Why everyone leases electric cars rather than buying (and maybe you should too)

Leases are a minority of overall car sales in the U.S., though the numbers soar for pricier luxury vehicles versus the less expensive, plain-Jane vehicles that serve as daily transport for most drivers.

That rule flips for electric cars: Most pricey Teslas appear to be purchased outright, while smaller and less expensive electric cars are largely leased rather than bought.

Turns out there are a couple of very good reasons for that—ones that future buyers of plug-in electric vehicles may want to keep in mind.

DON'T MISS: Electric Car Drivers Love 'Em, But Don't Buy 'Em: Why Leasing Rules (Oct 2015)

First and foremost, leasing an electric car removes the risk that an owner will be stuck with a car whose battery has degraded substantially in later years.

Different makers use a variety of methods to protect their packs from losing capacity, some seemingly more successful than others.

Data from Tesla Model S cars driven more than 100,000 miles seems to show a loss in range of around 10 percent, underscoring the benefits of a larger pack (60 to 100 kilowatt-hours) and the liquid cooling Tesla uses.

2017 Tesla Model S 100D [photo: David Noland, owner]

Nissan Leaf electric cars, on the other hand, use only passive air cooling, and models with 24- and 30-kwh packs have lost considerably more than 10 percent of their range in some climates.

Second, leasing lets drivers who love electric cars take advantage of better and longer-range models to come in the near future.

From 2011 through 2013, the affordable battery-electric models on the market offered ranges of 62 to 84 miles. Seven years later that range has grown to 110 to 238 miles.

CHECK OUT: Tesla Model S battery life: what the data show so far

It's unclear that battery ranges will double again over the next seven years—or that it needs to. Many owners appear satisfied with a rated range of 200 miles or more for cars used as primary vehicles, though what constitutes "enough range" varies significantly among individual buyers.

Third, leasing lets electric-car drivers take immediate advantage of the federal income-tax credit for buying a battery-powered car.

Not every buyer will necessarily qualify for the full $7,500 credit, depending on that individual's financial circumstances, and it can take up to 15 months to recognize the value of the credit when a tax return is filed.

2018 Chevrolet Bolt EV

Moreover, if the electric-car buyer finances all or part of the purchase price, the monthly payments have to cover the full negotiated price of the car, regardless of the value of the credit.

Leasing, however, means the financial entity that issues the lease can take the full income-tax credit—and that amount is almost universally deducted from the amount to be financed. That lowers monthly payments significantly over a purchase.

These points surfaced three weeks ago in a Bloomberg article with the somewhat unfortunate title, "Electric car drivers are too smart to own electric cars."

READ THIS: When do electric-car tax credits expire

(The URL shows its original title was the more straightforward, "Why most electric cars are leased, not owned.")

Amusingly, it cited Chevy Bolt EV driver Jeff Jablansky, the Los Angeles resident and occasional Green Car Reports contributor whose Bolt EV tire swap we happened to cover yesterday.

Between the reduced lease payment and California's $2,500 purchase rebate for an electric car, he pays just $220 a month to lease his Bolt.

2017 Volkswagen e-Golf, Catskill Mountains, NY, Oct 2017

The article cites Bloomberg New Energy Finance data showing that 80 percent of battery-electric cars and 55 percent of plug-in hybrids are leased in the U.S.

According to the Edmunds Lease Market Report released in late January last year, automotive leases overall represented 31 percent of overall U.S. new-vehicle sales in 2016, up from 29 percent in 2015.

That report has not thus far been updated for 2017; we will update this piece when that occurs.

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