The Price of an Electric Car Lease: Is an Electric Car Worth It?
Buying a new car is a major investment. For most people, it’s the second biggest purchase they make, after a home. And much like buying a home, buying a car with bad credit presents some challenges. Buying anything with poor credit can make it more expensive, thanks to higher interest rates if you even qualify for a loan. That being said, leasing an electric car may be an affordable option if have your heart set on an electric vehicle (EV).
Electric vehicles are attractive for multiple reasons, including the tax credits and incentives and reduced impact on the environment. Despite those benefits, though, an EV can be expensive to purchase and maintain. Although some electric cars, such as the Tesla Model S, have a price tag closing in on $80,000, many models fall within the $30,000-$40,000 range. For instance, the most affordable new electric car on the market in 2019 is the Smart EQ Fortwo at $24,000, while the Nissan Leaf and Hyundai Ioniq both come in around $31,000 before rebates and incentives.
Because buying an EV can be expensive, leases are an attractive option. The upfront costs and monthly payments can be lower than purchase costs, but before you opt for a lease, consider all of the associated costs.
The Price of an EV Lease
Generally speaking, the payments on an electric car lease are less expensive than purchase payments. Electrek lists average EV lease prices from dealers around the country, and has uncovered deals as low as $89 per month for a 36 months on a Chevrolet Bolt. This is after all rebates and incentives, assumes a down payment and acquisition fee of $7,590, and allows 10,000 miles, with a charge of 36 cents per mile for overages. Ultimately, this electric car lease deal works out to about $279 per month, for a total cost of $10,705 for three years.
Lease payments on other car models are higher, with some, like the Audi e-tron, which Electrek lists at just over $1,200 per month. Like leasing a gas-powered vehicle, leasing does allow you to drive a more expensive car for a lower monthly payment, but like any vehicle, you need to consider the initial acquisition cost and maintenance costs, which may put an EV out of reach.
Taking Advantage of Tax Credits
One of the most attractive aspects of buying or leasing an EV is the availability of tax credits. The federal government offers a tax credit of $2,500 to $7,500 on fully electric vehicles, with the exact amount depending on the size of the vehicle and battery capacity. The credit is available until 200,000 vehicles from that manufacturer have been sold, at which point it will begin to phase out. For the aforementioned Chevrolet Bolt, for instance, the credit has already been reduced to 50% and will phase down to 25% ($1,875) as of October 2019, until disappearing entirely in March 2020. Before visiting a dealership and calculating the cost of your lease, research the specific model you’re interested in to determine whether the federal tax incentive still applies, and how much you’ll qualify to receive.
Some states also offer incentives and tax credits, further reducing the electric car price . California, Colorado, Connecticut, Delaware, Maryland, Massachusetts, Oregon, and New York all offer some type of tax credit or rebate program for EV purchases, with some programs already on their way to being phased out. Other states offer incentives including reduced power rates for charging the vehicles, access to HOV lanes, or reduced tolls. Research your options before choosing a vehicle, as non-government programs may also be available. In Maine, for instance, Central Maine Power offers a rebate program for the purchase of specific EVs.
The Cost of Charging an EV
One benefit to leasing an electric vehicle is you don’t have to worry about the battery degradation common in electric vehicles. EV batteries can lose their power capacity over time, depending on how you drive, and even how you charge them between trips. With a 30,000 mile lease, that may be less of a concern — but you still need to consider the cost to charge your car.
Although most EVs can be charged on AC Level 1 equipment — a standard outlet on its own circuit — some vehicles may require AC Level 2 equipment for charging, which will require additional installation and costs. Cars with larger batteries typically need the AC Level 2 equipment, which has more safety features. Before purchasing an EV, make sure that your home has sufficient electrical capacity for charging, and if it doesn’t, what the costs for installation will be so you can include them in the overall costs.
On average, at $0.11 per kilowatt-hour, it costs $2.64 to charge a vehicle with a 70-mile range. When considering an electric vehicle, take into account how much you typically drive and how much battery power or range you need and the availability of a charging station to keep your vehicle battery powered. Use the vehicle cost calculator to get an idea of how much it will cost to run your electric vehicle as compared to a gasoline-powered car to get a full picture of the cost of ownership.
The Environmental Impact
For some people, the environmental benefits of owning an electric vehicle outweigh some of the extra costs. Carbon emissions are a significant concern in the climate crisis, but electric cars produce zero carbon emissions on the road. In addition, electric cars don’t use any fossil fuels (no gas or oil, unless that is the source of the electricity used to charge the battery), reducing overall consumption. This doesn’t mean that EVs have no environmental impact at all, as they do use resources and create emissions during the manufacturing process, and electricity production creates emissions, but driving an EV does represent an effort to help prevent climate change.
Considering a Hybrid
One option if an EV is out of reach financially is a hybrid vehicle. True to the name, a hybrid uses some combination of gas and electric battery power. The most common type is the parallel hybrid, which combines gas and electric power, depending on the type of transmission and driving conditions. A series hybrid only uses gas to power the battery, while a plug-in hybrid allows you to charge the vehicle for additional electric driving range. Prices range considerably for these vehicles, and they may not qualify for incentives, but the overall cost may be more affordable than an all-electric vehicle while still providing some cost savings and environmental benefits.
Getting a Personal Loan for an EV
Getting a loan for any vehicle can be a challenge if you have bad credit, and EVs are no exception. You can increase the likelihood of securing a loan by taking a few steps:
Fix Your Credit
To start fixing your credit, get a copy of your credit report and correct any incorrect or outdated information. Work on paying down your debt, and get current on any outstanding bills. Work with a reputable credit repair service to identify areas that will have the most effect on your credit standing and increase your credit score and likelihood of qualifying for a loan.
Work with a Reputable Lender
Don’t automatically accept the financing offer from the auto dealer. Shop around and consider reputable online lenders, who may offer loans with more competitive interest rates even if you have poor credit, or when you are ready to buy an EV once you’ve fixed your credit.
What are some advantages of an electric vehicle?
Electric cars have many benefits that include:
- Saving money due to their lower fuel cost
- Better for the environment
- Cheaper to maintain
- Safer than conventional vehicles
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