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Should you lease or purchase an electric vehicles? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make smarter financial decisions by offering interactive tools and financial calculators, publishing original and objective content. This allows you to conduct your own research and compare information for free – so that you can make informed financial decisions. Bankrate has agreements with issuers such as, but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The offers that appear on this site come from companies who pay us. This compensation could affect how and when products are featured on the site, such as for instance, the sequence in which they appear in the listing categories and other categories, unless prohibited by law. This applies to our loans, mortgages,, and other products for home loans. But this compensation does have no impact on the information we provide, or the reviews that appear on this website. We do not cover the universe of companies or financial offers that may be available to you.
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6 min read Published September 23, 2022
Authored by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the details of borrowing money to purchase a car.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since late 2021. They are passionate about helping readers feel confident to manage their finances by providing precise, well-studied facts that break down complex topics into manageable bites.
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The market has dramatically grown over the last year. EVs and hybrids made up 4.5 or 6.6 percent of new registrations from January through June 2022, according to the 2022 market trend report for the second quarter of 2022 report from . However, even as alternatives outside of Teslas and Toyotas grow, diving in the deep end to a new car could be a daunting task. In addition, with an average cost of more than $66,000 in the table for an electric vehicle the choice is loaded economically and logically. If you fall into a category of curiosity rather than confidence, an electric vehicle can help you determine if an eco-friendly ride is the right choice for you, while is best for drivers ready to commit. The option of leasing versus purchasing an electric vehicle
Leasing an electric car can give you hands-on experience with an otherwise expensive vehicle however, it could cost you more in the long run if you surpass restrictions or at the end of your lease.
Is it better to lease or purchase electric cars? In terms of the question of whether to go with it, it’s fairly easy to decide which option is best for your budget and you. If you are planning to swap up your car every few years and are able to handle mileage restrictions then leasing can be ideal. If you’re looking for the flexibility of ownership, buying is the option. However, the world of electric vehicles is just beginning to take off, when sales of electric vehicles increase year over year. So signing off on long-term ownership for a vehicle that is a bit new could be risky. To determine which is right for you, consider the advantages and drawbacks of each option. The pros to leasing an EV Vehicle warranty Lower monthly payment Newest technology features
Cons to leasing an EV It is faster to depreciate the vehicle. Also, it is difficult to sell vehicle Vehicle restrictions
Benefits to leasing an electric car advantages of an electric vehicle come down to added protection with a full-service which means fewer trips to the mechanic -and a lower monthly price and access to the newest technology. Warranty for the vehicle generally, leases run for 24 or 36 months, and in this time frame, your vehicle might encounter technical issues. In the case of EV maintenance, the need to replace the battery is the most frequent issue you might encounter. If you lease, however the vehicle, it will remain covered by warranty, giving you the chance saving thousands. Lower monthly payment Leasing a car allows you to drive the car for a predetermined duration of time, and then pay every month. It often costs less each month than a car payment for the same vehicle. In addition to the lower monthly cost, you will also spend less money upfront and likely quit the dealership without any cash down. Leasing costs less
The monthly average cost of leasing a new vehicle in the fourth quarter of 2022 was $540 versus $667 for buying the car, according to .
The latest tech features Even though models change from year to year for standard vehicles aren’t significant, the field of electric vehicles is advancing at a much more rapid pace. Leasing will give you the opportunity to be on the cutting edge in terms of available technologies, instead of being stuck with last year’s additions. The Hyundai Kona, for instance, received some notable upgrades from the 2021 to 2022 model with a new infotainment center and the latest driver assistance technology. The drawbacks of leasing an electric car While leasing an EV can give you the opportunity to experience the thrill of driving on electric power, it can also come with some disadvantages. The main issue is lease approval, inability leave the lease and restrictions on the vehicle. The approval of a lease to lease the vehicle could be a lot more difficult than obtaining an auto loan — particularly for those with low credit scores. Although you still may be permitted to lease even with having a perfect credit score, it will likely result in a higher monthly cost. Take a look at that the credit score average for drivers leasing new cars in the first quarter of 2022- 736 — which falls above the 729 average for a loan, according to Experian. The inability to sell the car The process of letting a car lease end isn’t simple or cheap. If you do end up not enjoying the car that you lease, you’ll likely remain in the lease , or expected to pay hefty fines to exit the . Depending on your lessor or lender, you could be asked to pay out the residual value in addition to any remaining charges and lease payments. Car restrictions when signing off on a lease, there are several key aspects to look out for including mileage, maintenance, and modification of the vehicle. If you lease an electric vehicle you will likely be limited to driving from 12,000-15,000 miles per year, may have to foot the bill for and will not be able to customize the vehicle. Buying an electric car Pros to leasing an EV Full ownership , no restrictions on vehicle size Credits and tax incentives
There are disadvantages to leasing an EV Pricey upfront cost, rapid changing tech Out-of-pocket repair costs
The advantages of buying electric vehicles The major benefit of buying an electric car instead of leasing comes down to the excitement of full ownership. You are able to do what you would like with your vehicle without having to limit the lease options the company makes available or worrying over costs. If you own an electric vehicle you are also able to take full advantage of tax incentives and credits that otherwise would be given to the lender. Full ownership Depending on your financial situation, buying an EV can allow you to at your own speed and place you in total control of your vehicle. You’ll have a solid grasp on your total cost before you start worrying about potential wear-and-tear charges that can add up after the expiration of the lease. No restrictions on your vehicle If you feel that the freedom of the road shouldn’t be restricted, then getting an EV might be the best option for you. It means you won’t be shackled by the odometer of your vehicle, and will be able to enjoy the freedom of the road. Apart from the ability to drive without limitation and with complete ownership, you have the option of adding any bells and whistles you think will are your preference to personalize your vehicle. Incentives and credit when purchasing an EV, you can avail a myriad of financial incentives. One of these is the credit, valued up to $7500. Some states also offer rebates to lower the cost to purchase a climate-conscious vehicle. But these incentives apply only for the person who owns the car. Therefore, if you were to lease you won’t be able to be eligible for these incentives. Drawbacks of buying electric cars The electric vehicle space has expanded and more affordable options are popping up but they nevertheless have costs that are higher than a conventional option. Higher prices also come with rapidly changing technology and higher maintenance costs. The upfront costs for expensive vehicles tend to be more costly than conventional cars, with an average of $66,997 as per Kelley Blue Book June 2022 data. Electric vehicle drivers typically carry almost identical credit profiles that those who finance luxury cars and pay , according to an . This makes the process more difficult for those who have less than perfect credit scores. Shop and save Borrowing money for an electric vehicle requires the same approach as one would take to reduce the cost of an ordinary loan You should shop around before submitting an application for loan and be prepared to leave. Technology is constantly evolving. Innovation in the electric car field is swift and especially true as legacy brands, such as Ford which has Mustang Mach-E and Chevrolet’s Bolt, Mustang Mach-E and Chevrolet’s Bolt have entered the market. But this growth also means that you’ll be stuck with the latest technology that is in the car you purchase. Although the latest developments may appear minor to the untrained eye, if the latest technology is the main reason for buying a car you should consider leasing in order to keep on top of the latest trends. Costs for repairs out-of-pocket any vehicle that is yours, you must pay for any necessary maintenance required during the ownership. But when it comes to an EV, this maintenance can be much more expensive than typical visits for a mechanic. Although the warranty for the battery will probably last between five and 10 years, EVs require replacement for other expensive repairs such as screens as well as advanced system updates. The main point is that it’s recommended to consider the issue of leasing or purchasing an electric vehicle the same way you would in the case of a conventional vehicle. For some, the advantages of the newest available tech might outweigh the disadvantages of ownership in full — while, for others, getting behind the wheel of a vehicle with confidence and incentives makes more sense. If you decide to buy an EV, to understand the additional costs of ownership and make the most of . Lease an EV in contrast will require the same care as it would typically. Check out a few leases and understand the whole of the contract prior to signing an agreement to lease.
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Writen by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers with the ways and pitfalls of borrowing money to purchase a car.
Editor: Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers gain the confidence to manage their finances through providing clear, well-researched information that breaks down complex subjects into digestible pieces.
Auto loans editor
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