Should You Lease or Finance an Electric Vehicle (EV)?

Deciding to buy an electric vehicle (EV) is an exciting step toward a greener future, but once you’ve chosen your ideal EV, the next big decision comes: should you lease or finance it? Both options have their pros and cons. Traditionally leasing has been more popular in the luxury segment, whilst financing or a straight purchase has been the more popular choice for non-luxury vehicles. Below I will break down the core reasons for pros and cons for both and they are not your usual reasons compared to gasoline-powered engines.

Benefits of Leasing an EV

I am assuming you know the usual arguments for why a lease can be beneficial; no long-term commitment, flexibility to swap vehicles more frequently, lower monthly payments. With this in mind, why specifically lease an EV?

• Access to Newer Models: EV technology is rapidly evolving. Over-the-air software updates are a frequent happening as manufacturers fix software issues with their vehicles. Leasing allows you the freedom to swap vehicles more frequently without a possible financial burden and keep up with said technology.

• Test The EV Waters: Leasing is perfect if you’re not ready to commit to owning an EV long-term. Maybe you'd like to see what the hype is all about, but are not sure if you'll even really like it. If it's a no, simply return it at the end of the lease. Love it and the technology hasn't improved that much, then buy it if the residual is fair for market value.

• No Depreciation Worries: This is probably the biggest reason to lease. Electric vehicles still tend to depreciate faster than gas-powered cars, but with a lease, you don’t have to worry about the resale value. The leasing company takes on the risk of depreciation. This may change over time, but right now, your vehicle's depreciation must be considered.

• Rebates: You can still take full advantage of all rebates available to you in a lease. It usually needs to be a 4-year lease to get the full amount, but nonetheless, they are still available to you.

Downsides of Leasing an EV

In all reality, there are no specific downsides to leasing an EV at this point in time. There are the usual arguments like mileage limitations, but are you really going to drive that much in an EV or mainly use it for the benefits of driving around town or commuting back and forth to work?

Yes, you don't own the vehicle with a lease, but is that at all a negative when you're not sure if you even want it?

The one argument that still holds strong is if you know you want that specific EV model and know you will keep it for at least 6 years. I would be happy to break down the numbers for you, but usually a finance is cheaper in the long run than buying out the lease. It really depends on the rates and residual value of the lease.

Benefits of Financing an EV

• Ownership: Once you pay off your loan, the car is yours. This means you can drive it for as long as you want without any restrictions or mileage limits.

• EV Warranty: Your EV will more than likely have the manufacturers' normal vehicle warranty and a separate term for the EV components. This is usually in the 8yr/160,000km range where the batteries will be covered under the 70% rule. After a full charge, if they fall below this thresh hold, the batteries will be replaced.

Downsides of Financing an EV

• Depreciation Risk: As already mentioned, EVs still lose value faster than traditional gas-powered cars due to rapidly changing technology. If you finance your EV and plan to sell it before the end of your term, you may find you have negative equity (lien owed is more than market value).

Key Factors to Consider

When deciding whether to lease or finance your EV, ask yourself the following questions:

• How long do you plan to keep the car? If the answer is "long term", then financing is your best option. For any other answers, leasing should be your choice.

• What’s your driving routine? Financing would give you the flexibility to drive as much as you want without worrying about being over in kilometres, but will you really drive that much in your EV?

• What’s your financial situation? Just looking at what is cheaper per month as a payment is not the right strategy. Consider how long you think you'll keep the vehicle first and base it on that answer. Financing for 6 years and selling the vehicle in 3 could be far more costly that the monthly difference between a lease and a finance.

• Are you worried about depreciation? Leasing is the clear winner here as it takes the risk of depreciation off your hands, but if you finance, you’ll have to consider how quickly your EV will lose value. For that, you could look at the residual value in a lease for guidance. You will probably be surprised by how much it will depreciate over 4 years.

Conclusion

Take the time to assess your driving habits and budget to determine the best option for your lifestyle. Whichever route you choose, driving an electric vehicle is a great step toward sustainability and enjoying the benefits of modern automotive technology, but make sure your decision makes most financial sense.

With Find My Wheels Consulting, I can help you make the right decision based on your needs. Whether you’re looking to lease or finance your next EV, I can guide you through the process and break down all the numbers for you in order to make the decision that much easier. Reach out to me for personalized advice!