EV Leasing Surges to Nearly 80% of New Sales, Driven by Incentives

– Leasing now accounts for nearly 80% of EV sales at dealerships in the US, up from 16% last year. 

– Federal tax credits and automaker discounts make EV leasing more affordable than purchasing outright. 

– Expiring leases may flood the used EV market, impacting resale values and long-term pricing stability.

Leasing is dominating the electric vehicle (EV) market, with nearly 80% of EVs sold through dealerships now leased rather than bought outright in the US, according to recent data from Edmunds. This substantial increase from just 16% at the start of 2023 highlights a shifting dynamic in the automotive landscape, where federal incentives and automaker discounts are making leasing a more attractive option for consumers. We’ve not been able to get any concrete figures for Canada yet, but we’re confident that leases account for at least 50% of all new EV deliveries.

Federal Incentives and the “Leasing Loophole”

A primary driver of this trend is the so-called “leasing loophole,” which allows lessees to access the full $7,500 federal EV tax credit, a benefit that buyers can only claim if they meet strict criteria. To qualify for the tax credit when purchasing an EV, the vehicle must be assembled in North America, adhere to battery-sourcing restrictions, and fall under certain pricing and income caps. However, these restrictions are bypassed when the EV is leased, enabling consumers to enjoy lower monthly payments.

In Canada, incentives are also applicable to leases. The amounts vary based on the duration of said lease. For example, a 48-month period entitles lessee to the full $5,000 credit, whereas for a 36-month period, the incentive drops to $3,750. Importantly, since October 1, 2024, incentive eligibility no longer applies to ZEVs from non-free-trade countries. Still, those already in or en route to Canada before this date will remain eligible, while ZEVs from Canada or free-trade countries will continue to qualify for incentives.

Automaker Discounts and Attractive Lease Offers

In addition to the federal incentives, automakers in the US, less so in Canada, are offering significant discounts on leased EVs, further driving the surge. Deals like the Hyundai Ioniq 5 for $159 per month with $3,999 down and the Kia Niro EV for $149 monthly with the same down payment are drawing in buyers looking for cost savings.

These discounts come as automakers look to boost sales in a market where EV demand is not as robust as initially expected. Leasing has become an effective strategy for moving inventory while keeping monthly payments low for consumers.

In Quebec, demand for EVs has risen slightly. As of January 2025, the maximum $7,000 incentive will drop to $4,000 and eventually to $0 by 2027. Like the federal rebate, the full incentive amount applies to a 48-month lease.

Why Consumers Are Favouring Leases

Leasing offers several benefits that appeal to EV buyers, especially in a rapidly evolving market. One of the main attractions is affordability, as leasing reduces upfront costs and monthly payments. Additionally, the fast pace of EV technology improvements means many buyers prefer leasing to stay up-to-date with the latest models without committing to a long-term purchase.

Another key factor is depreciation. EVs have shown faster-than-average depreciation rates, making leasing a safer option for those concerned about potential losses in resale value. Leasing allows consumers to avoid depreciation risks while enjoying the flexibility to upgrade to newer technology when their lease ends.

As more consumers turn to leasing, the future impact on the EV market is uncertain. When these leases expire, the market could see a flood of used EVs for sale in two to four years. While this may provide opportunities for budget-conscious buyers, it could also affect residual and resale values and the overall pricing stability of electric vehicles.

There are also questions about the sustainability of the leasing trend. While leasing has proven effective in the short term, it may not be a viable long-term strategy for driving EV sales, especially if incentives are reduced or phased out in the future. Automakers may need to adapt their strategies as consumer preferences and market conditions evolve.

Source: InsideEvs