Should You Buy or Lease an EV in 2023 By Carnex
If you are thinking of getting a new electric vehicle in 2023, you may be faced with multiple options, such as buying a brand new or used EV. But most likely, you will be thinking of either buying the EV outright or going through a lease agreement, and wondering which way is better for your situation. Buying or leasing an EV has pros and cons and presents itself with different factors that may influence the decision you make.
In this blog, we will go over the key reasons you should either buy or lease an EV, as well as the important factors for your consideration.
Lease an EV: Benefits of Leasing
In the current market, electric vehicles still present themselves with a high depreciation rate. You can find the BMW i3 and Nissan Leaf for a fraction of their original MSRP. These two vehicles were among the first mass-market EVs to be marketed at an affordable price when new. This is where the benefit of leasing comes from. As new generations of EVs roll out, the technology has improved across the entire electric vehicle market in the past few years. Newer models are produced with better range and performance for the same cost. Therefore, older EV models with technology that becomes obsolete quickly lose their value.
But you may avoid the high depreciation by leasing. When leasing an electric vehicle, you’re stuck with a particular residual value. The residual value is the automaker’s estimate of what the car will be worth when the lease expires. The manufacturer will lose money if the EV’s actual resale value is lower than anticipated when the lease expires. While this is a scenario that is quite plausible during an EV’s model cycle, consequently, you will have equity left over from your previous lease when you opt to lease a new vehicle, which you may use to lower the cost of the new lease.
Furthermore, when leasing, you can easily change and get rid of your electric vehicle. For example, in exchange for a new lease, you could get into a brand-new car with even better technology, performance, and range for the same price as your previous EV. If you want to keep your electric vehicle at the end of your lease, the dealer usually offers you a buyout price at a pre-determined residual price. That is, oftentimes, less than the actual depreciated value of your electric vehicle at the end of your lease.
Lastly, some provinces in Canada offer incentives when you lease an electric vehicle. For example, the Quebec government offers incentives for leasing an electric vehicle.
Buy an EV: Benefits of Buying
When buying an electric vehicle, the main advantage is that you get incentives from the federal or provincial governments to reduce the upfront purchase cost. Most provinces in Canada offer incentives for buying an EV, but you may not be eligible when you lease an EV.
Furthermore, when you buy an electric vehicle, you are not bound by a contract to keep the vehicle or pay a penalty to change or end the ownership of your vehicle. As a matter of fact, when you buy an electric vehicle, you have the opportunity to sell it whenever you realize you don’t like it or that it isn’t the right vehicle for your needs. This means that you can always sell it or trade it in for a different or newer-model electric vehicle. You have maximum flexibility, and you have the final word on everything you want to do with your electric vehicle, whether that is to sell it, trade it in, modify it, etc. In short, if you buy an EV, you are not bound by a dealer or any restrictions on the EV’s use.
Buying a used EV not only saves you money but also helps the environment.
Lease an EV: The Cons of Leasing
When you are leasing an electric vehicle, you usually have to sign a contract that is locked into a lease. That means you can’t decide to opt out of the ownership contract or that you have to pay the remaining balance on the lease plus a premium just to get rid of the electric vehicle. In most cases, you may be limited to certain conditions, such as the maximum mileage on the vehicle or modification limitations in the lease details.
Furthermore, most government incentives in Canada don’t offer any rebate or financial benefit when leasing an electric vehicle. That is due to the high possibility of returning it and changing it within a short period of time for another EV. When leasing an electric vehicle, the financial burden is further increased because, there is usually an interest rate on the lease agreement, meaning that you need to pay more than the amount of your share of the vehicle. Leasing also means that over a longer period of time, you might end up paying more for your leases than buying a car outright and selling it after a couple years of use.
Finally, when deciding wether to buy or lease an EV, you must make sure the leasing option is available at the dealership. Some EV dealers do not offer any kind of leasing on electric vehicles because of the possible downside risk associated with the progress of technology inside electric vehicles. This is why some dealerships only offer the option to finance or buy electric vehicles.
Buy Lease an EV: The Cons of Buying
In general, if you decide to buy an electric vehicle outright, you are taking on the main risk of your vehicle depreciating and losing a great deal of its resale value after only a couple years of ownership. That may cost more than simply leasing an electric vehicle because of the possible maintenance and repair costs that need to be paid at your own expense. This also means that when you buy an electric vehicle, it takes much more money upfront to buy it, as you usually need to have the cash amount in hand or finance the EV using a loan from the dealership or from the bank. That means you may also need to pay interest on your monthly loan amounts, which can end up costing more than leasing an EV over the same three-year period.
In conclusion, there is no definitive answer to whether you should buy or lease an EV. It is most likely a case-by-case situation that should depend on how long you need the car, what kind of payment is most beneficial for the vehicle, the time frame you decide to get it for, and the needs you have for the vehicle, whether it’s a long-range travel vehicle or just a daily commuter around the city. When deciding whether to buy or lease an EV, you need to use your own judgment. Seeking help from a financial advisor or an EV dealership can help you make a sound decision on whether you want to buy or lease your next electric vehicle.
Every Carnex electric car is inspected by our experienced EV technician. Our EV expert team is ready to assist you with finding the best EV!
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