For new car buyers looking to save money, the choice is clear— Leasing an electric vehicle is the cheapest option today in the United States. Falling EV lease prices, new federal tax incentives for leased EVs, and rising interest rates, coupled with the lower operating and maintenance costs of EVs, make leasing a new EV the most affordable way to get into a new car. This modeling evaluates the costs of buying and leasing 14 comparable EV and internal combustion engine models, and finds that leasing an EV is far cheaper than buying or leasing a gasoline-powered vehicle – up to $500 cheaper per month and up to $6,000 cheaper per year.
The monthly cost than leasing a comparable gasoline vehicle or buying an EV or gasoline vehicle. Because leases are paid
monthly with little or no down payment, new car buyers can realize savings the day they drive the car off the lot.
The savings are significant. For certain models, leasing an EV is up to $500 per month cheaper than leasing the comparable gasoline vehicle, with annual savings of up to $6,000. For example, the Tesla Model Y is on average $425 cheaper per month cheaper than a BMW X4, the Ford Mach-E is $502 cheaper per month, and the BMW i4 eDrive35 is $264 cheaper per month than the gasoline Kia Niro.
Inflation Reduction Act (IRA) incentives are accelerating this trend, helping American drivers cut costs and fight inflation by avoiding pain at the pump. Part of these savings are attributable to a new $7,500 tax credit for leased EVs introduced in the IRA. Many, though not all, dealers pass this credit through to new vehicle buyers in the form of lower lease payments, which increases savings.
Their analysis shows that while EVs are cost competitive even without federal incentives, the IRA federal EV tax credit makes EVs significantly cheaper than gasoline-powered vehicles. The federal EV tax credit makes average monthly lease prices 12 percent cheaper for leased vehicles that pass the incentive along to lessees, making almost every EV model cheaper to lease than gasoline-powered alternatives in most states.
Increasing competition among EV dealers with new incentives and growing inventories is creating significant price declines; last month’s average transaction price for EVs was 20 percent lower than the same time last year. EV ownership savings could also expand further if oil prices increase again to anything close to 2022 levels, about 40 cents per gallon more than their current level.
This dynamic is most apparent for leases, but is also significant for new vehicles financed to own. For new car buyers uninterested in leasing, financing new EVs is often cheaper than financing equivalent gasoline vehicles, an important angle considering nearly 80 percent of Americans finance new car purchases.
While higher interest rates make financing any car more expensive than it was a year ago, many EVs in many states are still cheaper to finance and own per month than an equivalent gasoline vehicle.