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6 min read Published 23rd September 2022
Writen by Rebecca Betterton Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ins and outs of securely borrowing money to purchase a car.
Edited by Rhys Subitch Edited by Auto loans editor
Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers feel confident to control their finances through providing clear, well-researched data that breaks complicated topics into bite-sized pieces.
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The market has dramatically grown over the past year, EVs and hybrids made up 4.5 or 6.6 percent of registrations between January and June 2022, according to a 2022 second quarter market trend report by . But even as options other than Teslas and Toyotas grow, diving in the deep end to a new car isn’t easy. In addition, with an average cost of more than $66,000 in the line for an electric vehicle, the options are endless — financially and logically. If you’re in a category of curiosity rather than confidence, an EV can help you determine whether an eco-friendly vehicle is the right choice for you, but is not recommended for those ready to commit. Lease versus purchasing an EV
A lease on an electric vehicle could allow you to experience hands-on driving an otherwise expensive vehicle, but can cost more in the long run , if you go over the limit or when you reach the end of the lease.
Is it better to lease or purchase electric cars? In terms of the decision of whether to go with it, it’s fairly easy to determine which route is the best choice for you and your pocket. If you intend to switch up your car every few years and are able to handle mileage restrictions then leasing can be ideal. If you’re looking to have the freedom of ownership purchasing is the best way to go. However, the world of electric vehicles remains at its beginnings, the sales of electric vehicles are growing every year. Thus, taking on long-term ownership for a vehicle which is not yet on the market isn’t always a good idea. To decide which is the best option for you consider the benefits and drawbacks of each option. Leasing an electric car Pros to leasing an EV Vehicle warranty . Lower monthly cost. technology features
Cons of leasing an electric vehicle Faster vehicle depreciation Inability to sell the vehicle
Benefits of leasing an electric car The benefits of leasing an electric car include increased security with a full-service which means fewer trips to the mechanic -which means a lower cost per month and access to the most recent technology. Vehicle warranty Generally, vehicle leases last 24 or 36 months, and during the course of time, your vehicle could have technical issues. When it comes to EV servicing, it is the requirement to replace the battery is the most frequent issue you might encounter. If you lease, however your car, it is likely that the vehicle will remain covered by warranty, giving you the potential savings of thousands. Lower monthly payment A car you lease gives you to drive the car for a predetermined duration of time, and then pay each month. It is usually cheaper each month than a car payment for the same vehicle. On top of the lower monthly cost, you will also spend less money upfront and likely leave the lot without putting any cash down. Leasing costs less
The average monthly cost for leasing a new vehicle in the fourth quarter of 2022 was $540. $667 when buying, according to .
Newest tech features While models change from year to year for traditional vehicles aren’t as dramatic for electric vehicles, the field is advancing at a much quicker rate. Leases give you the opportunity to be at the forefront when it comes to available technologyinstead of being stuck with the previous year’s accessories. The Hyundai Kona, for instance, received some notable upgrades from 2021 to 2022 models with a new infotainment center and the latest driver assistance technology. There are some disadvantages to leasing an electric car While leasing an electric vehicle can expose you to the experience of driving electric, it does come with some downsides. Primarily the challenge of leasing approval, the inability to quit the lease, and limitations on your vehicle. Lease approval to lease a vehicle can prove to be a lot more difficult than an auto loan particularly for those with low credit scores. Although you still may be eligible to lease a car even without a perfect credit score, it’s likely to result in a higher monthly cost. Take a look at the average credit score of people leasing new cars in the first quarter of 2022- 736 — that is above the average 729 score for a loan, according to Experian. The inability to sell the car The process of letting a car lease end isn’t easy nor cheap. Therefore, if you decide not enjoying the car that you lease, you’ll likely be entangled in the lease , or expected to pay hefty fines to exit the . Based on the terms of your lease, you may be expected to pay for the residual value, in addition to the remaining charges and lease payments. Car restrictions when signing off on an you will need to consider a number of factors to consider: mileage, maintenance and modification of the vehicle. If you lease your electric vehicle, you will likely be limited to driving from 12,000-15,000 miles per year. You could also be required to pay for maintenance and will not be able to customize the car. The benefits of buying an electric car to leasing an electric vehicle Full ownership with no limitations on the vehicle Credits and tax incentives
The disadvantages of leasing an EV Expensive upfront cost Rapidly changing tech Out-of-pocket repair costs
Benefits to buying electric cars The primary attraction of instead of leasing is the thrill of owning your car completely. You can do whatever you would like with your vehicle and not be restricted by the lease options the company makes to offer or worrying about costs. If you own an electric vehicle you also have the option of taking the full benefit of tax incentives and credits which otherwise would be directed to the lessor. Full ownership Depending on your financial situation buying an electric vehicle will let you go move at your own pace and place you in total control of the vehicle. You’ll have a clear knowledge of your total costs before you start worrying about wear-and-tear costs that can add up at the end of a lease. No restrictions on your vehicle If you feel that your freedom on the open road should not limit you, buying an electric vehicle could be the right choice for you. It means you won’t be shackled by the odometer of your vehicle, and can enjoy the freedom of the open road. Other than the ability to drive at your own pace the full ownership gives you the ability to add any bells and whistles that fit your preferences to create a unique vehicle. Incentives and credit purchasing an EV, you can benefit from a multitude options of incentives. One of which is the tax incentive, which can be valued up to $7500. A lot of states offer rebates to reduce the price of acquiring a climate-conscious vehicle. These incentives are available only to the owner of the vehicle, which means even if you lease the vehicle, you wouldn’t get these benefits. The disadvantages of purchasing electric vehicles The EV market has exploded and more affordable choices are emerging however, these cars nevertheless have more cost as compared to conventional options. Prices are higher, but they also include rapid technological advancements and increased maintenance costs. Expensive upfront cost tend to be much more expensive than conventional vehicles, at an average of $66,997 according to Kelley Blue Book June 2022 data. EV drivers also tend to have similar credit profiles that those who finance luxury cars and pay , according to a . This makes the process more difficult for those with less than perfect credit scores. Save money and shop for an electric car requires the same steps as it would take to save money on a conventional loan: Shop around and then apply for a loan and be prepared to turn down the loan. The pace of technological advancement in the electric car field is rapid, and this is especially true as legacy manufacturers, like Ford with the Mustang Mach-E and Chevrolet’s Bolt, enter the space. However, this also means that you’ll have to live with the current technology in the vehicle you buy. Although the latest developments may appear minor to the naked eye, if a flashy technology is the primary reason behind a purchase, consider leasing to stay on top of the latest the latest trends. Out-of-pocket repair costs As with every vehicle you own you are responsible for any maintenance that is required in the course of ownership. However, when it comes to the electric vehicle, this maintenance can be much more expensive than normal trips for a mechanic. Although the warranty for the battery will probably last between five and 10-years, EVs require replacement for other costly repairs like screens and system updates that are more advanced. The bottom line It is ideal to think about the decision of leasing versus buying an EV in the same manner as you would when for a conventional car. For some, the benefits of the newest available tech could outweigh the inconvenience of full ownership — while, for others, getting behind the steering wheel of a car with confidence and incentives makes more sense. If you decide to buy an EV be aware of the extra costs that come with ownership and make the most of . Lease an EV, on the other hand will require the same care like it normally. Check out a few leases and fully understand the contract prior to signing an agreement to lease.
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Written by Auto Loans Reporter
Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ways and pitfalls of using loans to buy the car they want.
The edit was done by Rhys Subitch Edited by Auto loans editor
Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers gain confidence to take control of their finances through providing precise, well-studied information that breaks down otherwise complex topics into manageable bites.
Auto loans editor
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