois, Armoracia Solar is struggling to get necessary permits from Madison County.
In Kentucky, the mayor of Lexington is getting into a public spat with East Kentucky Power Cooperative over solar.
In Michigan, Livingston County is now backing the legal challenge to Michigan’s state permitting primacy law.
On the week’s top news around renewable energy policy.
1. IRA funding freeze update – Money is starting to get out the door, finally: the EPA unfroze most of its climate grant funding it had paused after Trump entered office.
2. Scalpel vs. sledgehammer – House Speaker Mike Johnson signaled Republicans in Congress may take a broader approach to repealing the Inflation Reduction Act than previously expected in tax talks.
3. Endangerment in danger – The EPA is reportedly urging the White House to back reversing its 2009 “endangerment” finding on air pollutants and climate change, a linchpin in the agency’s overall CO2 and climate regulatory scheme.