Summary
- Nearly 80% of new EVs bought at dealerships are now leased, up from 16% last year
- Leasing loophole allows EVs to qualify for federal EV incentive
- Leasing has become more popular due to additional discounts and cheap lease deals
- Leasing benefits include ability to upgrade to newer models and mitigate depreciation
- The rise of leasing in the EV market may have significant long-term impacts, including flooding the market with cheap, used EVs in the future
Article
With the electric vehicle market rapidly expanding, a significant trend has emerged – the rise of leasing amongst EV buyers. According to data from Edmunds reported by The Wall Street Journal, nearly 80% of new EVs purchased at dealerships are now leased. This is a stark increase from just 16% at the beginning of last year, far exceeding the industry average of around 20%. While these figures exclude direct-to-consumer EV manufacturers like Rivian, Lucid, and Tesla, the impact of leasing on the overall market cannot be understated. With Tesla, a major player in the EV market, also showing lower lease rates compared to traditional brands, the actual percentage of EVs being leased may be even higher.
One major factor driving the surge in EV leasing is the “leasing loophole” that allows any new EV to qualify for the $7,500 federal EV incentive if leased rather than purchased outright. This loophole enables buyers to avoid certain restrictions and caps placed on outright purchases, resulting in significantly discounted monthly payments. As a result, EV leasing rates have been on the rise since revised EV tax credit policies came into effect in late 2022. Automakers have also been offering additional discounts on top of the incentive, making leasing an attractive option for consumers.
In addition to the financial incentives, leasing an EV offers other benefits that may appeal to buyers, especially those new to electric vehicles. With EV technology constantly evolving and improving, the ability to upgrade to a newer model quickly is appealing to many. Leasing also allows consumers to test out an EV with low commitment, as well as mitigate the fast depreciation rates that electric cars typically experience. As a result, the market is seeing a surge in cheap lease deals for popular EV models, enticing more customers to opt for leasing rather than purchasing.
While leasing may be driving EV sales currently, it is uncertain whether this trend can sustain the market in the long term. As an increasing number of leases end in the coming years, there may be a flood of lightly used EVs hitting the secondhand market. This could be advantageous for buyers seeking a deal, but it may also impact residual values and the overall stability of the market. It will be interesting to see how the leasing boom ultimately impacts the EV market and whether it leads to a significant influx of affordable, used EVs in the near future.
In conclusion, the rise of leasing in the EV market is reshaping how consumers access and own electric vehicles. With the allure of financial incentives, technology upgrades, and low commitment, leasing has become a popular choice for many EV buyers. However, the long-term implications of this trend remain uncertain, as the market may face challenges with the influx of used EVs in the future. As the EV market continues to evolve, it will be essential for industry players to adapt and innovate to meet the changing demands of consumers.
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