Evaluating the new J.D. Power EV ownership study

by Ernie Hernandez on November 11, 2012

Silver LEAF being driver

Does an EV lease make more sense?

J. D. Power and Associates has just released a study (found here) of the issues surrounding and driving the move into the electric vehicle (EV) segment. With a significant history of focusing on and evaluating the automobile market in general, it is worth taking a closer look at this study.

The three most common EV rejection factors according to the study are price, vehicle size and reliability. We will take a look at each of these three issues over our next several posts.

According to Neal Oddes, senior director of the green practice at J. D. Power  “There still is a disconnect between the reality of the cost of an EV and the cost savings that consumers want to achieve.” Our own experience with the ownership of our 2011 Nissan LEAF has influenced our thinking in this area, along with many of the other developements in the EV world since we made our decision to purchase our car.

First, we need to make a couple of assumptions. The EV of choice needs to be suitable for your situation. If your driving needs exceed the capabilities of a pure EV, perhaps you would be better suited to a hybrid or even a high-mileage gasoline powered vehicle. We also need to assume that the price of gasoline will continue to rise faster than the price of electric power in your region, as it has over the past ten years nationally (found here). With those assumptions out of the way, let’s take a closer look at the cost issue.

J. D. Power states that it would take an average of about 6.5 years for EV owners to break even with current monthly fuel savings of $129 per month. EV owners average $18 per month to recharge their vehicle while gasoline purchases would set them back an average of $147 per month according Power. This, however, does not take into account the rising prices that could be expected in both commodities. If gasoline prices continue to rise at an accelerated rate compared with electric power rates as noted above, the time frame to break even would be reduced.

More importantly, these assumptions of the J. D. Power study involve a vehicle purchase. Should one choose to lease a Nissan LEAF, there is currently a very attractive lease rate. Assuming Tier 1 credit, the current LEAF SV can be had with $1,999 down, and $199 per month for 36 months in many markets nationwide, with some areas offering a $249 per month lease payment. Certainly lease offers are subject to change, but taking a close look at current offers and dialing in various parameters is worthy of your consideration.

If you are a typical American new car owner, you trade in your car every 71 months (5.9 years) according to Kelly Blue Book (found here). Assuming gas prices rise faster than electricity prices, even if you purchased your LEAF, you would likely recoup the EV premium in that seven month difference between 5.9 and 6.5 years.

If you could drive a new car every three years, instead of every six, and save money in the process by leasing, would you do it? We have generally been averse to leasing, as essentially you are renting a car long term and the car payments never end. But if you own a gasoline powered vehicle, the trips to the gas station never end either. And they cost more every year. Also typically as gasoline engined cars age, fuel economy goes down with wear and tear of the engine and drivetrain. These factors are forcing us to reconsider the purchase versus lease decision even for our own situation. Too, by leasing an electric vehicle, you release yourself from the burden of future battery replacement costs, or very long term battery capacity reduction concerns – the bugaboos that the naysayers like to throw our way. One additional benefit of leasing – you are leaving yourself open to the possibility of better battery technology coming down the road and not obsoleting your car, reducing its trade in value even further.

We will review some of the other topics presented in the study in our upcoming posts.

{ 8 comments… read them below or add one }

Tom K November 11, 2012 at 9:12 pm

I would have thought EV battery range and time to charge up the battery would be major factors in rejecting an EV purchase. I find my LEAF is a very reliable car and more than adequate size…

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Ernie Hernandez (LEAFguy) November 12, 2012 at 6:20 pm

Tom, driving range will certainly be an issue with some. We chose to focus just on those issues mentioned in the study. The J. D. Power study focused on those that were already considering an EV. Likely they are aware of the range capabilities of the vehicle. I’ll put a link to the study in the article.

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Steve C. November 12, 2012 at 4:53 pm

The lease, at least in our situation, is definitely a money saver. We leased a Leaf so that my wife could park our Honda Pilot, which was getting a paltry 14 mpg. I calculated that we were spending close to $300/month in gasoline, and that my lease was essentially $225/month including tax and no money down (thanks to the California rebate). Add in the maintenance cost of the Honda, plus the fact that we didn’t have to wait until tax time to claim the $7500 federal tax credit, and it was a no brainer.

All we have to do is drive the Leaf 1000 miles per month to maximize our 12,000 mile per year lease, and it pencils out. In the meantime, we keep the Honda for longer drives or when we need to shuttle more than 3 kids around, which is fairly uncommon. If anything, I find myself driving the Honda once a week just to keep the battery charged!

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Ernie Hernandez (LEAFguy) November 12, 2012 at 5:49 pm

Steve – Welcome to Living LEAF. Your situation is exactly the scenario that I had in mind as I wrote this. Many say that it is unfair to compare against an SUV or larger vehicle, as that is not reality. As you (and we) have demonstrated, it is reality for a certain percentage of the population. We also kept our previous daily driver (a paid off 2004 Quest minivan) for longer trips and family vacations. In your case you are saving some money each month and have retained ownership of your Pilot for those times when it’s needed. Meantime, you get a vehicle that suits your needs, has a “full tank” every morning, and is fun to drive. Many of those that talk about how expensive electric cars are just have not done the math – they are relying on media reports that may be biased against EVs.

Many families are already paying well over $200 per month for gasoline on a paid off vehicle. They could keep their current ride for those trips not LEAF suitable, and still end up with less money out of pocket each month based on current lease rates. Thanks for your feedback.

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Steve C. November 12, 2012 at 9:49 pm

Actually, I forgot to mention one additional benefit. Getting the Leaf allowed me to sell a 2007 Infiniti M35 which was sitting in the garage, never driven. Essentially, the Pilot serves that role now, and we have an old 1995 Saturn SL1 which I use to run around town. Selling it put almost $16k in my bank account, which is far better than just looking at it in the garage.

I get about 28 MPG combined with the SL1, so we are spending dramatically less per month on fuel. I assume we’ll turn our Leaf in after 3 years with an eye on something with greater range. If battery technology hasn’t improved that much, maybe we go hybrid. Who knows?

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Ernie Hernandez (LEAFguy) November 13, 2012 at 1:58 pm

Thanks for the update.

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Craig Bozorth March 20, 2013 at 6:12 pm

I’ve visited two dealerships and find the price for a 2013 ‘S’ model about the same. I am not getting a clear picture, though, on the $7.500 rebate. Must I wait until the end of the year?

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Ernie Hernandez (LEAFguy) March 20, 2013 at 9:18 pm

Craig – Welcome to Living LEAF. There is no $7,500 rebate. There is a $7,500 Federal Income Tax Credit. If you buy a LEAF today, when you file your income tax return for 2013 next year, you would apply the credit against your income tax. If you do not pay $7,500 or more in income tax, you will not receive the entire $7,500 credit. Should you choose to lease the LEAF, Nissan will take the credit immediately and apply it toward a reduction of the capitalized cost of the LEAF, which will, in effect, reduce the cost of the vehicle to you by $7,500 today. I hope that helps.

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