One major complaint about electric vehicles is that they are too expensive. While EVs were already costlier than comparable internal combustion engine (ICE) cars, carmakers have raised average EV prices to a whopping $66,000 in recent months. Factors such as increasing energy prices, shortages of critical parts and costly raw materials have increased the cost of production, forcing automakers to pass on these extra costs to consumers.
For drivers who are unable or unwilling to part with tens of thousands of dollars to purchase an EV, leasing presents an attractive option. Meryem Brassington from Lloyds bank group says that the difference between those who can afford to purchase an electric car and those who cannot is widening. Leasing is an ideal way to bridge this gap because it involves significantly reduced costs and gives drivers an out if they don’t enjoy the EV experience.
In the third quarter of 2021, 24% of new vehicle purchases were on lease terms. Lease agreements allow drivers to test out EV technology without having to make a lifetime commitment. However, expensive leasing terms may prevent consumers who are interested in electric vehicles from accessing the zero-emission vehicles.
These terms are usually determined by calculating the residual value of the electric vehicle. This refers to an EV’s projected value when the lease agreement ends in three or four years. One of the reasons electric car leasing prices are high is issues with calculating the residual prices of the EVs once they hit the secondhand market. Insufficient data on secondhand EV prices is to blame for these issues.
Unlike conventional gas-powered cars, which have a robust and decades-old secondhand market, the used-EV market is quite small. Since the EV industry is still in its infancy, most of the EVs on the road are brand-new models, giving financiers little data to use for their calculations. If a vehicle worth $40,000 loses $10,000 in value over four years, drivers will only be required to cover the $10,000. As a result, vehicles with lower rates of depreciation usually have lower monthly payments and a high residual value after the lease expires. To make battery electric cars (BEVs) more accessible to the public via leasing terms, stakeholders will have to find ways to reduce electric vehicle depreciation.
As more information becomes available about the rate at which electric vehicles age, it is possible that leasing agreements will become more user-friendly in terms of the cost and a lot more people will be able to lease EVs from various manufacturers such as ElectraMeccanica Vehicles Corp. Ltd. (NASDAQ: SOLO) prior to making a decision to buy one outright.
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