Summary

Leasing an electric vehicle (EV) offers lower monthly payments compared to buying but comes with the tradeoff of not owning the vehicle at the end of the lease term. Historically, leasing was a smart option due to the rapidly evolving EV technology, allowing consumers to avoid being stuck with outdated models. However, recent advances in technology and the growing number of EV options have narrowed the gap between leasing and buying. Today, both leasing and purchasing are viable options depending on individual needs, preferences, and the vehicle in question.

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🚗 Leasing Basics

Leasing an electric vehicle works much like leasing any other car. You pay a down payment followed by monthly installments for the lease term, typically lasting about three years. At the end of the lease, you return the car like a long-term rental. Monthly payments for leases are generally lower than car purchases, as they’re calculated based on the difference between the vehicle’s initial price and its residual value (the vehicle’s expected worth at the end of the lease). However, when you buy a car, your monthly payments disappear once the loan is paid off, leaving you with an asset. Leasing a car doesn’t give you ownership, so you lose the ability to build equity or sell the vehicle when you're done using it.

Takeaways:

• Leasing typically offers lower monthly payments but no ownership at the end of the term.

Key Terms

• Residual value: The estimated value of a leased vehicle at the end of the lease term.

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🔄 How Leasing Has Changed

Leasing trends have shifted dramatically in recent years. Supply-chain disruptions, stemming from the global pandemic and other market forces, have slowed vehicle production. As a result, there has been a reduction in incentives offered by manufacturers to lease cars, such as cash toward down payments. This change has led to fewer drivers leasing vehicles. In 2019, about one in three new cars were leased. By mid-2022, that number had dropped to less than one in five. For electric cars, the landscape has changed similarly, though an increasing variety of EV models and advancements in technology have improved options for consumers.

Takeaways:

• Supply-chain issues have reduced car leasing options and incentives in recent years.

Key Terms

• Incentives: Discounts or offers provided by manufacturers to encourage car leasing or buying.

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🔋 EV Advancements and Costs

The electric vehicle market has evolved rapidly. In just a few short years, both the quality and range of available EVs have improved significantly. For example, by the end of 2023, the number of EV models in the U.S. could quadruple from the number available in 2020. Electric vehicles now span various types, including large SUVs and trucks, compared to the smaller cars that previously dominated the market. While the average price of an EV remains higher than that of traditional gas-powered vehicles, there are still several affordable options under $40,000. Additionally, with advancements like increased driving ranges and improved battery technology, EVs are becoming more accessible and attractive for a wider range of drivers.

Takeaways:

• EVs now come in a greater variety of models, including SUVs and trucks.

Key Terms

• Range: The distance an EV can travel on a single charge.

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🔧 Technological Evolution in EVs

One of the key concerns for EV buyers has always been the rapid pace of technological change. Just a few years ago, the Chevrolet Spark EV had a range of 82 miles. Today, for nearly the same price, a Chevrolet Bolt offers a range of 259 miles. While this technological progress can be exciting, it can also make some hesitant to buy an EV, worrying about future advancements they might miss out on. In fact, more than one-third of Americans surveyed in a March 2023 poll said they’re waiting for EV ranges to reach 500 miles before making the switch. Even so, many drivers today are finding that current EV models meet their needs perfectly, making ownership an increasingly viable option.

Takeaways:

• EV technology is evolving rapidly, making newer models more appealing, but some buyers are waiting for even greater advancements.

Key Terms

• EV range: The distance an electric vehicle can travel on a full charge, an important factor in purchasing decisions.

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🔍 Should You Lease or Buy?

The decision to lease or buy an EV depends on the car you’re considering and your personal priorities. Leasing can be a great option for vehicles with less-proven technology or models that are expected to undergo significant upgrades soon. For example, battery innovations that are expected to hit the market in about three years may make today’s EVs seem outdated. For this reason, some experts, like Sandy Munro of Munro & Associates, suggest leasing an EV with unproven longevity or technology. On the other hand, buying an EV with a well-established track record, such as a Tesla, could offer better long-term value. Ultimately, leasing allows you to hedge against future technological shifts, while buying lets you own a vehicle outright and build equity over time.

Takeaways:

• Leasing is a good choice for cars with newer, less-tested technology, while buying makes sense for established brands like Tesla.

Key Terms

• Battery innovation: Ongoing improvements to electric vehicle batteries that promise to increase range and decrease charging times.

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Conclusion

Both leasing and buying an electric vehicle have their advantages and disadvantages. Leasing offers lower monthly payments and protection against the rapid pace of technological advancements but doesn't provide ownership. Buying gives you a long-term asset and eliminates payments once the loan is paid off, though it may leave you exposed to technological obsolescence. Ultimately, your choice will depend on the specific vehicle you’re interested in and your personal preferences regarding risk, flexibility, and long-term ownership.