Electric car revolution is here and by 2040 one third of the total 1.6 billion cars worldwide will be electric. This was revealed in Bloomberg’s New Energy Finance colleagues’ global long-term Electric Vehicle Outlook 2018.
If 2040 means a long time out, then let’s have a look at the year 2024. This is a year when electric vehicles and internal combustion engine vehicles will reach upfront cost parity due to the decreased cost of manufacturing batteries. So that’s just six years from now that any new car will become competitive, on upfront costs, with an electric vehicle.
What about lease options?
But we can’t wait for six years till the electric cars match conventional engine cars. Six-years is two three-year auto lease cycles. That matters because about a third of all cars in the U.S. are leased. People who are buying a cay right now might find in future upfront cost parity between electric and conventional vehicles to be academic, but for someone looking to lease a car six years from now, it will be an ideal time to compare drivetrains.
If we consider the contemporary stats then you would know that total industry lease rate is not as attractive as the lease rate for luxury vehicles. More than half of the entry-level luxury SUVs are leased and more than 60% of midrange luxury cars are leased. Drivers have been switching towards SUVs over cars. As a result, lessees or the buyers have more options available as the times passes by. Luxury car and SUV drivers will have almost 300 new electric models to choose from when their lease time is over after three years.
After the end of another three years, this range of electric cars will increase and it will become easier to choose an electric car. At that point, the decision to choose an electric car will not be a monetary one, but performance-based only.
For now, leasing a car seems confusing. Most of the leasing ads are geared towards business owners who might deduct the business expense or to individuals who are enticed by lower monthly car payments of the leasing programs. But in reality, benefits of leasing a car are significant regardless of a consumer’s economic status. The same can be said about electric car leasing.
One of the biggest advantages of leasing a car is a lower cost of acquisition. You benefit from lower monthly, with a negligible amount of down payment, and a good chunk of savings on sales tax. Moreover, consumers also enjoy trading into a newer model car even before the expiry of their lease agreement. Thanks to Quitalease and other such online solutions that have made it convenient for the people to trade their leased cars before the lease term expires.
Lease, as you all know, is an alternative method of financing a car in which the consumer is only paying for the depreciating value of the car. It is like a car rental but for longer periods. Leasing electric vehicle will be the future as it will further decrease the cost of keeping a vehicle. Here are a few reasons why leasing an electric car the next time will be a smart move:
Cash Flow and Depreciation benefit
Leasing reduces our overall cash outlay on a car. The consumer only pays a used tax on the monthly payment in leasing as compared to the sales tax on the purchase of the car.
For example, take a $40 thousand car with a $500 monthly lease payment. The $500 monthly payment includes the used tax. Multiply that by 36 months and the total outlay in cash is $18,000 versus $40 thousand to purchase the car in the same time duration.
Most cars are purchased with a 60-72 month finance term. If we take the scenario of 60 months, and purchase a car for $36k with zero interest, that would equate to $600 a month. At the end of your finance term, the vehicle would be worth approximately 27% of the original price. Unfortunately, this is a scenario for almost all new car purchases. When the depreciation is that much, then it always makes sense to lease a car.
Save on Taxes
When a person is leasing a car, he will not be paying any sales tax on it. Depending on the state you live in, this saving can go as up to 10% of the value of the car. Leasing electronic car is more attractive as some states offer tax rebates and incentives for using environment-friendly cars.
The warranty on a leased car is usually for three years or 50,000 miles, whichever comes first. A typical car lease agreement is for a 36-months. So you are protected by the warranty through your lease period. It will save the maintenance expenses because it’s under full-factory warranty, including oil changes. The same perks are allowed to the electric car lessees.
Don’t be scared to drive
Most of the people looking to lease a car are scared about the miles limit. But many of the luxury-car franchises including the like of Mercedes-Benz offer the consumers to purchase additional miles up front. And as a side benefit, if the mileage isn’t used, the money is credited back to you. Electric cars are more efficient and fun to drive, so don’t be afraid to drive a new-tech car.