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.