To lease, or not to lease, that is the question

An informal poll of the 198 mynissanleaf.com model year 2013 owners showed that a whopping 75% of them leased instead of purchased. They will drive their cars 10,000-15,000 miles per year, pay a monthly payment after their down payment, and turn the keys in at the end. At first this sort of baffled me. There are however some reasons a lease looks flat out appealing.

Leaf Battery

First off, you get to leave the worry factor at the door. “What if new battery tech comes out in three years and makes this car looks like a kids toy?” There are a lot of these fears that come from people interested in EVs. It’s a valid concern, further highlighted by rapidly changing world of EV batteries. Nissan Leaf’s for example have had reported much higher than expected capacity degradation in hotter climates. Some companies like Nissan and Smart air cool their batteries, rather than liquid cooling like Tesla and Chevrolet. Nissan is working to fix the situation in future generations of the lease by working on a battery that’s more effective in hotter climates. Further, car manufacturers seem to be aiming for a 300 mile range electric car to produce somewhere in the 2016-2018 model year. Clearly the retail cost of this is an unknown, as is the feasibility at anything below Tesla model S prices.

gas prices

Another significant factor is the cost to switch off of using their current gas guzzler. a 15mpg truck driven 12,000 miles per year eats 800 gallons of gas. Given a $3.50 per gallon cost, that truck costs $2,800 per year in gas alone. Given the same miles at 15 cents per kWh, and a kWh per 100 miles of 34 (a commonly referenced number), the same miles cost $612 on electricity, saving over $2000 per year. Some owners can even see the entire cost of leasing offset in gas savings. For a lot of potential owners this fact alone is enough to make the switch.

tax inceitves

Full electric vehicles get some impressive incentives from the federal government, to the tune of reducing your federal tax liability by up to $7500. If you tax earnings do not incur such a liability however, you may be better off leasing. Dealerships who get this tax incentive will frequently take the full amount off of your bill at the end of the lease, and/or possibly from your down-payment. Some states add to this by giving you a rebate, such as the $2,500 rebate offered by California.

I personally chose to purchase my Nissan Leaf due to a few things. 1) An under-valuation of just how good a deal it is to lease a leaf. I did not fully comprehend how different leasing an EV is to leasing a traditional car cost-wise. 2) An under-assumption of battery degradation and it’s affect on me. From the numbers it looks like my Leaf will have 70% of its original capacity in five years time (from purchase), and 50% of its capacity in ten years time. At this time I may have the option to buy a new battery, or I may have to take Nissan’s current offer of a new battery that keeps 70% or higher capacity for $100/month. 3) I like owning things. It’s true. There’s something about lacking monthly bills and debt that I highly appreciate. 4) I figure that the incentives may dry up when they’re currently slated to run out. In California there’s up to $10,000 in incentives to buy, coupled with manufacturers who sometimes take a loss selling you a vehicle just to stay compliant. It’s a crazy marketplace, and I don’t believe it’s sustainable. This works in my favor if EVs don’t get dramatically better by the time I want to sell mine, keeping my EVs value high. 5) I believed EV owners were toe-dipping, just testing the waters to see if they’d want to own an EV. I believed that they were likely to lose out big on tax incentives because when they were ready to purchase, these would be gone.¬† This may or may not work out.

I have mixed feelings about my choice to purchase, mostly dependent on the future. There are still a lot of unknowns with EVs, and I believe most people’s choice to lease is due to them. Only you can make the right choice for yourself when assessing your situation and risk tolerance. I only urge you to research leasing vs. buying more than you may have thought to do with past vehicles.

The Decision To Buy

I was in the market for a used pickup truck. I reasoned that it would be cheap, practical, and give enough headroom for my tall guy frame. So how exactly did I go from a used truck to a new electric vehicle?

Miss EVLife recommended I look into a hybrid, something like a Honda Prius. She reasoned it would save money in the long run (we’re frugal people). I was worried they would be small people cars, and that the high cost may not be offset during the lifespan of the vehicle. I heard an interesting statistic, most fully electric vehicles (EVs) are sold at a loss. Some reports have that number for some car manufacturers as high as $10,000. I then heard another interesting statistic, between California and the federal government, about $10,000 worth of tax incentives are available when buying an EV new. That really got me thinking.

EVs come with questions, some end up being limitations or problems, and some end up as unexpected benefits. The following explanations are mostly given for my car, a 2013 Leaf with QC & 6.6kWh charger.

  • Range: It’s a big factor. I quickly found that today’s EV ranges are advertized somewhere between 75 (Leaf & Equivalents) and 300 miles (Tesla). Is this entirely genuine? Well that depends on a lot of factors, which I should preface also apply to the range “single tank range” of regular old internal combustion engine (ICE) vehicles as well. Speed, elevation change, and accessory use (blasting A/C, etc.) being the biggest ones. Road trips are possible, but I wouldn’t do longer trips up the coast in my Leaf. 80 miles, sit at a gas station for 20 minutes (if QC is available, this is more limited) or 3 hours (Level 2). Sure you can make this scheme work, but I’d prefer to road trip in a car with a gas tank (or maybe a Tesla, ah wouldn’t that be nice?). Here is the range chart user TonyWilliams posted for the Leaf
  • Charging (ICE equivalent): So how long does it take to charge an EV? This is also a more complicated answer than it seems like. The reason for this is partly because, as it turns out, We’re used to filling out gas tanks when they’re near empty, it’s how we’ve operated ever since getting a learners permit. I’ll give those numbers, and we’ll go from there. One thing to note is that with this car the level1 and level2 chargers are actually onboard, so the object we’d normally want to call a “charger” is actually an EVSE (Electric Vehicle Supply Equipment). Now the 2013 QC equpped leaf has many ways to charge. The vehicle comes with a level 1 EVSE, which is intended to use as a “backup”. It charges the vehicle on a normal household outlet, 0%-100%, in about 21 hours. A true, taking full advantage of the 6.6kWh charger, EVSE will charge the car 0%-100% in about four hours. There are also level 3 quick chargers (QC) that will charge from 0%-80% in about 20-30 minutes. Why am I giving you a statistic for 80% here where I gave the others for 100% you may ask. The reason behind this is that QCs need to stop giving you their insane charge rate before they hit the upper limits of the battery.
  • Charging (EV thinking): My commute is 40 miles round trip. I wake up with an 80% charged EV (it’s set that way to prolong battery life), I drive to work and am around 54%, then come home ending around 32%. I’ll do some chores, and getting to 10% isn’t likely. I usually plug in when I get home, and when I need to use my Leaf it’s got enough charge for me to do so. In my three weeks of ownership I’ve never needed the car but been unable to use it because of its battery life. If I was doing true 30amp 6.6kWh charging my post commute back to 80% would likely take about two hours.

Cost: I’ll admit I’d never really known the cost of filling up my gas tank throughout the years. I’ve always had an inelastic need/want for gasoline. If I needed to get to my job, I filled up. If I wanted to go on a road trip, I went. Here’s the thing about buying a vehicle though, it’s not going to magically change fuel efficiency in the coming years. So if you’re the frugal type car buying is a great time to analyze. My analysis was as follows, for ownership (not leasing).

  1. Fuel: Consider driving your vehicle 125,000 miles in its lifetime. That’s about that my replaced vehicle got. Consider static gasoline and electricity costs (for the moment) of my rates, which are about $4/gal gasoline, and 10c per kWh of electricity. For the sake of comparison and simplicity I’ll be discussing a 25mpg car, a 50mpg car, and an EV that uses (charging loss + battery) 34 kWh per 100 miles. Over 125,000 miles, a 25mpg car needs 5000 gallons of gasoline, a 50mpg car needs 2500 gallons of gasoline, and an EV needs 42,500 kWh of electricity. The cost for the 25mpg is $20,000 in gasoline, the cost for the 50mpg car is $10,000 in gasoline, and the cost of the EV is $4,250. I’m personally coming from a 25mpg type car, saving about $15,750 over the lifetime of the car if I’d have replaced it with something similar.
  2. Maintenance: After changing oil, oil filters, transmission fluid, transmission filters, brake pads, a fuel pump, a valve cover, various engine gaskets, and even an engine mount, I ran out of steam fixing my last car. There are pages and pages of maintenance guidelines, which ran through my mind while pleasantly looking under the hood of EVs. It’s a bit startling. EVs need much less space under the hood than their internal combustion counterparts. They also require much less maintenance. For the Leaf, you rotate your tires, occasionally replace brake fluid, inspect various things, and change the cabin air filter. I may be leaving something off, but that’s the gist of it.
  3. Insurance: Well, it is a new car. Long gone are the days when I didn’t even care to put comprehensive on my old (KBB $1200) car. That said they really aren’t bad, you just have to shop around. Repairs can be oddly expensive for this new model car, so you’ll want some coverage. I’ve heard of very expensive headlight repairs, things like that.
  4. Incentives: For my state (CA) and income level, I am receiving $10,000 back in the form of rebates. To say $10,000 is off the purchase price IS disingenuous. The issue is that you’re still paying the sales tax on that initial $10,000 (and the opportunity cost of that money, from the time of sale to the time it’s back in your hands). The breakdown of this is that the CA Clean Vehicle Rebate Project gives you $2,500 back about two months after purchase & application date. The federal government gives you UP TO $7,500 back at tax time after purchasing an EV. The statement of “up to” is because you need to have $7500 of federal tax liability to get this much off your taxes. The other “up to” caveat is based on which car you purchase because they give out money based on battery size. Full EVs I believe always get the full rebate, while plugin hybrids get considerably less.
  5. Fixed Upfront Costs vs. Future variable Costs: Gas is variable, and so is electricity. Gasoline does seem to be much more so however.

Non Cost Factors:

  • Smog check? Shmrog check! No need.
  • HOV Lanes have no magic formula for monetizing¬† HOV lane usage, but in California that’s certainly a perk.
  • SO QUIET. With my old vehicle I heard a lot more noise, be it engine noise, road noise, it all just added up. When you get into an EV with the car windows down and begin to drive you just get a zen like quiet. At highway speeds it’s more of the same + road noise.
  • They are also fun to drive, or slow to drive, depending on how you want to drive and the range you need. The leaf has about 200lb torque off the line, and the Chevy Spark EV has about 400. In real terms they’re just plain fun if you feel like stomping on the peddle, and easily keep up with highway traffic. The salespeople will turn off the ECO mode and tell you to floor it. While this is fun, it’s not terrible indicative of normal EV driving habits. While you wouldn’t have noticed driving inefficiently much in a gasoline car, you will in an EV. This isn’t due to a drastic change in physics, but rather a smaller “tank” making small changes impact your day more. Most EV drivers drive in the slower lanes, maintain speeds using “one pedal driving”, and generally try not to go pedal to the metal. That said I love the “punch” of my EV, even if it’s not a daily feature I use.
  • They are very space efficient. Without an internal combustion engine EVs are free to return that extra space to the car designers. In some cases choices were made to shorten the overall length of the car to improve “parkability” in more urban areas. In other cases you get extra passenger space and cargo room for the car length.

All in all I found an EV to be the right decision for me, after some serious soul searching.