Should you rent or buy an electric vehicle?

The electric vehicle market has grown significantly over the past year, with electric and hybrid vehicles accounting for 4.5% and 6.6% of new registrations respectively from January to June 2022, according to a market trends report from the second quarter 2022 published by Experian. But even as the options outside of Teslas and Toyotas expand, diving headfirst into an all-new type of vehicle can be daunting. And with an average price of over $66,000 on the line for an electric vehicle, the choice is loaded — financially and logically. If you fall into a category of curiosity rather than confidence, renting an electric vehicle can help you decide if green driving is right for you, while buying is best for drivers who are ready to commit.

Lease versus purchase of an EV

Leasing an electric car can give you hands-on experience with an otherwise expensive vehicle, but can cost more in the long run if you go over restrictions or buy it at the end of the lease.

Is it better to rent or buy an electric car?

When it comes to leasing or buying your next vehicle, it’s pretty simple to figure out which route is best for you and your wallet.

  • If you plan to change vehicles every few years and can manage mileage restrictions, leasing can be great.
  • If you want freedom of ownership, buying is the way to go.

But the world of EVs is still in its infancy, even though EV sales are up 40% year over year. Therefore, signing long-term ownership of a seemingly new-to-market vehicle can seem risky. To determine which is right for you, consider the pros and cons of each option.

Rent an electric car

Benefits of renting an EV

  • Vehicle warranty
  • Lower monthly payment
  • Latest Technology Features

Disadvantages of renting an EV

  • Faster vehicle depreciation
  • Inability to sell the vehicle
  • Vehicle Restrictions

Advantages of renting an electric car

The benefits of renting an electric car boil down to added protection with a full vehicle warranty – which means fewer trips to the mechanic – a lower monthly cost and access to the latest technology.

Vehicle warranty

Typically, vehicle leases last 24 or 36 months, and during that time your vehicle may experience technical issues. When it comes to EV maintenance, needing a new battery is the most common problem you might encounter. But when leasing, your vehicle will likely still be covered under warranty, saving you thousands of dollars.

Lower monthly payment

Renting a car allows you to drive the vehicle for a set period of time, paying monthly. This often costs less each month than a car payment for the same vehicle. In addition to a lower monthly cost, you’ll also spend less money up front and likely leave the field without setting aside any money.

Renting is cheaper

According Experian.

Latest Technology Features

While year-to-year model changes for conventional vehicles are not dramatic, the field of electric vehicles is advancing at a much faster rate. Renting will give you the chance to be on the cutting edge of available technology, rather than being stuck with last year’s additions. The Hyundai Kona, for example, received notable upgrades from the 2021 to 2022 model, including an updated infotainment center and new driver-assist technology.

Disadvantages of leasing an electric car

Although renting an electric vehicle can expose you to the experience of electric driving, it does have some drawbacks. Primarily the challenge of lease approval, inability to exit lease and vehicle restrictions.

Lease approval

Getting approved for a vehicle lease can be much more difficult than a car loan, especially for people with poor credit. While you can still rent without having a perfect credit score, that will likely mean a higher monthly payment. Consider the average credit score of drivers who lease new cars in the second quarter of 2022 — 736 — which is higher than the 729 average for a loan, according to Experian.

Inability to sell the vehicle

Leaving a car lease is neither easy nor inexpensive. So if you end up not liking the vehicle you’re leasing, you’ll likely be trapped in the lease or have to pay hefty fines to get out of the deal. Depending on your lessor, you may have to pay the residual value in addition to the remaining lease payments and fees.

Vehicle Restrictions

When signing an automobile lease, there are a few main aspects to look out for: mileage, maintenance, and vehicle modification. If you lease your electric vehicle, you’ll likely be limited to driving between 12,000 and 15,000 miles per year, you may have to pay the maintenance bill, and you won’t be able to customize the vehicle.

Buy an electric car

Benefits of renting an EV

  • Full ownership
  • No vehicle restrictions
  • Incentives and tax credits

Disadvantages of renting an EV

  • High initial cost
  • Rapidly evolving technology
  • Repair costs borne by the customer

Benefits of buying an electric car

The main appeal of buying an electric car instead of leasing comes down to the excitement of full ownership. You can do whatever you want with your vehicle without being limited to what the leasing company has or worrying about fees. As an EV owner, you can also take full advantage of tax incentives and credits that would otherwise be directed to the lessor.

Full ownership

Depending on your financial situation, buying an electric vehicle can allow you to pay off your loan at your own pace and give you full control of your vehicle. You’ll have a good idea of ​​your total cost upfront instead of worrying about potential wear and tear charges that can accrue at the end of a lease.

No vehicle restrictions

If you think the freedom of the road shouldn’t be restricted, buying an electric vehicle might be a better option for you. This way, you won’t be captive to the vehicle’s odometer and can enjoy the freedom of the road. Besides the ability to drive without limitations, full ownership allows you to add all the bells and whistles that suit you to customize your vehicle.

Incentives and tax credits

When purchasing an EV, you can benefit from a multitude of financial incentives. One of them, the federal electric vehicle tax credit, can be worth up to $7,500. Many states also offer rebates to reduce the cost of purchasing a climate-friendly vehicle. But these incentives only apply to the owner of the vehicle, so if you were to lease, you wouldn’t benefit.

Disadvantages of buying an electric car

The EV space has expanded and more economical options are appearing, but these vehicles still tend to have a higher price tag than a conventional option. Higher prices also come with rapidly changing technology and higher maintenance costs.

High initial cost

Electric vehicles tend to be significantly more expensive than conventional vehicles, an average of $66,997 according to June 2022 Kelley Blue Book data. Electric vehicle drivers also tend to have almost identical credit profiles to those who finance luxury cars and pay large down payments, according to a TransUnion Report. This can make approval more difficult for borrowers with less than perfect credit scores.

Buy and save

Borrowing money for an electric vehicle requires the same approach as saving money on a conventional loan: shop around, get pre-approved for a loan, and don’t be afraid to go.

Rapidly evolving technology

Innovation in electric cars is rapid, and that’s especially true when legacy brands, like Ford with the Mustang Mach-E and Chevrolet Bolt, enter the space. But this growth also means you’ll be stuck with the technology currently available in the vehicle you buy. While progress may seem slight to the naked eye, if flashy technology serves as the main attraction, consider renting to keep up with the trends.

Repair costs borne by the customer

As with any vehicle you own, you must pay for any necessary maintenance that occurs during ownership. But when it comes to an electric vehicle, this maintenance can be much more expensive than the usual visits to the mechanic. Although the battery component warranty is likely to run for five to ten years, EVs need to be replaced for other expensive repairs such as screens and advanced system updates.

The bottom line

It’s best to approach leasing versus buying an electric vehicle the same way you would when buying a conventional car. For some, the benefits of the latest technology available 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 electric vehicle, do your research to understand the additional costs associated with ownership and take advantage of green auto loans. Renting an electric vehicle, on the other hand, requires the same attention as usual. Review a few offers and understand the entire contract before committing to a lease.

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