Buying vs. Leasing an Electric Vehicle: Which is Better?

Electric vehicles (EVs) are growing in popularity each year. Many consumers considering an EV get stuck wondering – should I buy or lease? This is an important decision that can majorly impact your finances over the next few years.

Table of Contents

Buying vs. Leasing Key Questions

What are the pros and cons of buying or leasing?
How do EV incentive programs differ for purchases vs leases?
What is the total cost of ownership comparison?
Which option gives lower monthly payments?
How do insurance, taxes and fees differ?
What flexibility do you need regarding length of ownership?

EV Pricing Considerations

Upfront Costs

Like most vehicles, MSRP is just the starting point. There are various incentives, taxes and fees that make the final purchase or lease price quite dynamic. It’s key when comparing EV options to calculate the “out-the-door” price with all these factors included.

This total price can vary quite significantly depending on where you live due to state and local electric vehicle incentives or added registration fees. We’ll explore a few location-based variables below.

Battery Size & Range

The size of the EV battery pack directly correlates to both pricing and the vehicle’s all-electric driving range per charge. In 2023, most affordable EVs deliver 150-250 miles per charge while premium Tesla models boast over 300 miles.

If your driving habits require more range, larger battery EVs can become pricey purchases, so leasing is an attractive option to keep costs manageable.

Charging Network Access

Unless you can charge regularly at home, public charging network access becomes extremely important. Evaluate an EV model’s compatibility and included access to networks like Electrify America, EVGo, ChargePoint or Tesla Superchargers.

Reliable fast charging access on the go can sway favor between similar EV models as part of your buying decision-making process.

Buying an Electric Vehicle

Purchasing an electric vehicle mirrors much of the process of buying a gasoline-powered car. But there are a few EV-specific variables to factor in as pros and cons:

Buying Pros

Full access to purchase incentives & tax credits – For 2023, these can discount EV pricing by up to $7,500 at purchase
Custom configuration – Order the exact EV model, battery, features you want
No mileage limits or return condition worries – It’s yours to keep and drive for many years

Buying Cons

Higher upfront cost – Even with discounts, buying means financing a large amount
Uncertainty of long term value – EV battery & tech advances make valuation tricky
Ownership responsibilities – You handle insurance, maintenance and repair costs

As you weigh buying versus leasing, be sure to calculate federal and any state/local purchase incentives you can access in your scenario.

For example, California’s Clean Vehicle Rebate offers up to $2,000 additional savings at qualifying EV purchase. Some utilities also offer purchase rebates. The savings can be substantial if you qualify.

Who Should Consider Buying an EV?

You plan to drive your vehicle for 5+ years

Buying pays off long term by avoiding recurring monthly payments. Make sure to get a long battery warranty to hedge value concerns.

You have easy home or workplace charging access

Regular charging is essential for convenient ownership and to maximize range when needed.

You want custom configurations within budget

Order the exact EV make, model, features and battery size you want without compromise.

You qualify for maximum purchase incentives

If eligible for $7,500 federal tax credit plus other purchase incentives in your state, buying means you can access the most EV savings.

Leasing an Electric Vehicle

Leasing has grown more prominent recently across all vehicle types – allowing people access to pricier or newer cars they perhaps couldn’t buy outright. Approximately one third of all vehicles in 2023 are leased rather than purchased.

Here’s an overview of some advantages and tradeoffs when leasing an EV:

Leasing Pros

Lower upfront & monthly costs – Requires smaller down payment to drive away an EV
Always driving a new car – Upgrade to latest EV models every 2-4 years
Hassle free ownership – Avoid most insurance/maintenance responsibilities
No concerns of future value or battery warranty – Turn in lease when complete

Leasing Cons

Limited annual mileage – Typically 10k-15k miles per year cap before overage fees
Wear & tear fees – Charges for dings, scrapes or abnormal interior wear
No equity – Payments made are rental charges rather than building ownership

EV Lease Considerations

If opting to lease an electric vehicle, be aware of a few key variables that can impact overall cost:

Incentives – Federal EV tax credit only applies to vehicle purchases, not leases. However other state and utility incentives may still discount lease pricing.

Battery Warranty – Review battery capacity warranty details closely so you don’t pay for degraded range if the lease outlasts the coverage.

Charging Access – Home or workplace charging is extremely preferred to avoid public fast charging costs which can add up significantly.

Mileage Needs – Carefully consider your annual driving habits to avoid excess mileage overage fees that provide no added benefit or equity at lease end.

Who Should Consider Leasing an EV?

Here are some key factors that point towards leasing as the better EV option over purchasing:

You want lowest upfront & monthly costs

Leasing allows driving the newest EVs with smaller down payment and installments vs buying. This helps manage cash flow for other priorities.

You don’t drive more than 12-15k miles per year

Avoid being excess mileage penalties while taking advantage of hassle-free driving under warranty.

You want flexibility of switching EV models

Leasing allows cycling into a new or different EV model ever 2-4 years as market offerings expand.

You don’t have easy home or workplace charging

Paying daily public charging fees is more reasonable if you’re not the vehicle owner long term.

Buying vs Leasing: Total Cost of Ownership Analysis

To determine the best EV ownership path for your situation, let’s run through a detailed cost analysis of buying vs leasing using the 2023 Hyundai Kona Electric as an example.

This subcompact SUV is Hyundai’s top selling EV in the US with an MSRP starting at $34,000. We’ll compare total spending over a 4 year ownership period:

Buying

Category	Amount
Vehicle Purchase Price	$34,000
Tax/Reg Fees (@7%)	$2,380
Federal Tax Credit	-$7,500
Out-of-Pocket Purchase Payment	$28,880
Insurance	$1,800 x 4 years	$7,200
Electricity (@$0.15/kWh)	$500 x 4 years	$2,000
Maintenance	$200 x 4 years	$800
Total 4 Year Cost		$38,880

Total Cost of Ownership of buying

Leasing

Category	Amount
Capitalized Cost (MSRP + fees)	$37,000
Monthly Lease Payment	$350 x 48 months	$16,800
Insurance	$50 x 48 months	$2,400
Electricity (@$0.50/kWh public charging)	$125 x 48 months	$6,000
Total 4 Year Cost		$25,200

Total Cost of Ownership of leasing

Key Takeaways:

Even with purchasing discounts, buying requires over $13,000 more money during the same 4 year term
Leasing assumes no home charging increasing electricity costs but delivers lowest overall payment totals
Buying equity accrued is minimal for most EVs limiting long term residual value

For many consumers, the lower monthly costs and overall 4 year spending makes leasing the most affordable way to drive an electric vehicle. Mileage needs and desire for custom vehicle configuration should also help determine the best option.

Final Thoughts

We covered many variables that factor into whether buying or leasing an EV delivers the best value depending on your situation and priorities.

While buying seems logical to build long term ownership equity, various incentives and total cost factors make leasing surprisingly competitive depending on your driving needs. Either option however allows avoiding gas costs while driving an EV.

Boiling it down – purchasing works best if you qualify for full incentives, drive higher annual miles, and plan to own your EV 5+ years.

Whereas leasing excels for lower short term costs if you drive below average miles and want to upgrade EVs regularly.

Hedging the options, many people like leasing their first EV to test the experience before later buying their second EV for long term use post incentives.

No matter which route you determine best fits your lifestyle, both buying and leasing EVs continue to become more affordable. Growing adoption will likely bring broader offers too. Shop multiple dealers for best pricing and incentives to maximize the EV savings!