Is it better to lease or buy an electric vehicle?
If your next car is an EV, is it better to lease it or buy it outright? Each option has its benefits and drawbacks, we’ll go over the basics in this guide.
The basic process for leasing or buying an EV is the same as it is for a gas-powered vehicle.
Buying: You will usually have a loan payment when you buy a car. You’ll pay off the loan over a set period in monthly installments. When your payments are complete you take ownership of the car from the loan servicer (i.e. the bank).
Leasing: When you lease a car, you rent it for a certain time (usually between two and four years). When the lease term is complete you return the car. You will often have the option to purchase it from the dealer.
Leasing an EV is popular due to the rapid introduction rate of new technology and models. Newer EVs can often go farther on a single charge than older models. By leasing an EV, you can upgrade to a new model at the end of the lease and stay on the leading edge of EV technology.
Some EVs are eligible for a tax credit of up to $7,500. The leasing company can roll that credit into your lease cost, saving you money on your monthly payment. Since a credit is only helpful if you owe taxes at the end of the year, not all families can take advantage of the credit if they purchase a vehicle upfront. Leasing helps more people take advantage of the tax credit.
Leasing companies are not required to pass on tax credits, so be sure to check on this before you sign your lease.
All vehicles lose value in their first few years on the road. Electric vehicles may lose value more quickly than gas vehicles because of how quickly the technology is evolving. Leasing allows you to try out a vehicle without taking on the risk of losing money if you want to sell it after a few years.
Buying will save you money. According to Consumer Reports, “In general, two back-to-back three-year leases will cost thousands more compared with buying a car (with a loan or with cash) and owning it over that same six-year period.”
When you lease a car, you have a cap on the number of miles you can drive per year (often 10,000-12,000 miles). If you go over that limit, you may have to pay significant fees. You might also face high charges if the vehicle is damaged when you return it.
The incentives available for EVs are the biggest draw for many Vermonters. Local and Federal incentives are very compelling. Many automakers, auto dealers, and electric utilities are also offering incentives. You can check out the Drive Electric Vermont Electric Vehicle Incentive Calculator to understand the eligible incentives
Whether you buy or lease your EV, there are many advantages to going electric. You’ll save thousands of dollars over the life of the car in fuel and maintenance costs. And you’ll reduce your carbon footprint from day one.
- Current rebates and incentives are favorable. There are major state, utility, and federal incentives for EVs.
- Leasing is a good option if you want to stay on the leading edge of EV technology.
- As with a gas-powered car purchase, buying an EV outright will usually save you money in the long run.
In the end, you need to crunch the numbers and feel confident about the EV you'd like to drive.