If you’re thinking about buying an electric car in 2024, you’re probably wondering how much electric car you can really afford. There are electric vehicle tax credits of up to $7,500 for the purchase of a new electric vehicle, and up to $4,000 for the purchase of a used electric vehicle, but not every new electric vehicle qualifies for this full amount of tax credits.
And if you buy a used electric car, you may have concerns about the quality of the used electric car battery that has already traveled thousands of miles. What if there was another way to get behind the wheel of an electric car, without the long-term commitment of purchasing an electric car? Well, there is: it’s called leasing.
Leasing a car is nothing new in the automotive industry; For many years, car shoppers have had the option of leasing rather than buying. But some electric car leases may be better than buying them, depending on your car shopping needs.
Let’s take a look at the biggest reason to lease an electric car instead of buying one.
The main reason to rent an electric car: Try it before you buy
Leasing an electric car allows you to try out a new electric car without a long-term commitment. Many people are curious about electric vehicles, but have concerns such as range concerns, lack of public charging stations, and whether EVs have as much value as gas-powered cars. Buying an electric car with so many unknowns can seem risky.
When you rent an electric car, you can get a short-term commitment. Some typical car leases last from 18 to 36 months. Here are some car companies that offer electric car rental:
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- Hyundai: Lease the 2024 IONIQ 5 SE Standard Band starting at $343 per month for 36 months with $5,008 due at signing.
- Pole Star: Lease a long-term, single-engine 2024 Polestar 2 starting at $349 per month for 27 months with $5,349 due at signing.
- Volvo: Lease a 2024 Volvo C40 Recharge starting at $483 per month.
These lease offers were valid as of January 15, 2024 but may expire and may not be available in all states. The exact terms of your car rental will depend on the dealership and the manufacturer’s suggested retail price of your vehicle. But leasing an electric car may give you a lower monthly payment than you could get from buying a new electric car and taking out a car loan.
Do EV leases get the full EV tax credit?
Another fun fact about leasing an electric car is that leased electric cars are eligible for the full $7,500 in new EV tax credits. If you buy a new electric car, you may only get $3,750 of this tax credit (or less) because of federal rules regarding where the electric car is manufactured and where its battery materials come from.
When you lease an electric car, you (as the customer) don’t get the $7,500 tax credit directly. Instead, the car dealer takes a $7,500 credit and (ideally) passes the savings on to you, in the form of a discount on the price of your leased car. For example, both Hyundai and Polestar advertise their lease prices that include a $7,500 rebate of the EV tax credit.
But just like the lease price, whether or not you get a discount on the leased vehicle tax credit is ultimately up to the dealer. Some dealerships may mark up the price of a leased car before they discount it, which means you don’t really get that full EV tax credit.
Renting an electric car: pros and cons
Renting an electric car has potential advantages and disadvantages.
Renting an electric car: pros
- The monthly payment for a lease may be less than purchasing a new electric car: For example, if you bought a new Volvo C40 Recharge (MSRP $53,600) with a down payment of $12,000 and a 48-month car loan at a 7% APR, you would have a monthly payment of $996. Rental price starts at $483 per month.
- You don’t have to worry about the depreciation of used electric vehicles: By leasing a new electric car, you get the latest electric car technology, the latest electric car batteries, and you won’t be on the hook for maintenance, repairs, or depreciation if the electric car loses a lot of its value as it transitions from “new” to “used.”
- No repair costs: With a lease, the dealer usually covers repair and maintenance costs. But you should still buy car insurance.
Renting an electric car: cons
- You don’t own anything after the lease ends: With a lease, you make a trade-off – you get a lower monthly payment (ideally) and lower ownership costs, but you don’t actually own the car at the end. When you buy a car, you can pay off the car loan and own the car with no monthly payments. Leasing a car is like renting an apartment, rather than building equity in a home of your own.
- You may owe additional money: Lease terms typically require that the vehicle be driven only a certain number of miles, such as 10,000 or 12,000 miles per year. For every mile you travel above that limit, you’ll have to pay a fee — like $0.25 per mile. You may also be charged a fee for additional wear and tear on the vehicle. Also, insurance for rented vehicles can sometimes be more expensive than purchased vehicles.
minimum: If you’re interested in electric vehicles, and don’t mind the complexities and potential downsides, leasing an electric car can fit your budget and avoid the risks and liabilities of purchasing an electric car. Make sure to get quotes from car insurance companies before renting an electric car.
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