If you have decided that you want to invest in an electric car, the next step is deciding if you wish to buy or lease it.
Inside EVs published a report which stated that 80 percent of electric cars in the US in 2018 were leased. This study did not talk about Tesla, but we believe that the findings wouldn’t be affected much since the leasing offers that Tesla provides are fairly attractive.
The Dilemma: Is it Better to Buy or Lease an Electric Car?
It is true that electric vehicles that offer customers attractive deals to lease also offer some great deals to buy, such as the Mini Cooper Electric Hardtop, Nissan Leaf, Hyundai Ioniq 5, Chevrolet Bolt, and some Kia electric car models.
Some cars are expensive to lease, as well as buy, such as the Tesla Model S, which has a retail price of $99,900, and the Tesla Model Y, with a retail price of $62,900. Recently, it has been reported that Tesla has increased its prices because of supply chain problems, gas prices, and inflation.
If you want to own an electric car, you can either buy or lease it- both options have their fair share of pros and cons. However, one must be aware of the basics of leasing and buying electric cars as the rules for traditional cars are vastly different.
When you buy an electric car, you can pay for it in monthly installments or in one go. Usually, buying an electric vehicle is pricier than buying a traditional car that runs on gas. It was found that in November 2021, the starting price of an electric car was $56,437.
Traditional cars, on the other hand, could be purchased at an average price of $25,650. As you can see, the price of buying an electric car is high.
Leasing an electric car means that you rent it, but you get to keep the car for a longer period of time. Today, every electric car manufacturer offers leasing deals to boost their sales and attract customers.
Usually, leasing contracts last from two to four years. This way, the customer does not have to sell or trade the car.
However, keep in mind that when you lease a car, you are not the owner of it. You are merely renting it out for an agreed period of time. If you want, you could put in an option to buy the electric car in the contract once the leasing period has ended.
In our opinion, leasing an electric car is better than buying it. However, we have listed both sides of the argument so that you can make your own decision.
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Pros of Buying an Electric Car
Buying an electric car comes with several benefits, the biggest one being that once you pay off the car loan, you become the sole owner of it. Here are some benefits of buying an electric car:
1. Full Tax Credit
When buying an electric car, you can get the complete value of the federal tax credit. Moreover, you become the sole owner of the utility, state, and local incentives.
When it comes to leasing a vehicle, you can never be sure whether the company will pass down the total amount of incentives to you. Incentives can make a $10,000 or more price difference to your electric vehicle.
However, you might have to wait to see the savings till you file the upcoming year’s taxes.
2. Mileage Limit Does Not Exist
When you buy a car and become its sole owner, you don’t have to worry about how far you can drive it- there is no limit.
Even though it is more difficult to get thousands of miles on an electric vehicle every year than on a traditional car vehicle, if you go over your lease’s mileage limit, it can cost you a lot in a short span of time.
3. You Can Customize It
The best part about buying an electric car is that you can let your creativity run wild. Unlike a leased car that cannot be tampered with and must be returned in perfect condition to the showroom, you can put your personal touch to an electric car if you buy it.
4. Buying Incentives
Most electric cars do not come with cashback and financing incentives. However, some electric vehicles offer deals in an attempt to boost the frequency of sales.
In the long run, you can save loads of money with low-cost financing deals.
5. You Can Get a New Car Whenever You Want
Let’s say that you have purchased an electric car, but after a year, you realize that you aren’t particularly fond of it. You do not have to think twice before selling it to someone else.
If you lease an electric car, you cannot terminate the contract easily. Even though transferring your lease is an option, there is no guarantee that you will be able to do this.
6. Longer Warranties
If you have purchased your electric car, you can get an auto loan whenever and browse the marketplace to ensure you receive the best interest rate. Before heading to a dealership, it would be of great help if you have a pre-approved loan offer.
Even though the dealer might find a loan that provides a special rate, they will not try unless they know they need to beat an offer.
However, when leasing an electric vehicle, the interest rate in the contract will have to be negotiated with the deal you are getting the vehicle from. In leasing, this is known as the money factor.
Cons of Buying an Electric Car
It is no secret that buying an electric car is heavy on the pocket. Here are some disadvantages to keep a lookout for:
1. Range and Batteries will Decline Overtime
As time passes, you will notice that the electric vehicle’s battery pack will degrade. This means that the distance you can travel on a single charge will slowly start to drop. How much this distance drops depends on where the car is charged, the conditions in which the car is taken out, and how often it is charged.
If the batteries continue to degrade, the market value of the vehicle will be affected. However, if the degradation does not fall under the warranty coverage that the company provides, the value of your car will drop significantly.
2. You Can Never Be Sure of the Car’s Future Value
Electric vehicles are advancing faster than all other technologies in the market right now. Due to this reason, we cannot be sure what the electric vehicle market will look like over the next couple of years or how valuable an electric car purchased today will be in the future.
Of course, there are chances that the value of these vehicles will remain high as their charging speed, range, and performance increase. However, this also means that electric cars today could lose their value if future vehicles progress and become technologically better.
3. You Need to Deal with Post Warranty Problems
If you are the owner of an electric car and keep it for longer than its warranty coverage, you are responsible if something in the car stops working.
Even though the batteries have a sufficient warranty period, other parts of these vehicles are costly. This includes high-tech safety components, electronic drive systems, and infotainment screens.
Why Leasing an Electric Car Is a Better Option
If you are considering getting an electric car, leasing it is a great option. Here’s why:
1. You are Not Bound to Older Technology
The greatest advantage of leasing an electric car is that you will not be bound by old technology. You do not have to worry about the financial risk of being the owner of a car replaced by faster technology and not even worth the amount you bought it for.
Each year, faster electric vehicles are introduced with a quick charging system, better performance, and better range. If you buy the wrong car today, you will have to deal with little equity when you are ready to upgrade to a new car.
2. You Can Switch More Often
Leasing an electric car means that when your lease finishes, you can upgrade and get the car with the latest technology if you wish.
All you have to do is bring the car to your dealer and negotiate a new lease on the model you want. You can then drive the car of your dreams and enjoy all its cool, new features.
Moreover, most people who buy an electric car end up driving it for years because they cannot switch their cars that often. However, with leased cars, you do not have to wait to collect more funds or cut down your spending to afford a new car.
You can sign another lease with another dealership when your current lease ends. This will allow you to flaunt a new car every few years.
3. No Warranty/ Battery Problems
Usually, when you lease an electric car, you will have to sign a lease for two or three years. During this time frame, there are very few chances that you will discover issues with the car that do not fall under the warranty provided to you by the dealership.
When you own a car for a longer time, there is a higher risk that you will come across issues that are not included in the warranty repair bills.
4. You Can Take Advantage of Loyalty Bonuses
You may be offered conquest and loyalty bonuses if your car dealership is looking for ways to retain you as a customer or take other clients away from the competition. Compared to traditional cars, the bonuses for electric cars are always higher.
This means that when your lease ends, you can negotiate from a stronger position- you can threaten to go to a competitor or stay with the current company and get awarded in return.
5. More Incentives
There is no better way to get incentives than by leasing electric cars. This is because the federal and state governments love rewarding electric car owners to encourage the use of clean energy.
For instance, if you reside in California and lease an electric car, you can receive a $2,000 cash rebate.
Many carmakers also give their customers cash bonuses in an attempt to lower the prices of electric vehicles so that more people find the lease payments within their budgets.
6. Avoid Depreciation
If you have purchased an electric car and want to sell it later, you will find that its value has depreciated. In 2020, electric cars depreciated 52 percent within the first year, showing how this can affect the original price of a vehicle you buy.
However, you will not have to worry about this issue when you lease an electric vehicle. You can also take advantage of lower interest rates and find ways to raise the car’s residual value at the end of the lease.
Cons of Leasing an Electric Car
Of course, leasing an electric car has some disadvantages too. Here is what you need to know:
1. You May Not Receive Tax Credits
Some leasing companies do not hand over the value of subsidies and tax credits to customers. This means that when you lease an electric car, you will have to be extra cautious and check that you receive all the incentives.
Do not underestimate the difference between getting and not getting subsidies- they can make a huge difference to your pocket.
2. You will Have a Mileage Limit
When you lease a new car, there are strict mileage limits that you must adapt to. If you cross this limit, you will have to pay the additional mileage charges once your lease ends. Do not underestimate these charges, as they tend to add up quickly.
Based on the car, you may have to pay an additional 15 to 50 cents for every mile that you exceed.
As compared to gas vehicles, it is harder to exceed the mileage limits of electric cars. However, leases usually have intentionally low mileage limits so that consumers have to pay more.
3. Cannot be Customized
Let’s say that you want to add some fancy wheels to your electric sedan or some lights with better performance that will allow you to see better at night. If your electric car is leased, you will be unable to make any of these physical changes permanently.
This is because when you return the car by the end of your lease period, it needs to be exactly the same condition it was when you first got it. Of course, you can revert the changes, but you will have to pay extra, so is it really worth it?
You might also be interested in;
- Ugly Electric Cars in the USA
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- Why do Electric Cars Depreciate so Fast?
- How to Improve an Electric Car’s Range?
- How Do Electric Cars Benefit Large Cities?
My name is Matthew, staying in Seattle, Washington. Electric Vehicles (Electric Cars & Electric bikes) caught my attention for the last few years and my love for electric cars and bikes is everlasting. I spend many of my weekends traveling to various places all over various cities with my electric vehicle (e-bike and electric car). Here I am sharing my expertise, experience, and invaluable information about electric cars and electric bikes. Check out more.