Is it better to buy or lease an electric vehicle?
Are you considering switching to an EV as a greener option but wondering whether to buy or lease an electric vehicle? With so many EV options on the road in Canada and more on the way, you might be wondering whether it’s better to start with a lease or buy.
You might be debating whether it makes more sense for you to buy or lease an EV, given that EVs are more expensive than their gas-powered counterparts. Making decision can be challenge, as both options have advantages and disadvantages. While your personal circumstances and needs will determine whether buying or leasing an electric car is the best option for you, we’ll explore the pros and cons of leasing and buying an electric car in this article to help you make an informed decision.
Lease an electric vehicle
Leasing an electric car is similar to leasing a traditional car. You’ll make monthly payments to the leasing company for the use of the car. Leasing an EV offers some substantial advantages over outright owning one. Let’s take a look at the pros and cons of leasing an electric vehicle.
Advantages of leasing an electric vehicle
Lower Monthly Payments: When you lease a vehicle, you agree to a predetermined residual that is decided by the manufacturer based on the projected resale value of the vehicle. You are therefore paying for the predicted depreciation of the EV. However, if you are financing an EV, you may owe more on your loan than the value of your EV because of the fast depreciation. By leasing, you agree to a predetermined residual value, which is the anticipated value of the EV at the end of the lease. As a result, even if the car’s eventual resale value is lower than expected after your lease is up, you won’t lose money. You can anticipate reduced monthly payments compared to financing the same EV. Therefore, with leasing an EV, lease payments are typically lower than loan payments, so you may be able to afford a higher-end electric car than if you were to buy it outright.
Depreciation: In general, new EVs tend to depreciate faster than comparable gas-powered vehicles. The reason behind this is that newer models depreciate more quickly than older ones since manufacturers replace older models with newer ones that have strong battery life and performance every few years. For example, the BMW i3 and Nissan Leaf can typically be found for a small portion of their original MSRP. When they were first released, these two cars were among the first mass-market EVs. Because EVs frequently develop significantly every few years, much like smartphones, leasing an EV may be more advantageous than leasing a conventional car.
Upgrading to a Newer Model: Leasing allows you to upgrade to a newer EV model every few years, which means you’ll always have access to the latest technology. Electric cars are always improving with advancing battery life, and new EV models are released by the auto industry all the time. In other words, a decision that appears wonderful today may not seem so terrific in the future. With leasing an electric vehicle, you’ll have a way out of your lease at the end of its term if you change your mind.
Disadvantages of leasing an electric vehicle
Mileage Restrictions: Most leases come with mileage restrictions, so if you plan to drive your electric car frequently, leasing may not be the best option for you. By accepting a lower limit, you can reduce your monthly cost; however, going beyond that limit will incur a mileage fee. You may have to pay additional charges if you exceed the mileage limit or if there is excessive wear and tear on the car.
No Equity: When you lease a car, you don’t build equity, which means you won’t have anything to show for your payments at the end of the lease term.
Buying an electric vehicle
Advantages of buying an electric vehicle
Buying an electric car means you own the car outright and can do with it as you please. However, it also means you’ll be responsible for all maintenance costs and repairs. Let’s take a look at the pros and cons of buying an electric vehicle.
Flexibility: Buying any car always gives you the most freedom, even when you’re dealing with a depreciation hit. One of the top reasons to get an EV is because of its many flexible options. You won’t be penalized for damage, mileage, restrictions, or EV customizations, despite the possibility of a depreciation hit. If you decide you don’t like your new EV, you can also trade it in for another vehicle. Because you are not locked into the lease, you can sell it or swap it out for another car without paying the remaining balance of the lease or through a third-party lease transfer company. In addition, if you own a business, you can qualify for the zero-emission incentives for electric vehicles, which include electric, hybrid electric, and hydrogen fuel cell models. Canadian businesses are allowed to deduct up to $55,000 of the purchase price the year the vehicle is put into service.
Ownership: When you buy an electric car, you own it outright and can keep it as long as you want, and you are building equity. You’ll also have something to show for your payments at the end of the loan term.
Disadvantages of buying an electric vehicle
Higher Monthly Payments: Since you’re paying for the entire cost of the car, your monthly payments will be higher than if you were to lease it. In addition to a higher monthly payment, you’ll also be responsible for all maintenance and repair costs, which can add up over time.
Depreciation: Like any car, an electric car will depreciate in value over time, which means you may not get as much for it if you decide to sell it in the future.
All the advantages of driving an electric vehicle are yours, whether you lease or buy one.
Electric motors are simpler to maintain and have fewer moving parts than gasoline engines. If there is no internal combustion engine or multiple-gear gearbox, an electric vehicle has little chance to break down. Another favorable thing about owning an EV, whether you buy or lease one in Canada, is its operating costs. You will unquestionably pay less to drive and recharge an EV than any comparable gasoline or diesel vehicle. Additionally, you will be qualified for the EV incentives whether you purchase or lease an electric vehicle in Canada. The Canadian government is offering up to $5,000 in point-of-sale incentives to Canadians who buy or lease electric vehicles, which will further reduce your upfront cost of acquiring an EV.
Deciding whether to buy or lease an electric vehicle comes down to your personal circumstances and needs. If you’re looking for lower monthly payments and the ability to upgrade to a newer model every few years, leasing may be the best option for you. On the other hand, if you want to own the car outright and don’t want to worry about mileage restrictions, buying may be the way to go. Ultimately, it’s up to you to decide which option is best for your lifestyle and budget.
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