As EV demand has been less than expected, automakers are searching for ways to eh, dispose of excess inventory. Tesla has been fairly direct and just cuts the price on their website. Other automakers have been more creative and provided a “cheap-lease deal”. Lets explore these aspects of the auto-industry a bit further. Our analysis suggests that the cheap lease deal can be a sensible approach for an automaker, particularly given the “leasing-loophole” allowing just about any EV to qualify for the full 7500 US tax credit (source).
To begin with, why are automakers not direct and just cut the price on their website? Well, as it happens there are consequences to doing so, mostly you devalue the balance sheets of your current owners. For example, one of the key reasons Hertz decided to “dump Tesla” came down to Tesla’s price-cuts (source), its easy to understand, a 25% drop in value is going to hurt (source) in the car rental business, where profit margins are usually around 5-10% (source). Further, you have existing customers that all of a sudden have to deal with a drop in value on their car. Sure, if you bought your car outright, and have no plans on selling any time soon, no problem, why not hold onto your car a little longer. But if you lease, its another story. The automaker can still claim (at least in theory on the books), that a lease customer is just “holding-on-to-the-car-for-us”. Thus it can be a way for the automaker to ride out short-term swings in the market.
A lease is also a way for the automaker to earn some extra cash in fees. Lease terms can be quite strict, early termination fees, mileage overage fees and the list goes on (source). Further, the lessee (e.g. you), are on the hook for maintenance, which you may be nudged to do at the dealership (pronounced expensive, but usually good and fast).
Rumours have surfaced of some drivers scoring incredible lease deals, particularly in places with generous EV incentives. Lets analyze this a bit further, leaning on the following: Nissan Aryia example, Nissan Leaf example, source and source.
Note that we have assumed we are in Colorado, USA, as that state offers particularly generous incentives. Also, while the Leaf and the Ariya do not qualify for the US federal tax credit, apparently there is a leasing loophole, where through some creative accounting, one apparently can make use of the full tax credit provided you lease instead of buy (source).
If you are Nissan, and hence want to make a bit of money, or at least not lose a lot of money, how does the $250/month lease deal work? Well, for that, lets look at what happens when the car comes back to Nissan after a 2 year lease. Looking at the row, cost – lease income, we see that the question here is… can we sell a 2 year old Nissan Leaf for more than $7,140 or a 2 year old Nissan Aryia for more than $29,190?
Id say in the case of the Leaf, no problem, from our used EV survey (source), the mid-price is about 27k CAD, or 20k CAD. The Ariya might be a tougher sell, but 30k, would represent about 60% of the MSRP, which is within reason for depreciation.
So, why do these cheap lease deals work? While incentives certainly help, in particular, how they are applied at the time of purchase (or lease initiation), we also find other reasons why automakers prefer the cheap lease deal to price discounts.
Electric car adventures 