Summary
- Leasing an electric vehicle may initially seem like a good idea but may not be as financially sound as it appears
- Money expert Jade Warshaw recommends buying a used electric vehicle outright instead of leasing
- Leasing is one of the most expensive ways to operate a vehicle, even after considering cost savings and tax credits
- Electric vehicles depreciate faster than gas-powered ones, impacting monthly lease payments
- Mileage limitations and charging costs are additional factors to consider when leasing an electric vehicle
Article
Leasing an electric vehicle may initially seem like a good financial decision due to reduced gas costs and tax credits, but some experts, like money expert Jade Warshaw, advise against it. Warshaw recommends buying a used electric car outright instead of leasing. There are several reasons for this recommendation, including the fact that leasing is one of the most expensive ways to operate a vehicle. Even with savings from switching to electric and federal tax credits, the cost of driving the car remains high. In some cases, the full federal tax credit may not even be passed on to the consumer, as it goes to the company that leased the vehicle.
Another reason to avoid leasing an electric car is that they depreciate faster than gas-powered vehicles. In a recent study, used EV prices were found to have fallen four times faster than hybrids and six times faster than gas-powered cars, losing 24.7% of their value in the past year. Faster depreciation rates can lead to higher monthly lease payments, as the depreciation is factored into the lease payments during the lease term. Higher rates of depreciation mean higher monthly lease payments.
Mileage limitations are another drawback of leasing an electric car. Lease agreements often come with mileage limits, and exceeding this limit results in additional charges per mile. The average mileage cap is around 12,000 miles per year, with a typical penalty of $0.25 per extra mile. Going over the cap by 4,000 miles could result in an additional $1,000 due at lease termination. This can add up to significant costs over the course of the lease.
Charging an electric vehicle is generally cheaper than filling up a gas tank in a gas-powered vehicle. However, Warshaw points out that there are other factors to consider with charging, such as the time it takes and the cost of quick charging. Charging an EV at public stations can be more expensive and less convenient than charging at home. Prices to charge at home can range from $300 to over $1,000, excluding installation fees, depending on the type of charging unit. Overall, these additional costs and limitations make leasing an electric car financially unsound, according to Warshaw.
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