Should You Buy a New or Used Electric Vehicle Weighing the Pros and Cons

The pros and cons of leasing vs. buying an electric car

By Russ Heaps

What looks better in the current automotive market? Here's some help on whether you should lease or buy an EV, plus a dive into subscription services, too.

Quick facts about leasing vs. buying an electric vehicle:

As we consider the question of whether you should lease or buy an electric car, we will pretty much approach the lease vs. buy issue as we normally do. That is, the reasons for leasing or buying a pure electric vehicle (EV) are about the same as for a gas-powered car with an internal combustion engine (ICE). For our purposes here, we will assume you've done all the research and settled in your mind the overall question of driving an electric car versus an ICE vehicle. In other words, you are dead set on an EV.

Should you lease or buy in today's automotive and EV-friendly climate? That's a somewhat different matter. As you read through this story, we will summarize the current automotive market, provide some pros and cons for buying and leasing an electric car, and even discuss subscription services.

Also see: The pros and cons of electric cars

Today's automotive environment

Today's automotive marketplace is challenging for both dealers and consumers. Here are some influences conspiring to frustrate buyers and sellers.

New car inventories

According to Kelley Blue Book parent company Cox Automotive, new car prices are generally inching down as dealer inventories reach near-normal levels. However, it remains a mixed bag depending on the brand. What we often consider domestic brands, like Dodge, Ram, Ford, and GM, are seeing inventories well on the rise. However, the supplies of some Asian brands like Toyota, Honda, and Kia remain stubbornly tight.

For electric vehicles, Cox Automotive data show car dealers ended the second quarter with more than 92,000 awaiting sale. That compares to a year ago when they had 21,000 EVs. That's great news to a consumer heart set on an electric car, were it not for other factors, like higher interest rates.

Rising interest rates

The United States Federal Reserve has hiked the nation's interest rate to reduce inflation and could increase the rate even higher. Consequently, the interest rates on car loans and leases have also been rising. Higher auto loan and lease interest rates increase a vehicle's cost to own. Higher interest rates have helped force some buyers with bad credit ratings out of the marketplace. Consequently, carmakers started focusing on and producing higher-priced models.

The average transaction price of a new electric car in May was $55,488. Considering that Bankrate says the average interest rate on a 60-month auto loan is now about 7%, it's bound to give you pause. Even putting 20% down ($11,000) on that average transaction price above on a 60-month loan at 7%, it will still work out to an $881 monthly payment before taxes. That monthly payment is out of reach for most Americans.

Inflation

Although the rise in inflation seems to be easing, it still means the budgets of most Americans remain under pressure. Consequently, the spike in car transaction prices, rise in interest rates, and less cash to spend make 2023 a tough time to acquire a car, whether or not it's a new, used, or leased EV.

What's the difference between leasing and buying?

One noteworthy difference between leasing and buying is monthly leasing payments are usually less than loan payments. This is because the car is yours when you pay off a loan. However, when you complete a lease, you turn in the keys with nothing to show for years of payments. In reality, leasing is just glorified renting.

Other differences include annual mileage caps, early termination penalties, and usually, leasing agents require much higher credit scores, among other negatives. You can check out everything you need to know about leasing in Kelley Blue Book's Leasing Guide.

Plus:What is EV, BEV, HEV, PHEV? Here's your guide to types of electric cars

Pros of buying an electric car

Read: 5 reasons you should hold off on buying an EV

Cons of buying an electric car

More: Before buying an EV, consider these hidden costs of ownership

Pros of leasing an electric car

Check out: Four valuable lessons I learned taking a road trip in an electric car

Cons of leasing an electric car

PRO TIP: Whether you buy or lease an EV, there's a chance it could qualify for federal and state tax credits. However, navigating the amount of the credit and which vehicles qualify can be confusing. It's even more difficult if you lease your electric car. If you and your EV meet all the qualifications, the savings can be as much as $7,500 off the price. Moreover, some states and localities offer additional incentives.

What about an electric car subscription?

Beyond buying and leasing, you can drive a new (or near-new) electric car through a subscription service. Think of it as a cross between leasing and renting or a hybrid of sorts. Like renting and leasing, you owe and own nothing when the subscription term is complete. It also doesn't require much in the way of upfront cash. However, unlike renting and leasing, your monthly subscription payment includes insurance and scheduled maintenance.

Although factory-sponsored subscription services have lost some steam in the last few years, Volvo and Porsche still offer subscriptions with all the bells and whistles. Hyundai recently launched its Hyundai Evolve+EV subscription service that features the Ioniq 5 and the Kona Electric models.

There are a few third-party subscription services, as well. Steer EV offers a comprehensive-feature subscription service offering several electric vehicle models from assorted carmakers. There are other non-affiliated subscription programs, as well.

You might like:18 new EVs to watch for in 2024

Pros of EV subscriptions

Cons of EV subscriptions

What about leasing or buying a used electric vehicle?

You may consider leasing or buying a used EV, depending on the mileage and age. Carmakers warranty EV batteries for at least eight years or 100,000 miles. Consequently, if there is still time and miles left on the battery warranty, a used EV may be a good deal.

When buying a used EV, you might consider if you qualify for federal tax incentives for cars under $25,000. If eligible, the credit is $4,000. Also, the used car must be at least two model years old and purchased at a dealership. The vehicle also only qualifies once in its lifetime. Used vehicle buyers can only qualify for one credit every three years.

More: Should you buy a used EV? Here are 10 things to know before you make the leap

We recommend buying over leasing for most car shoppers in a normal market. But this isn't a normal market. Furthermore, we're discussing EVs. On average, EVs carry a higher price tag than comparable ICE vehicles. Consequently, leasing's historically lower monthly payments can help those in the market right now. Furthermore, electric vehicle owners tend to be more sensitive to the newest technology. Leasing allows drivers to regularly move on to the latest tech in the newest electric vehicles with very little fuss.

Advantage in 2023: Leasing.

PRO TIP: Having purchased a new car in 2023, I can tell you that unless you order and are willing to wait several months to take delivery, odds are, you will have to compromise. The ICE SUV that I really wanted was neither expensive nor unique. However, it simply wasn't among inventories in Greenville, South Carolina, or within 50 miles. Considering the very stingy supply and selection of EVs at dealerships at the time, you will be in a small minority if you score precisely what you want from EVs already on the dealer lot. Be prepared to compromise whether you lease or buy.

This story originally ran on KBB.com

-Russ Heap

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

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Copyright (c) 2023 Dow Jones & Company, Inc.

How to buy the best used electric car

Thinking of going electric, but want to get more for your money? The second-hand electric car market is growing and our tests show there are some high-scoring models now available used. We explain what to look for and how to avoid getting stung.

As with all cars, the price of a used electric car will vary depending on factors such as the make and model, its age and overall condition. And although our data shows electric car batteries typically don't lose much of their original charge (even for models over 5 years), it's still something worth checking before you buy.

Read on to find out what to look out for when buying a used electric car, the ones to shortlist and why your existing car might be worth much more than you think.

Find out which models perform best for safety, reliability and more in our guide to thebest electric cars.

How much do used electric cars cost?

If you're looking to buy nearly new (one that's just a year or so old), don't expect to save much money. In some cases, the increase in demand means you could end up paying more for a nearly new electric car than one that's brand new (but out of stock).

As is often the case, the real bargains are found in the older used market. The earliest fully battery-powered cars have been on sale in the UK since as early as 2011, and our research has highlighted a number of models that have stood the test of time, if not the ravages of depreciation. Further down, we've listed some of the used electric cars that are worth shortlisting, with typical prices starting from just over 6,000.

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Should you buy a used electric car?

With the potential for much lower running costs compared to a petrol or diesel, and a supremely smooth driving experience, used electric cars have a lot going for them. However, there are some important potential drawbacks to consider.

The main issue is that of driving range. In recent years, larger batteries and improved efficiency have seen the latest electric cars manage over 300 miles between charges. However, many older used models struggle to manage 200 miles some can't even reach half that figure. Depending on the car you choose, you may find yourself looking for a chargepoint nearly every time you set off.

As always, manufacturer-claimed mileage is often wide of the mark. We test every electric car under the same, real-world conditions, so by reading our electric car reviews you'll know exactly how far you'll be able to travel in your chosen car.

Along with reduced mileage, older electric cars probably won't include the latest charging technology. This means it's unlikely you'll benefit from the latest ultra-rapid charging stations, so youll be waiting a tad longer to refuel.

That said, the majority of used older models do offer some form of rapid-charge compatibility, so you wont necessarily be reliant on far slower 7kWh fast chargers. For more on charging, read our guide on charging electric car.

Is electric car battery degradation really a problem?

One thing that puts some people off buying a used electric car is the fear of the lithium-ion battery having degraded, reducing the car's range. It's an understandable concern after all, anyone whos owned a laptop or phone for a few years will attest to the limited usable life span of their batteries. However, the fact is it's not something you need to be overly concerned about.

Data from our annual car survey shows that reduced battery capacity (and therefore driving range) is far less of a problem for electric car owners than you might imagine. In fact, our data shows that, on average, drivers reported only a minimal reduction in capacity (around 9% over seven years) as their car ages. As the chart shows, electric cars purchased in 2014 still have, on average, 91% of their original charge capacity.

If you're unlucky enough to suffer a greater drop in capacity, the car's manufacturer warranty should have you covered. Most warranties cover the battery pack and will provide for a repair of replacement should it drop below a certain percentage capacity.

Kia for instance, will cover the battery for seven years or 100,000 miles (whichever comes first) and will take action should the battery drop below 70% of its original full charge.

What to check when buying a used electric car

If youre still concerned about the state of the battery and are buying from a dealer, ask them to provide a health check report. This should show the battery's remaining capacity.

If you're buying privately or via an online car-buying service, you probably won't be able to get a battery report. However, you should still treat buying a used electric car just like you would any other used car.

Most important of all, ensure the car has a full service history. You should also use the free tool on Gov.uk to check whether the car is subject to any recalls and to see its MOT history simply enter the car's registration number to find out (and be very suspicious of owners who won't tell you the registration of the car they're trying to sell you).

For a small fee, services such as HPI will tell you if the car's been reported as stolen, written off or saddled with outstanding finance. Buying through a manufacturer approved-used scheme should ensure all these checks have been carried out and youll typically get a years warranty thrown in if the original one has expired.

Find out more on how to thoroughly check a used car, and how to negotiate the best deal, in our guide on how to buy the best used car.

Where to buy a used electric car

Although dealer-approved used electric cars offer peace of mind and the process of buying one is usually simple and quick, youre likely to pay a premium even if you manage to secure a discount.

Of course, there are other ways of buying a used car to consider, especially if saving money is high on your agenda. We reveal the pros and cons of each (from online brokers to car supermarkets) in our in-depth guide on where to buy a car.

How to get the best price for your existing car

Although you're likely to get the best price by selling your car privately, online car-buying services such as Webuyanycar, Motorway and Carwow provide a relatively easy way of selling your existing car. Most of these services offer free valuations, so even if you have no intention of selling your car in this way, you can use them to calculate an asking price for a private sale.

For more ways to get the best price on your existing car, read our guide on how to sell a car.

Used electric cars to shortlist

The best used electric cars have decent driving ranges, are easy to drive and practical.

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Used electric cars to avoid

Plenty of electric cars have failed to impress in our lab tests as their driving ranges and performances in crash tests.

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• • Comfort and practicality
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