Electric car sales accelerated in the second quarter of this year. Americans driving home in a record number of electric vehicles (EVs), 48% more than in the same period last year.
According to a new report, the return of leasing is powering the sales surge.
A joint report from credit bureau TransUnion and automotive consultancy S&P Global Mobility finds that 48.7% of new EVs last quarter were leased, up from about a third a year ago.
“Auto leasing has been up overall in recent quarters, but nowhere more so than in the EV market, where leasing has now surpassed financing as the preferred option among consumers,” said Satyan Merchant, senior vice president and auto and mortgage line of business leader at TransUnion.
Leasing Crashed, but It’s Coming Back
Leases routinely made up nearly a third of all new car sales before the COVID-19 pandemic.
Those numbers declined rapidly as the pandemic’s impacts spread.
When a lease ends, lessees typically have the right to return the car or buy it at a price established when they first agreed to terms. Cars usually depreciate, and lenders have historically had an easy time predicting depreciation well enough to set a fair lease-end purchase price several years in advance.
The early pandemic’s supply chain shortages caused strange market conditions, in which recent-model used cars rose in value. Millions of drivers found themselves with an expiring lease and the right to buy the car for its residual value, a price fixed years ago that now seemed low. Many purchased the cars rather than returning them to start a new lease.
That phenomenon reduced leasing dramatically.
A separate strange condition is bringing it back, at least in the EV market.
The federal government provides a tax rebate of up to $7,500 toward the lease or purchase of many EVs. Purchased EVs are subject to restrictions – price caps, limits on where the automaker builds the car and its battery, and more. Leased EVs are not.
Some appealing models like the Hyundai Ioniq 6 or Kia EV9 (the 2024 World Car of the Year) are eligible for the rebate when leased but not when purchased.
As a result, TransUnion and S&P Global Mobility say leasing has nearly returned to pre-pandemic levels.
A steady supply of recent used EVs should reach the market over the next two to three years. Used EVs are eligible for a $4,000 federal tax rebate.
