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

An informal poll of the 198 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.