Eliminate Gas Costs By Leasing an Electric Car

Aaron AvatarA few months ago my brother and I were talking about thrifty living and he mentioned someone he worked with who leases an electric car – saving him a lot of money in fuel and auto repair costs.

I'd never really heard of anyone doing this – and thought the idea was genius. Being that wife and I routinely spend over $350 per month in gas driving to our jobs and miscellaneous errands/travel – lowering this monthly “vehicle payment” would be a blessing. Plus, we'd be doing our small part in helping to save the environment, right?

I wanted to get a hold of this guy to see how he came to this decision and how it was working out for him. Granted, gas prices (of late) have been going down – but this is typically short-lived.

Here's a part of our “email interview”:

How did you come to the decision to lease an electric car vs owning a car outright?

Originally I was looking at a small gas efficient commuter car back at the end of 2012.  The Nissan dealer alerted me that a Leaf may be perfect for a commuter since my round trip from home to work was 40miles.  I did the math and it did indeed make sense.

Can you do the math for us on why this makes sense for you economically?

Depending on your normal gas usage, however much that is to drive a 1000 miles/month (many drive SUVs and the gas savings is greater). You are driving a reliable new car for lease payment minus gas savings, usually equates to  $100-$150 per month.  I justify this as a cost of getting back and forth to work with reliable transportation.

lease-electric-carHow long are your leases?

First lease was 24 months and is expiring in Dec.  Negotiating a lease is a little different then buying a car from a  dealer.  You factor depreciation and after the rebates (7500 federal rebate), the difference divided by the months is your monthly payment. For Example 38000 MSRP with a 60% depreciation after 2 years would look something like this.

Cost at end of 24 months $22800.
MSRP 38000- (10000 rebates, try to negotiate down to invoice price)=28000 Net Cap cost
money factor (interest)- my latest interest was literally $0. Right now Leaf's have about 3% interest.
+destination cost $800 in Texas (varies per state)=
$6000 / 24 months =$250 monthly payment

What do you pay in electricity w/ having to recharge every day?

Its very little, and I would estimate it raises my electric bill $20/month.  Electricity is relatively cheap.  Also my city  charges me $25 per 6 month period to charge unlimited in all the city's charging stations.

Do you worry that you'll “stall out” without any recharging stations around when you are out and about?

This is called range anxiety, and yes it is similar to the feeling of running out of gas.  I would use the example of the Seinfeld episode when Kramer gets a rush from how far he can take the car without putting more gas in it.  I have run out one time and mostly it was my fault not having enough patience to wait for it to charge.  Nissan has a 1-800 number to come out and tow you for free in these instances.

What if you need to drive long-distances?

You don't.  There are various Level 3 charging stations popping up (currently one in my city that will fully charge your car in 30-40 minutes but I hear they are very expensive).  Until there are more of these spread out between cities, this car is a basic city commuter going 60-80 miles on a full charge depending on road type (flat vs inclined roads/declines), weather (running AC or heat will use battery power from car), and how you decide to drive it (like your grandma, or like
you have a roadster).

What type of person do you think would benefit from leasing an electric car?

Especially someone who drives a car with less than 25 mpgs with a overall commute of 40 miles round trip per day.  When the gas savings becomes $150-$200/month it makes sense especially if you want a very reliable transportation option vs an aging car that may need a major repair over 100k miles when you actually own the car after paying the
financing for 5-6 years.

Could you tell us what your monthly lease payment is?

$250/month for a 2012 Leaf SL. Currently negotiating a 2015 Leaf S with the charging package for $225/month with zero down.  I also have a $1000 Leaf loyalty to put towards my next lease so the first time lessee may not be able to get such a deal.  I am also a savvy negotiator. To note, Texas has a state rebate if you buy (almost never makes sense) or lease 48 months they will cut you a State rebate check for $2500, especially an added bonus that I am looking forward to taking advantage of.  I consider this free money and these state programs vary state to state.

Anything else you might like to add?

Watch gas prices. If they continue to fall the electric car may make less sense.  I never thought we would see a gas sign at $2.65 but that is what we have in my city.  I'd look at a Prius or Honda Fit to compare.

Also in 2013 the Leaf upgraded the charging capability so the car if plugged in to your garage on a slow “trickle” charge will fill your battery in half the time – around 8-9 hours.  A level 2 charging system in your garage will cost about 800-900 but will give you a full charge in about 4 hours. I currently have a 2012 so I am looking forward to the added bonus of charging in less time.

Additional thoughts to leasing an electric car

While this all sounds dandy and seems to be working for our friend here – there are some drawbacks to the vehicle. Namely:

  • As was noted, the car on a full charge only goes 80-100 miles, depending on the electric car
  • While you may be helping the environment and eliminating air pollutants, the batteries that go into the electric cars don't typically last very long and (some have noted) are potentially just as bad for the environment
  • That said, the batteries are quite expensive to replace (which is why leasing may be the preferred option)
  • There aren't a lot of charging stations around the US – yet
  • You likely couldn't take a long-distance road trip in it

Still – to me at least – this is an attractive option. I figure everyone -even if you own your car outright – has a monthly “car payment”, be it in the form of gas costs and/or repairs. By leasing an electric vehicle, you are effectively eliminating the gas and (most likely) repair costs.

Right now, there are several electric vehicles available for purchase/lease in the US. They are:

  • Ford Focus Electric
  • Fiat 500e
  • Chevy Spark
  • Kia Soul EV
  • Mitsubishi MiEV
  • Nissan Leaf
  • Smart Electric
  • VW E.Golf
  • BMW i3
  • and last but not least, the Tesla

As our friend mentioned though – Federal and State governments are still rewarding folks who decide to purchase/lease an electric vehicle – and this is also worth mentioning as it will help save you even more.

Do you think it makes sense to lease an electric vehicle?

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  1. Excellent article. We use a Nissan Leaf in Atlanta, Georgia with respect to our loose leaf tea business. The electric car saves us $100s/month in gasoline costs. Electric cars have all the benefits mentioned in this article and more. Gasoline and the smog that results have a tremendous health burden especially on lungs and heart. Cancer and heart disease result from exposure to car exhaust/smog. Our country imports an estimated $1T in oil to feed our gasoline habit. This has a tremendous burden on the consumer. If that money stayed in the U.S. it could have a multi-Trillion dollar stimulatory effect on the economy. Electricity is almost 100% produced by Americans in America. So our money would go to support American jobs. The savings, ~$750M/year, can be spent by consumers and will exchange hands 6-7 times. Thus, we have a multi-T dollar stimulus. Simultaneously we need to re-source the electric grid away from fossil fuels such as coal and toward alternatives such as solar and wind. This would result in less emissions and mitigate our impact on the earth’s climate. Isn’t it great? With the electric car everyone wins!

  2. This was a great article on this topic both from the environmental perspective and the great explanation of how a lease works. I’d say that 90% of Americans have no idea how a lease actually works and why often leasing a “luxury” car or “electric” car (cars that cost a lot) can actually be cheaper than leasing the bottom of the barrel type cars ….

    Personally, I’ve found that leasing deals are great in both August and December. This past August, I picked up a 2014.5 Toyota Camry (slightly remodeled, thus .5) for $1200 down and $95/month for 2 years …. yes, you read that correctly, $95/month. To get a Corolla (a smaller car) would have cost nearly 50% more. I had looked into the Prius, but the deals weren’t there where I lived.

    The key thing with leases is to make sure you’ve got enough miles to meet your needs and the residual value is calculated correctly and fairly in case you want/need to purchase the vehicle. With my Camry, I’m betting those in the know are thinking the residual was something like $20K or more …. it wasn’t … $15K. So bottom line, if I buy the car, I’m getting a Camry for $19K, and that’s what you have to look at … what would be the bottom line purchase price …

    • Great info here Andy! $95/month is incredible! I’m going to shoot you a note to find out more about this.. :)

  3. Wow. I’m generally against leasing a vehicle but this makes a lot of sense! It’s crazy to think that it can be cheaper to lease a car than pay for gas in some situations. I am thankful, though that I do not have to do this much driving everyday.

    • Yeah, I have held the belief that leasing is always a bad thing. But, it can certainly work out for your benefit if the conditions are right. Think you have to factor in where you live, how often you travel and (possibly) if you have back-up transportation if you need to travel longer distances. Seems like it could take some planning for recharging – but if one could save hundreds/thousands of dollars – well worth it.

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