Key takeaways

  • Leasing an EV gives you access to new tech more frequently.
  • Buying an EV means you won't face mileage limits or wear-and-tear fees.
  • Both buying and leasing an EV can give you access to tax credits.

The electric vehicle market continues to grow, with sales setting a record of nearly 300,000 in 2023’s second quarter. And the Tesla Model 3 made the list of top leased vehicles for 2023.

As available electric vehicle models multiply, choosing and shopping for your first EV can be daunting. And with an average price of over $50,600 for an electric vehicle, according to Kelley Blue Book, the choice is loaded.

If you’re curious but less-than-confident, leasing an EV can help you decide if an eco-friendly ride is right for you, while buying an EV is best for drivers ready to commit.

Is it better to lease or buy an electric car?

The world of electric vehicles is still in its infancy, even with EV sales increasing nearly 50 percent since 2022. So, signing off on long-term ownership for a vehicle seemingly new to the market can feel risky, especially when we don’t know how much parts and maintenance will cost as these vehicles age.

Leasing an electric vehicle may be beneficial if you want to try out a hybrid or EV. Many electric engines do not have the same range their fossil-fuel-powered counterparts do. If you drive frequently or do not have access to charging stations in your area, leasing may be a good way to test the waters without committing to long-term.

And there are other benefits — and drawbacks — to leasing versus buying any car. These should also play a role in your decision when it comes to an EV or a hybrid.

Leasing an electric car

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Pros to leasing an EV

  • Vehicle warranty
  • Lower monthly payment
  • Newest tech features
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Cons to leasing an EV

  • No equity
  • Difficult to end early
  • Vehicle restrictions

Benefits of leasing an electric car

Vehicle warranty

While leasing, your vehicle will still be covered by its manufacturer warranty. This could help you save thousands of dollars on expensive repairs like replacing the battery.

That being said, new cars all come with warranties whether you lease or buy. Your warranty should last for the duration of your lease, whereas buying a car means you will be responsible for repairs once the warranty period ends.

Lower monthly payment

Leasing often results in a lower monthly payment. This is because your payments are only based on the duration of the lease and the expected sale price when the lease period is up. In addition, you could avoid a large down payment — although this could mean a higher monthly payment.

And while most data is for gas-powered vehicles, electric vehicles and hybrids should also see a lower monthly payment through a lease.

The average cost to lease a car was $586 in the second quarter of 2023, according to Experian. The cost to finance a car was much higher at $729 per month.

Newest tech features

While model changes year over year for conventional vehicles are not dramatic, the EV field is advancing much faster. Leasing allows you to be on the cutting edge of to available technology, rather than being stuck with last year’s add-ons.

For example, improvements to the battery capacity can extend your car’s range, enabling you to go further on a single charge.

Drawbacks of leasing an electric car

No equity

Just like with any other lease, leasing an EV leaves you without equity when the lease period ends. Since you have to give back your vehicle, everything you paid up to that point can’t be recouped. You won’t be able to use the vehicle as a trade-in, and you cannot to get the money you put down back.

You can always buy out your lease and then drive it longer or use it as a trade-in. But these routes aren’t guaranteed to recoup the costs of leasing a vehicle.

Difficult to end early

Leaving a car lease is not easy or inexpensive. If you do not like the vehicle you lease, you will likely be expected to pay hefty fines to exit the lease agreement. Depending on your lessor, you may be expected to pay out the residual value in addition to remaining lease payments and fees.

Vehicle restrictions

When signing off on an auto lease, there are a few main aspects to look out for: mileage, maintenance and vehicle modification. If you lease your EV, you will likely be limited to driving anywhere from 12,000 to 15,000 miles a year. You will also have to foot the bill for maintenance and cannot customize the vehicle.

Buying an electric car

Green circle with a checkmark inside

Pros to buying an EV

  • Full ownership
  • No vehicle restrictions
  • Tax incentives and credits
Red circle with an X inside

Cons to buying an EV

  • Expensive upfront cost
  • Rapidly changing tech
  • Potentially steep depreciation

Benefits of buying an electric car

Full ownership

Depending on where you stand financially, buying an EV can allow you to pay off your loan at your own speed and place you in total control of your vehicle. You will have a firm grasp on your total cost upfront instead of worrying about potential wear-and-tear or mileage overage charges that can add up at the end of a lease.

No vehicle restrictions

If you feel that the freedom of the open road should not be restricted, then buying an EV might be a better option for you. This way you will not be held captive by the vehicle odometer and can enjoy driving — and modifying — your car as much as you want.

Tax incentives and credits

When purchasing an EV, you can benefit from a multitude of financial incentives. The federal EV tax credit, for example, can be worth up to $7,500 dollars. Many states also offer rebates to lower the cost of purchasing a climate-conscious vehicle.

However, you may still be able to take advantage of the federal tax credit when you lease a vehicle. The leasing company will be qualified for the full $7,500 credit. That credit may be passed on as savings to you in terms of the vehicle price you negotiate on your lease contract.

Drawbacks of buying an electric car

Expensive upfront cost

Electric vehicles tend to be more expensive than conventional vehicles. A new EV averages $53,376, according to Kelley Blue Book.

EV drivers also tend to carry almost identical credit profiles to those financing luxury cars and pay large down payments, according to a TransUnion report. This can make getting approved for a loan more of a challenge for borrowers with less-than-perfect credit scores.

Rapidly changing tech

Innovation in the electric car field is rapid, especially as legacy brands like Ford, BMW and Hyundai expand their options.

And that growth is the downside to buying. You won’t be able to take advantage of upgrades unless you sell your car and buy a new one — which can be an expensive route. Advancements in battery life and changing charger standards may make leasing a better option.

Potentially steep depreciation

That same changing tech could also lead to steep depreciation. If the car you buy now is no longer being produced in a few years, it could lose much of its value. In addition, companies like Tesla slashing prices on their models means that you could pay tens of thousands of dollars more for a car than it will be worth in just a few months.

And all of this is on top of the normal depreciation any new car faces.

The bottom line

It is best to approach the question of leasing versus buying an EV in the same way you would when shopping for a conventional car. For some, the benefits of the newest available tech may outweigh the lack of full ownership — while, for others, getting behind the wheel of a vehicle with confidence and incentives makes more sense.

If you decide to buy an EV, do your research to understand the additional costs associated with ownership and take advantage of green auto loans. On the other hand, leasing an EV requires the same attention as leasing a gas vehicle. Review a few offers and understand the contract before committing to a lease.