At first, leasing an electric vehicle may seem like a great idea — you can cut back on gas costs and they often come with attractive tax credits. However, some experts say it’s not as financially sound as it seems.
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“I would buy it outright and I would buy it used. I would not lease it,” said money expert Jade Warshaw on a recent episode of “The Ramsey Show.”
Here are four reasons why Warshaw does not recommend leasing an electric car.
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A Lease Is the Most Expensive Way To Operate a Vehicle
According to Warshaw, a lease is one of the most expensive ways to operate a vehicle. Even after considering the cost savings by switching to electric and the federal tax credit, it doesn’t necessarily make up for the higher cost of driving the car.
You may not even receive the full federal tax credit. According to Edmunds, leased electric vehicles from dealerships are considered “commercial vehicles” under IRS regulations. Because of this, the $7,500 tax credit goes to the company that leased it to you. They can choose to pass the savings along, but it’s not a requirement.
Electric Vehicles Depreciate Faster
Electric vehicles also depreciate faster than gas-powered ones. A recent study by iSeeCars found that used EV prices have fallen four times faster than hybrids and six times faster than gas-powered vehicles, losing 24.7% of their value over the past year.
A vehicle’s depreciation rate also impacts monthly lease payments because it affects how much the lessor will recoup their investment. When leasing, the depreciation is factored into the lease payment during the lease term. The higher the rate of depreciation, the more you’ll likely pay in monthly lease payments.
Mileage Limitations
Mileage limits are common with lease agreements. Going over this limit means you’ll have to pay a per-mile charge for every extra mile. According to Kelley Blue Book, the average cap is 12,000 miles per year, and the typical penalty is $0.25 per extra mile. If you go over the cap by 4,000 miles, that’s an additional $1,000 due at lease termination.
Charging
It’s generally cheaper to charge an EV than to fill up a tank with gas on a gas-powered vehicle. However, Warshaw said there’s more to charging than meets the eye. “There’s the time, and then if you want to do a quick charge it costs more,” she said.
You can charge your EV at public stations, but these are often more difficult to come by, and more expensive than charging at home. According to J.D. Power, the prices to charge at home range from $300 to well over $1,000 (excluding installation fees) depending on the type of unit.
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This article originally appeared on GOBankingRates.com: 4 Reasons It’s Not Financially Sound To Lease an Electric Car, According to Jade Warshaw
