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Would Battery Leasing Ease Sticker Shock On Costly Electric Cars?

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2013 Smart ForTwo Electric Drive (European version)

2013 Smart ForTwo Electric Drive (European version)

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There's no getting around it: Hybrids cost more than gasoline models, and plug-in electric cars cost a lot more than gas vehicles.

Each type of green car cuts operating costs, either by raising gas mileage substantially or replacing gas costs with grid electricity that generally cuts the cost-per-mile by two-thirds or more.

But that's a hard case to make when a Nissan Leaf starts at $35,200 and a similarly sized Nissan Sentra starts at $16,430, or less than half that.

Most early electric-car buyers don't choose their cars based on payback; it's a nice side benefit, for sure, but it's not why they bought their cars.

But to spread into the mass market and sell in higher volumes--which will itself lower costs--electric cars have to get cheaper. Much cheaper.

Buy car, lease battery?

Now analyst Pike Research looks at the idea of carmakers leasing the pricey lithium-ion battery pack for a set monthly payment, which radically cuts the price of the car itself.

2013 Smart ForTwo Electric Drive (European version)

2013 Smart ForTwo Electric Drive (European version)

Enlarge Photo

"If the European programs boost sales," writes Scott Shepard, "you can be sure the model will make its way across the Atlantic."

They may be about to do that even before the jury returns on whether European battery leasing leads to sales the carmakers wouldn't otherwise have gotten.

In an interview at the New York Auto Show in April, Annette Winkler, the global head of Smart, said the company's revised and more powerful 2013 Smart Electric Drive model will be the lowest-priced battery electric car on the U.S. market--"below $26,000."

She hinted that Smart would bring its European battery leasing model to the States--which would make Smart the first company to test such a program.

A French thing

Over the years, battery leasing has been proposed by many manufacturers, analysts, and third-party companies.

Renault Fluence ZE electric cars in Israel, provided by Better Place [photo: Better Place]

Renault Fluence ZE electric cars in Israel, provided by Better Place [photo: Better Place]

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In Israel, for example, Better Place customers buy their cars--right now, only the Renault Fluence ZE is available--but lease their battery from the company, paying for a set number of miles per year. 

Similar schemes are available in France for four electric Renault models and the small van from startup maker Mia, with battery lease costs of $50 to $100 a month, but they've never been tried in the U.S.

Nissan was rumored to be looking at launching its Leaf battery electric car that way.

But when the Leaf arrived at dealers in December 2010, it carried a single purchase (or lease) price for the entire car, battery included.

Conservative buyers?

So we wonder whether other makers may wait to see how Smart succeeds (or doesn't) with the leasing of its low-volume Electric Drive two-seat minicar in the U.S. market before deciding whether to pursue such a radical approach.

Mia Electric microbus

Mia Electric microbus

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U.S. car buyers are often surprisingly conservative, and the fear of being left with a battery-less car that can serve only as a lawn ornament is likely top of at least some consumers' minds.

Battery life: no worries

On the other hand, leasing a battery would completely get rid of fears about battery packs needing replacement before the car's useful life had expired. On a three- or five-year lease, the assumption would be that with a new lease comes a new battery.

What do you think? Would you be more likely to buy a car and lease the pack, or would you want your plug-in car to come with a single price for the vehicle and its pack together?

Leave us your thoughts in the Comments below.

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Comments (12)
  1. Of course it does. It's simple maths but depends on your free cash. Even today's battery electric cars will eventually pay off because of the outrageous difference in cost per mile driven.

    However, you need to find $15,000 to invest in a depreciating battery and wait for the investment to come back to you.

    A manufacturer can choose to make a lower profit on the battery and of course, he probably has much more access to cash at better rates than you do.

    Leasing the battery gives you a lower differential in cost per mile, but you're ahead pretty much from day one. The end result may be a lower pay back, but with advancing battery tech, you're also protected against the depreciation of the value of the battery asset.
     
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  2. "Nissan Leaf starts at $35,200 and a similarly sized Nissan Sentra starts at $16,430, or less than half that"...wrong! There is the $7500 tax credit to consider which cancels out probably at least 3/4 of the Nissan Leaf's battery cost. Since the tax credit is dependent on battery size I doubt a car without a battery would qualify. Maybe the taxcredit could be changed to apply to battery leasing as well, distributed in equal monthly chunks. Wouldn't be a bad idea. A lease scheme could reduce the base price of the Nissan somewhat more (though not dramatically) and would certainly go a long way in soothing fears for ownership of a big ticket item like an EV battery, or what I like to call "battery anxiety".
     
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  3. Combine range anxiety with battery anxiety and you find the only real problem, EV anxiety.
     
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  4. Battery leasing only reduces sticker shock, and it also heightens cost of ownership. Battery lease payments wouldn't be much different then paying your gasoline bill. A Leaf might be pricey for a four-door hatchback Nissan, but you don't have to rent the parts that make it work and your only going to have to make payments if you opted to lease or finance it. Battery prices will go down but it's going to take time not a leasing scheme. There is no need to rush, range will go up and prices will go down, give it time.
     
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  5. Leasing is what I'm do now, every time I fill up with gasoline. I lease the planet's future, trust costs, luxuries, "necessities" will be "affordable" with promised progress I believe in with a blind faith that shames other religious zealots. No, for myself, to answer the question, I would buy the car with the battery.
     
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  6. Leasing batteries is a very bad idea. I can guarantee you that if you lease the battery for five years, you may pay double for the battery by the end of that five years. No two automakers pay the same price for batteries and no two stores who sell batteries charge you the same price for exactly the same battery. As cheaply made as autos are today, automakers are probably making a 90% profit on every sale. There is no reason for EVs to cost as much as they do. It takes a lot less to make an EV than it does an ICE and we now have a glut of batteries, so much so that battery makers are closing down production. So, "no", do not lease the battery.
     
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  7. What battery anxiety? I have a Nissan Leaf, and I got a 100,000 mile warranty to cover the battery. If the battery goes dead in less than 100,000 miles, they give me a new battery for free. After 100,000 miles I'll be ready to buy a new car anyway. I had no interest in either leasing the car or leasing the battery.
     
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  8. Good for you. Mind though that the warranty doesn't cover capacity loss over time which does nothing to ease my battery anxiety considering the pack doesn't have that much capacity to spare to begin with.
     
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  9. its like anything else. options options options, the more, the better.

    its surprising to me at least what little things can affect a car purchase decision. (i am a car salesman) i get customers waffling on a $300 item on a $32,000 purchase.

    its the wrong color, wrong material, wrong this or that. but at the same time, the more options you provide the higher the base cost.

    but some options are no brainers and a lease option on the battery pack along with different capacity options.

    sure, EVs are still in infancy and no doubt still feeling out the market to determine what the market wants. the relatively brisk changes in features on the different MY Leafs is a telling indication of Nissan moving to a vehicle more people want
     
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  10. I love to watch folks try to solve an insoluble problem by simply
    moving pieces around on a chessboard - here an economic one. An unaffordable battery remains unaffordable regardless of how the cost is paid or spread out. The biggest fraud I see amongst those trying to push EV sales into price ranges where the cars clearly cannot compete, either in terms of capabilities (short range)
    or economics, is the total amnesia about battery replacement costs. Too often EV enthusiasts ruin their credibility by making it sound as though owning an EV is going to mean practically free transportation. You must factor in battery costs to get it right,
    and must treat the battery for what it currently is : a consumable component in the fuel system.
     
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  11. So tell me, Kent, when you bought your ICE, did you factor in the cost of its battery replacement and the cost of gasoline for ten years so you could get it right? Since the Volt and the Leaf came out, battery prices has dropped a great deal and battery technology has greatly improved. The Leaf has a 100,000 mile warranty. By the time you need to replace that battery, it probably will be no more costly than replacing your ICE battery today and lithium will probably not be used.
     
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  12. It would still depend on the 5-10 year cost of ownership.
     
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