EV lease penetration nears half of sales

Leasing volume continues to be a driving force behind EV adoption, buoyed by federal tax credits and lower monthly payments. In the second quarter, EV lease penetration climbed 15.1 percentage points year over year to 48.7% of total EV sales, according to a TransUnion leasing study released Aug. 1. . The percentage of financed EVs fell 9.9 percentage points YoY to 34.7%, and the percentage of EVs bought with cash slipped 5.3 percentage points YoY to 16.6%, according to the report. Leasing volume has jumped across all powertrain types as more consumers turn to EV leasing, with the volume of vehicles leased up 32.5% YoY to 714,000 units in Q1, according to the report. EV leasing continued to ramp up in Q2. . At Ally Financial , for example, leases comprised 64% of the lender’s EV originations , according to the bank’s earnings report. The rise in EV leasing penetration is largely driven by the $7,500 tax credit under the Inflation Reduction Act, which allows for leases to qualify for the full credit. Manufacturers are pushing the tax credit and leasing heavily to make obtaining an EV more affordable, EV Life co-founder and co-Chief Executive Kevin Favro, told Auto Finance News . “Affordability of the vehicle is the most critical thing,” he said. “Forget range anxiety; forget charging. . How do you get a public charge? How do you get a home charge? If you can't afford the car, none of those questions matter.” When leasing an EV, consumers are opting for a lower monthly payment, which is especially attractive in the current high-interest - rate environment, Erin Keating , an executive analyst at Cox Automotive , told AFN . The average monthly payment for a financed luxury EV is $765; that monthly payment falls to $652 for lease deals, according to a report by S&P Global released Aug. 9. “ Leasing is returning across the board ; we saw it heavy in EVs this year, but it is not just in EVs,” Keating said. “Leasing is one of the options to help bring monthly payments down, and monthly payments are what people are looking at.” Leasing will remain attractive for potential EV buyers since there will be more vehicles available for the tax credit with new models hitting the market. Hyundai Motor Group ’s new EV mega plant in Georgia will start production in Q4, EV Life’s Favro said. Volkswagen also announced plans for an EV plant in South Carolina shortly after the passage of the Inflation Reduction Act in 2023, he said. . The Volkswagen plant is expected to begin production in 2026. Residual values still a concern Lenders and consumers remain concerned about the residual values of EVs. . By leasing, the consumer doesn’t have to worry about the value of the car declining as depreciation is factored into the monthly payment, DriveItAway Holdings Chief Executive John Possumato told AFN . Mobility platform DriveItAway offers subprime consumers access to a vehicle through a microlease , or a monthly subscription, regardless of their down payment amount or credit history. “There's still a lot of nervousness around the value, and the obsolescence of the battery,” Possumato said. “You put those two together, and [leasing] is the only way to go for a manufacturer to move a unit.” Wholesale used-EV values were down 7.2% YoY for the first half of August while non-EV used-car values fell 3.6%, according to the latest Manheim Used Vehicle index report by Cox Automotive , released today. . Wholesale used prices overall ticked up 0.5% YoY in the first 15 days of the month. As used-EV values decline, there is an undiscovered value that consumers are missing, Possumato said. . For example, DriveItAway has several Chevy Bolts on its lot that are only 2 years old but come at a great price, he said. “On the one hand, we're sad because the resale value has crashed,” Possumato said. “On the other hand, they're great buy opportunities. . This is a $30,000 to $35,000 car that's now on the market for $12,000 or $13,000 with a lot more life left in it.” One hurdle is that many consumers remain unaware that the federal government mandates an 8-year , 100,000-mile guarantee on all EV batteries, which is extended to 10 - years and 150,000 miles in California, Favro said. Some lenders such as Capital One have explainers on their websites detailing these warranties to would-be car buyers. Still, Possumato sees leasing as the main driver of EV adoption. “The underlying consumer adoption — that's the issue,” he said. “That's not a fast cure. . The idea of not being on the hook for the residual for the consumer is going to have a major play and leasing is going to be the way [EVs] are put out.” The Auto Finance Excellence Awards recognize leadership, performance and achievements by executives and companies in the industry. . Nominations for the 2024 AFE awards can be submitted here . . Early bird registration for Auto Finance Summit 2024 ends Aug. 23.

EV lease penetration nears half of sales

Wholesale used-EV values down 7.2% YoY

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