Act Now, Because EV Lease Deals Will Probably Get Worse Next Week
Hyundai Ioniq 6 Lease Deal
If you're looking to lease a new EV in the next couple of months, you might want to get the deal done this week.
If you're already planning on leasing a new EV in the next month, you might want to act now. Starting next week, the average EV lease deal will likely get a bit worse, according to one expert.
Tyson Jominy—the vice president of data and analytics at J.D. Power—says that predicted EV residual values have fallen in recent months, and that those depressed residuals will start factoring into new lease deals on July 1. A car's residual value is how much the automaker expects it to be worth after the lease term, and it's the difference between that and the current sale price, minus any tax credits, that determine the monthly payment on a car. The higher the residual, the easier it is to offer cheap lease rates. One of the key sources automakers use to project residual values, the J.D. Power Automotive Lease Guide, gets updated every two months, with the new edition's values likely to influence July leasing rates. For EVs, the updated residuals aren't good.
"Many automakers will reevaluate their programs because in some cases EV residuals are getting worse by up to four [percent] or so on a 36-month term. So a $50,000 vehicle could have a $2,000 lower residual value," Jominy told InsideEVs.
That extra $2,000 in depreciation has to be absorbed by somebody. Jominy says that he can't say which automakers will react to the change, but most will have to choose between absorbing the extra cost on already-subsidized lease deals or passing on the burden to the consumer. In his hypothetical example for a $50,000 car with a residual value that's $2,000 lower, that would mean an extra $55.55 per month over 36 months. It's not cataclysmic, but it's material. He suggested many automakers will absorb around half of the added cost.
It's no surprise that EV residuals are falling. Residual values take into account the pace of updates in the market, and attempt to predict how desirable a new car today will be in three years. With new models offering lower prices, longer ranges and better technology every year, it's no surprise to see projected values of current models trending downward.
"Based on the way EVs have been going—primarily with Tesla taking price cuts—there's a lot of downward pressure on EV values," Jominy said. "So this is starting to be reflective of the market conditions."
More EV Leasing News
It's a tough rut for automakers, who have already been heavily subsidizing EV leases. Since the passage of the Inflation Reduction Act, the federal tax credit heavily incentivizes leasing for anyone who either wants an EV that doesn't qualify for the purchase credit or makes too much money to qualify for it themselves. Jominy says about 60% of all new EVs are leased.
"Automakers have been offering some very aggressive deals recently," he said. He noted that some had offered low-APR financing, but the lease deals were extremely attractive. The Toyota bZ4X, for instance, could be leased in some markets for $129 per month for 36 months with $1,999 due at signing. Those lease deals worked, too. Price is the number one barrier to EV adoption for most buyers, and people respond to a good deal. Toyota bZ4X sales skyrocketed 545% the month Toyota launched that incredible deal. Toyota sold half as many bZ4Xs in April as it did in all of 2023.
bz4x may sales
But offering those extremely attractive lease deals is going to get more expensive for automakers next month. If you're not ready to pull the trigger, don't worry too much. EVs are likely to remain some of the cheapest cars to lease. Plus, the days of ultra-fast depreciation appear to be coming to an end. Jominy notes that early EVs like the Nissan Leaf would lose most of their value during a lease term. Today, residuals are much stronger for EVs, and heading in the right direction.
"We expect [EVs] to be right around parity with ICE vehicles pretty shortly. They're really arguably not worse in terms of residuals on average today," Jominy told InsideEVs.
As prices stabilize and end-of-year deals come around, there will be plenty of good lease deals to come this year. But if you were planning to get an EV in the next month or so, you might want to see if you can score a deal this week.
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