First rule of EV acquisition – lease, don’t buy
You will notice the careful wording of the title of this article. It is more important to look at the cost of driving the Nissan LEAF, than it is to look at the cost of owning the Nissan LEAF. Let’s examine why.
Should you buy or lease?
The first thing to recognize is that vehicles used for transportation don’t appreciate – they depreciate. Still, the answer to the question of buying vs. leasing is a personal one. A key factor is to look at your own experience in vehicle ownership. This applies to any new vehicle acquisition – not just that of the Nissan LEAF. If you tend to keep your cars for their entire useful life (perhaps ten years or more), you will likely be better off buying. Why ten years or more? Because the average new car loan today is five years and three months according to Experian. That said, one third of new car buyers in February opted for new car loans of six years or more according to J.D. Power. By the time you pay off your loan, and take maintenance and repair costs into consideration, your cost to own per year will start to decline over an extended period of time. But these costs are heavily front-loaded in the first five to six years.
Another consideration is repair costs, as noted aboved. Most non-luxury brands today offer a three year or 36,000 mile comprehensive (often called bumper-to-bumper) warranty with a powertrain warranty that extends to five years or 60,000 miles. Out of pocket repair costs could occur from the fourth year on for vehicle electrical systems (power seats and windows, audio systems, etc), and from the sixth year on for potentially more expensive powertrain repairs. According to the Kelly Blue Book website KBB.com, as of February 2012 the average new car holding period was 71.4 months, or just shy of six years. We would not be surprised if that holding period has risen in the past two years. Paying off your new car including purchase cost, interest, taxes, insurance, maintenance and repairs is typically not something that most new car buyers think of. Depreciation alone in the first two years takes a huge chunk right off the top. A 2013 Chevrolet Impala LT had a Manufacturer Suggested Retail Price (MSRP) of $27,385. According to Bankrate.com, it will depreciate $17,983 over five years, and cost $41,327 over that timeframe. You would fetch less than $10,000 at trade-in time. If you want ownership with reduced overall cost, consider buying a low mileage two year old car with the intent to replace it about every four years before expensive repairs start to kick in.
Why you should lease your next electric car
Cars have been around for over a century. In fact, electric cars have been around for over one hundred years also. But the current crop of mass-market electric vehicles (EVs) started arriving in early 2011 for the most part. Lithium based batteries have been used since the early 1990’s in commercial applications – primarily small electronic devices such as phones, cameras, and laptops. Their use in EVs requires much more power. This is accomplished by stringing together huge quantities of lithium cells into modules which are then combined to create the battery pack. For example, the Nissan LEAF battery pack consists of 192 cells placed in 48 modules. Lithium based batteries are still being developed and their ultimate potential for use in an EV application is far from perfected. It is this battery development, refinement, and improvement that provides the key reason to lease your next EV.
Most mass-market EVs currently have mid-20 kilowatt hour (kWh) battery packs. These generally provide a fully-charged driving range of 70 to 90 miles. The Toyota RAV4 EV carries a battery of almost 42 kWh but it is not mass market in either price ($49,800) nor geography (California only). Tesla’s Model S totes either a 60 kWh or even larger 85 kWh battery pack around, but owners pay for it in both cost and vehicle weight. Tesla claimed in 2013 that they would offer a pre-paid battery replacement option – $10,000 for the 60kWh or $12,000 for the 85 kWh. Owners on the teslamotorsclub.com blog have stated that this option never materialized, and the cost to replace a reduced capacity battery was quoted at $45,000 by Tesla to one Model S owner. Nissan has never quoted a replacement cost for the LEAF battery. If leased rather than purchased, the battery replacement cost is moot as the replacement burden falls to the manufacturer or the subsequent owner. Said subsequent owner is acquiring a two to three year old vehicle at a lower cost than new, but is also acquiring a two to three year old battery. If your intent is to truly own a low mileage, low driving distance, city-only vehicle, this may be the way to go. Used 2011 LEAFs can currently be had for anywhere between $14,000 and $20,000 on autotrader.com. Given the high current replacement battery costs, the developing technology, and the undeniable fact of reduced driving range over time, the most reasonable way to acquire any new EV – not just the LEAF – is to lease it.
So – What does it cost to drive a Nissan LEAF?
In many major markets Nissan is still offering a 2013 Nissan LEAF S for $1,999 initial payment and $199 per month for 36 months. This rate applies to Tier 1 credit holders and some Nissan competitors have offered similar deals. When leasing an EV, the federal $7,500 tax credit does not come into play as the manufacturer takes the credit and reduces the capitalized cost of the lease by the same amount. With a purchase, the purchaser must wait until the following year to apply to receive the tax credit.
According to the EPA, the average cost to fuel a Nissan LEAF is $550 per year (based on 15,000 miles per year), or less than $50 per month. Compare that to what you are spending on gasoline now. With fuel being the second-largest cost of ownership over the first five years (according to Consumer Reports) it is easy to see the advantage of an EV as energy costs can be as low as one quarter the cost of gasoline. As we have written in another article (found here), the cost of gasoline has risen much more than the cost of electricity over a ten year time frame.
The cost to insure will be similar to other compact cars with some insurance carriers offering electric car discounts, sometimes classified as hybrids by the insurance company. Certainly the cost to insure the LEAF will not be higher than a comparably sized gasoline powered vehicle.
Finally, when one looks at electric cars in general, maintenance costs are dramatically reduced. There is no oil or filter to replace, no tune up required, and no exhaust system to rust. The electric motor consists of one moving part (plus the bearings to support it). In addition, think of your weekly trip to the gas station that you will no longer need to make and add that time saved to your personal account.
One additional cost will be the acquisition of an item called an EVSE (electric vehicle supply equipment). Many LEAF owners get by easily using only the supplied 120-volt EVSE that comes with the car. Charging takes longer, but if you’re done driving by 9:00 PM and don’t leave until 6:00 AM that still allows for 9 hours of charging. For many owners this will be adequate. Should you need additional capability, there are now many aftermarket choices to choose from. Just type 240-volt or Level 2 EVSE into your favorite search engine and you will find many alternatives for less than $1,000, some significantly less.
Acquiring an EV today requires careful examination of your real driving needs and your mindset about owning vs. leasing. Many people are averse to the idea of leasing a vehicle. We used to belong to that camp. But when the next generation LEAF, due in a couple of model years, offers the possibility of more range along with improved features it has the potential of relegating the current model to the equivalent of the iPhone 3. Not that it’s a bad phone, but who wants an iPhone 3 when you can have Siri?