EV Leasing vs Buying: The Best Way to Own an EV in 2025!
EV Leasing vs Buying; More electric vehicle (EV) buyers are opting for leasing over purchasing, with 46.6% choosing to lease compared to 36.8%, according to Experian’s State of the Automotive Finance Market report from September 2024.
There are several reasons why consumers find leasing appealing. One key factor is affordability—on average, leased EVs come with lower monthly payments. Experian’s data reveals that the average lease payment is $88 less per month than a traditional loan payment. Additionally, leasing allows drivers to upgrade to newer models more frequently, reducing concerns about depreciation and outdated technology. Both leasing and buying also provide access to federal EV tax credits of up to $7,500.
However, purchasing an EV has its own benefits. While used EV prices have fluctuated in 2024, ownership enables buyers to build equity over time. This accumulated value can later serve as a down payment for future vehicle purchases.
To help you make an informed decision, let’s explore the key advantages and drawbacks of leasing versus buying an EV.
Key Takeaways: Leasing vs. Buying an EV
Choosing to lease or buy an EV comes with significant benefits. Regardless of your decision, going electric will help you save thousands on fuel and maintenance costs over time while also lowering your carbon footprint from day one.
- Incentives & Rebates: Attractive federal and local incentives make EV ownership more affordable.
- Leasing Benefits: Ideal for those who want to stay updated with the latest EV technology.
- Buying Advantages: Purchasing an EV outright often results in greater long-term savings, similar to traditional gas-powered cars.
Ultimately, it’s essential to evaluate your budget and preferences to make the best decision for your EV journey.
Leasing vs. Buying an Electric Vehicle Overview
Still on the fence? To some extent, choosing the right EV and financing may come down to the individual offer that works best for you. For a quick overview of leasing versus buying, have a look at the comparison below.
| Leasing | Buying | |
|---|---|---|
| Ownership | The leasing company owns the vehicle | You own the vehicle |
| Average credit score | 751 | 745 |
| Average monthly payment (2024 top 10 models) | $532 | $783 |
| Available tax credit | Up to $7,500 credited to the leasing company; savings may be passed on to you | Up to $7,500 if your vehicle is on the (short) list of approved makes and models, payable to you or the dealer, who can apply the credit to your purchase |
Source: Experian data
The difference between buying and leasing an EV
The basic process for leasing or buying an EV is the same as it is for a gas-powered vehicle.
| Buying | Leasing |
| When purchasing a car, you typically finance it through a loan, which you repay in fixed monthly installments over a specific period. Once all payments are made, full ownership of the vehicle transfers from the lender—such as a bank—to you. | When you lease a car, you essentially rent it for a set period, typically ranging from two to four years. Once the lease term ends, you return the vehicle to the dealership. In many cases, you may also have the option to buy the car at the end of the lease. |
Factors to consider when deciding between leasing and buying
Your budget: Leasing can be a more affordable option for those with limited budgets.
- Your driving habits: If you drive a lot, buying might be more cost-effective in the long run.
- Your long-term goals: If you plan to keep the vehicle for a long time, buying might be a better option.
- Your preference for technology: If you want to stay updated with the latest EV technology, leasing can be a good way to access it.
- Your financial situation: Consider your credit score and ability to handle debt.
- The availability of EV charging infrastructure in your area: Ensure you have access to charging stations before committing to an EV.
- Government incentives: Check for any government subsidies or tax credits available for EV purchases or leases.
Why Leasing an EV Can Be a Smart Choice? The best reasons to lease (instead of buy) an EV
Leasing an electric vehicle (EV) is a great option for those who want to stay updated with the latest advancements in EV technology. With rapid improvements in battery range and features, newer EV models often outperform older ones. Leasing allows you to upgrade to the latest model once your lease term ends, ensuring you always drive a cutting-edge vehicle.
- Access to Tax Credits: Some EV leases include federal tax credits (up to $7,500), which can be applied to lower monthly payments—making leasing more affordable than buying for many individuals. However, it’s important to confirm whether the leasing company passes these savings to customers.
- Lower Depreciation Risk: Since EV technology evolves quickly, their resale value may decline faster than traditional gas-powered cars. Leasing eliminates the worry of depreciation, as you return the car at the end of the term without financial loss.
- Flexible Ownership: Leasing allows you to experience different EV models without a long-term commitment, making it ideal for those who like to explore new technology.
What Does Leasing an Electric Vehicle Mean?
Leasing an electric vehicle (EV) is similar to leasing any other car. Instead of buying, you make a small or no down payment and agree to monthly payments for a fixed term, usually three years. At the end of the lease, you return the car to the dealership.
Unlike purchasing, where you own the car after completing payments, leasing offers flexibility and lower upfront costs. Some experts suggest leasing first, as you can always decide to buy the EV later.
One major advantage of leasing is access to the EV tax credit loophole. While EV buyers must meet strict eligibility requirements for a federal tax credit, leased EVs qualify automatically. Under the Inflation Reduction Act, leasing companies claim the $7,500 tax credit and can pass those savings to customers, reducing monthly payments.
Since lease costs are based on expected depreciation, leasing allows you to drive an EV without worrying about resale value.
Advantages of Leasing an Electric Vehicle
Leasing an electric vehicle (EV) offers several financial and practical benefits, making it an attractive option for many drivers.
Cost Savings & Financial Benefits
- Lower Monthly Payments: Leasing usually requires a lower down payment and offers reduced monthly costs compared to financing an EV purchase. Over a typical three-year lease, you can save thousands of dollars.
- Minimal Repair Expenses: Since leased EVs are new, they are typically covered under the manufacturer’s warranty, reducing unexpected repair costs.
- Tax Incentives: Under the 2022 Inflation Reduction Act, leasing companies can claim a $7,500 federal tax credit on EV leases. While not guaranteed, many companies pass these savings on to customers.
Convenience & Flexibility
- No Depreciation Worries: EVs lose value slower than gas-powered cars, but depreciation isn’t your concern when leasing. Simply return the vehicle and upgrade to a newer model.
- Wide Range of Models: Leasing provides access to the latest EVs with advanced features and improved battery performance. When your needs change, you can switch from a hatchback to an SUV or a model with a longer range.
- No Battery Degradation Concerns: EV batteries degrade over time, but leasing ensures you always drive a newer car with optimal performance.
Additional Perks
- Maintenance Packages Available: Many lease agreements allow you to add servicing, MOTs, and breakdown recovery for hassle-free maintenance.
- Access to the Latest Technology: Leasing lets you upgrade to newer EV models every few years, benefiting from advancements in battery range, charging speed, and infotainment systems.
- Eco-Friendly Choice: By leasing an EV, you contribute to reducing carbon emissions and improving air quality, supporting the transition away from gas-powered vehicles.
- Short Commitment Span: Not ready to commit for the long haul? No worries. Lease terms usually run between 2 to 4 years, offering flexibility.
- Forget Depreciation Woes: One of the biggest car owner concerns is the steep depreciation, especially in the rapidly evolving EV market. With leasing, that’s a non-issue. Once your term ends, return the vehicle. No strings attached.
- Potential Tax Benefits: In several regions, leasing an EV can lead to tax credits or rebates. It’s like the cherry on top of your eco-friendly sundae!
- Future Flexibility: When your lease ends, you have options galore! Fancy buying your leased EV? Go for it! Want to try a new model or brand? Lease again. Just want to return it? That works too.
Disadvantages of Leasing an Electric Vehicle
While leasing an EV can lower monthly costs and repair expenses, it also comes with certain drawbacks:
- Future Financing Required: At the end of your lease, you must either return the vehicle or purchase it at a predetermined price. If you wish to keep it, you’ll need to arrange new financing, which may not always be ideal.
- Mileage Limits: Most lease agreements impose an annual mileage cap of 10,000 to 15,000 miles. Exceeding this limit results in additional per-mile charges.
- Extra Fees: Early lease termination or excessive wear and tear can lead to unexpected costs.
- Damage Charges: Beyond normal wear, any additional damage is assessed using the BVRLA Fair Wear & Tear Guide, potentially leading to extra fees.
- Battery Leasing Costs: Some EVs, like the Renault Zoe, require a separate battery lease, adding to overall expenses. However, this practice is becoming less common.
Who Should Consider Leasing an Electric Vehicle?
Leasing an EV is a great choice for those who value flexibility and lower upfront costs. It may be the right option for you if:
- You prefer a lower down payment and manageable monthly payments.
- You can secure a lease that includes savings from the federal EV tax credit.
- Your annual driving is 15,000 miles or less, aligning with typical lease limits.
- You enjoy upgrading to a new vehicle every few years.
- You don’t mind the leasing or car-buying process at the end of each lease term.
- You’re not looking to build equity or use a trade-in for your next vehicle.
What Does Buying an Electric Vehicle Mean?
Purchasing an electric vehicle (EV) requires a higher initial investment compared to leasing, but it comes with the benefit of ownership. As an EV owner, you won’t have mileage restrictions or lease terms, and your car remains an asset you can keep or sell anytime.
There are two ways to buy an EV: paying in full or financing through a loan (typically for five to six years). While financing spreads the cost into manageable monthly payments, high interest rates can make it expensive.
Tax Benefits: You may qualify for a $7,500 federal tax credit, but eligibility depends on your income, vehicle price, and manufacturing location. If applicable, this credit significantly lowers the overall cost.
Long-term ownership offers financial benefits, but with rapid advancements in EV technology, your car may depreciate quickly. Future innovations like solid-state batteries could further impact resale value, making leasing a more flexible alternative.
Advantages of Buying an Electric Vehicle
Purchasing an electric vehicle (EV) means making a long-term investment that comes with several benefits, even if monthly payments are initially higher than leasing. Here’s why buying an EV can be a smart choice:
- Full Ownership: You have complete control over your EV—drive unlimited miles, customize it as you like, and keep it for as long as you want.
- No Ongoing Payments: Once your loan is paid off, you own the car outright, eliminating monthly payments. In contrast, leasing requires continuous payments if you switch vehicles.
- Building Equity: When you sell or trade-in your EV, you recover some of your investment. This can help fund your next car purchase or reduce future expenses.
Drawbacks of Buying an Electric Vehicle
Purchasing an EV gives you full ownership, allowing unlimited mileage, modifications, and long-term use. While monthly payments may be higher than leasing, they eventually end, leaving you with a car free of payments. Additionally, when you sell or trade-in your EV, you recover some of your investment, which can help with future purchases.
However, buying an EV also comes with challenges:
- Higher Financing Costs: Loan payments are typically higher than lease payments and may require a larger down payment.
- Depreciation Risks: Some used EVs have lost value quickly, leading to lower trade-in prices or even negative equity.
- Expensive Repairs: While maintenance is generally lower, battery replacements (after about 10 years) can cost up to $20,000, and specialized repairs can be costly.
- Limited Tax Credits: Not all EVs qualify for federal tax credits, and eligibility depends on income and vehicle price limits.
Who Should Consider Buying an Electric Vehicle?
Purchasing an electric vehicle (EV) is a great option if the following apply to you:
- You have the necessary down payment and can afford monthly payments.
- You plan to use your current car’s trade-in value to offset the cost of your next vehicle.
- You typically keep your cars for many years rather than upgrading frequently.
- You expect to drive 15,000 miles or more annually, making leasing mileage limits less practical.
- You prefer full ownership, without restrictions on mileage, modifications, or customizations.
- Your EV qualifies for a federal tax credit, or you don’t rely on the incentive to make your decision.
Buying vs leasing a car in different situations
Buy or lease decisions is dependent on multiple factors, and there is no one-size-fits-all answer. The best option will depend on the individual’s circumstances. However, here are some things to consider when making a buy or lease decision:
| 1 | How long does one plan to keep the car? | Leasing may be the better option if the car is needed for a short period. This is because one can return the vehicle at the end of the lease and avoid any costly repairs that may come up during ownership. |
| 2 | How much money can one afford to put down? | If one has limited funds for a down payment, leasing is a better option since one does not need a large down payment to lease a car. |
| 3 | Does an individual have good credit? | If one has good credit, they may get a lower interest rate on a loan for a new car, which could make buying more affordable than leasing. |
| 4 | How much mileage can one drive? | There may be better options than leasing if one travels a lot as most leases come with mileage limits. Exceeding these limits can result in hefty fines at the end of the lease period. |
| 5 | What should one go for, a car loan or a car lease? | Regarding car lease vs car loan, it is important to consider budget, lifestyle, and long-term plans.
If an individual wants a new car every few years and does not mind mileage limitations, a lease may be a better option. If an individual wants to own a car and have the freedom to drive as much as they want, a loan may be the better choice. It is also important to consider the costs associated with each option, including the down payment, monthly payments, and any penalties or fees. It is recommended to compare the costs and terms of a car lease vs a car loan before making a decision. |
Is leasing cheaper than buying an EV?
The answer to this question is not a simple yes or no. Whether leasing or buying an EV is cheaper depends on your circumstances, driving habits, and financial goals.
Leasing offers lower upfront costs than buying and can come with lower monthly payments depending on the make and model whilst letting you test the waters with an EV first, making it a more affordable choice for some.
However, if you plan to keep the vehicle for an extended time and are concerned about mileage limits, buying might be a more cost-effective option in the long run.
Leasing vs. Loan – Why Leasing an EV is a Smarter Financial Choice
- Lower Monthly Payments: Leasing an EV typically costs less per month compared to financing with a loan. This is because lease payments cover only the car’s depreciation over the lease term, not its full price.
- Minimal Upfront Costs: Many EV lease offers require little to no down payment, making it a budget-friendly option for those looking to switch to electric vehicles.
| Expense Type | EV Leasing | EV Loan |
| Monthly Payment | Generally lower | Typically, higher |
| Down Payment | Often minimal or none | Usually required |
| Maintenance | Largely covered under warranty | Potentially more out-of-pocket |
| Long-term Value | No resale concerns | Depreciation affects resale value |
- Stay Up-to-Date: Leasing allows you to drive the latest EV models with cutting-edge technology and features. When your lease term ends, you can easily upgrade to a newer model without the hassle of selling or trading in your car.
Mahindra’s EV Car Lease Program
Mahindra & Mahindra Financial Services (Mahindra Finance) has introduced Quiklyz, a lease-based vehicle subscription service, targeting urban markets. The company aims to achieve a business volume of Rs. 10,000 crore in the next 3-5 years through this initiative.
Mahindra provides a car leasing program that allows customers to select a plan based on their anticipated annual mileage. If the set limit is exceeded, an additional charge of Rs. 9 per extra kilometer applies.
- Growth and Expansion Plans: Mahindra Finance plans to expand Quiklyz to 30 cities within a year, starting with metro locations like Mumbai, Delhi, Bengaluru, Chennai, Hyderabad, Gurugram, Noida, and Pune. The company also aims to tap into tier-II cities, further strengthening its reach.
- Strategic Focus on EVs & Last-Mile Mobility: According to Ramesh Iyer, Vice-Chairman & MD of Mahindra Finance, leasing is gaining traction in last-mile mobility, especially with the increasing adoption of electric vehicles (EVs). The company sees this as an opportunity to design customized leasing products suited for both individuals and businesses.
- Early Mover Advantage: Car leasing is still a new concept in India, particularly for retail customers. By launching Quiklyz early, Mahindra Finance aims to attract millennials and new-age corporates, offering them a hassle-free vehicle ownership experience. With its innovative approach, Quiklyz is set to revolutionize vehicle leasing in India, making car ownership more accessible and flexible for urban consumers.
Quiklyz is India’s first fully digital vehicle leasing and subscription platform, designed for both retail customers and corporates. It offers multi-brand leasing options, enabling customers to access a new car without the hassles of ownership. The service covers registration, insurance, maintenance, and roadside assistance, making it a convenient alternative to traditional car ownership.
Key Features of Mahindra’s Car Lease Program:
- Customized Mileage Plans: Choose a plan with an annual kilometer allowance that aligns with your driving habits.
- Excess Mileage Charges: Any additional kilometers beyond the allotted limit incur a fee of Rs. 9 per kilometer.
- Flexible Lease Duration: Various lease terms are available, enabling you to select a period that suits your needs.
- Advantages of Leasing: Ideal for those who prefer lower upfront costs, frequent car upgrades, and a hassle-free experience without the burden of reselling a used vehicle.
Mahindra’s EV Vehicle Return Conditions
The leased vehicle must be returned on or before the lease closure date in good condition, with normal wear and tear accepted. The following items must be included at the time of return:
- Original Registration Certificate (RC) book
- All manuals, including service booklets provided at delivery
- Original insurance policy document
- Valid Pollution Under Control (PUC) certificate
- Two sets of keys as received at the time of delivery
Inspection & Additional Charges
Upon return, the vehicle will be inspected, and charges may apply for:
- Excessive damages beyond normal wear and tear
- Missing parts or accessories
- Missing documents required for return
- Unauthorized part replacements that were not part of the original fitment
- Upholstery damage, such as fabric tears or discoloration
- Extra kilometers are driven beyond the agreed limit
- Damage caused due to the removal of any part
Conclusion
Both leasing and buying a car come with advantages and drawbacks, making the choice highly dependent on individual preferences and budget. Leasing offers lower monthly payments and access to newer models, making it ideal for those who enjoy upgrading frequently. However, purchasing provides greater flexibility, no mileage restrictions, and full ownership after payments are complete. If customization and long-term savings are priorities, buying is the better option.
Before making a decision, it’s essential to weigh the car lease vs. car loan option carefully. Conducting a detailed cost-benefit analysis will help determine the most financially sound and practical choice based on personal needs and long-term goals.
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