Electric Car Leasing – a Way to Avoid Depreciation

Electric Car
Electric Car

With governments and businesses spending tens of billions investing in electric car technologies and infrastructure, and with so much buzz going on around the world, you would expect people queuing outside the dealer centres waiting to get their hands on that fashionable, shiny eco-toy. But for some reason it’s not quite happening. Even the large EU economies are struggling to convince people to go electric. Both Germany and the UK hardly managed to sell 1000 electric cars each in the 2011. It’s not difficult to understand why. Electric cars are more expensive to buy, they depreciate quicker, and you cannot go too far out of town because of the limited range. Although the latter wouldn’t matter a lot for the urbanites, the price factor is still a considerable obstacle for the electric cars to go mainstream.

A Clever Way of Buying an Electric Car

As with everything in life, it is important that you choose the best route for getting to your goal. Owning an electric car is no different. Choose the right way and you’ll be laughing each time you pass a petrol station! The pivotal part of owning an electric car is the type of finance you choose.

Without going too far into the boring stuff, there are two main financing routes – conventional car finance and car leasing. With car finance, after you’ve paid off your monthly payments, you own the car and it’s up to you what to do with it next. You can keep the car and enjoy it or use it as part-exchange for your next purchase.

Most cars after a 4-year finance term will have depreciated by between 50 and 70% of their initial value. An electric car can depreciate by as much as 90%. In fact, an electric car can lose 30% of its value in the first year. It mainly happens because of the battery. It will eventually become less efficient, reducing the range. Besides, cars continue to be developed and become more advanced so today’s electric vehicle will be considered quite outdated in 2016.

Life gets easier with car leasing. The method was initially used by businesses to finance equipment but it has gradually spread to the private sector as a clever way of getting behind the wheel of a brand-new car.

The main difference between finance and leasing is that at the end of the lease term, you don’t own the car. You simply return it and take on another leasing contract. That’s how people keep driving new cars without ever having to worry about depreciation. Car leasing makes more sense than ever now that we’re talking about buying electric cars.

Electric vs. Internal Combustion

Which one’s better? There’s only one way to find out! No, there will be no fighting, we’ll simply compare. Let’s take one of the few electric cars that you can actually buy today – Nissan Leaf – and compare it with an average family car. Both cars are being purchased on a 4-year lease. We also assume that you’re a frugal driver and you’ll be recharging your electric car overnight benefiting of the lower night tariff. Or, if it’s the internal combustion car – you won’t be spending more than £30 per week at the pump.

If we go purely by the monthly payments, the Nissan Leaf is slightly more expensive. But, electricity is significantly cheaper than fossil fuel and is likely to remain so for quite a few years. Another tangible saving you make with a green vehicle is the annual road tax.

Nissan Leaf Electricity £750 Road Tax £0 Insurance £2000 Deposit £1065 Monthly Payment £354 47 Monthly payments £16640 Total spend over 4 years £20455

Average ICE Car Fuel £6250 Road Tax £800 Insurance £2000 Deposit £990 Monthly Payment £320 47 Monthly payments £15040 Total spend over 4 years £25080

4 years down the line we will have saved £4,625. It’s a good deal – you’re saving money and making a difference for the environment. For fairness sake, we should mention that the comparison works out only if we look at medium-size family ICE cars. If you find an agreeable car with a monthly lease payment of less than £220, it will work out cheaper than driving an electric car. On the other hand, £220 is not a lot of money and you’re probably looking at a very small and basic car, whereas Nissan Leaf is comfortable and really nice to drive.

What About the Range?

Although saving thousand pounds a year on motoring might entice some people to get an electric car on leasing, the manufacturers will have to do more to drive the industry forward. First and foremost it’s the range. Currently, 100 miles per charge is the conveniently accepted standard and the majority of manufacturers seem to be capped at that, making excuses that the battery technology doesn’t permit squeezing higher ranges out of the modern cars.

As far as production vehicles are concerned, the Tesla Model S has the longest range with an estimated 265 miles. Unfortunately, there is nothing in the way of a breakthrough enabling the Model S to go so far per single charge. Yes, they are using a special design nickel-cobalt-aluminium cathodes and a clever battery management system, but it’s still the old li-ion technology that powers the car. The main reason why this car can achieve a 265-mile range is the sheer amount of battery cells that the manufacturer has managed to hide beneath the floor.

The typical Li-ion battery offers the specific energy density of 120 – 200 Wh/kg depending on technology. In short, it means that if you want to carry with you 200 Watt-hours of energy, your battery will need to weigh 1kg. This is by no means the limit. A California-based company Envia Systems has developed a new battery that reaches 400Wh/kg. It’s quite a long way off commercialisation, however when it finally gets to the manufacturers they will be able to build electric cars with range twice as long as today.

And that’s not it. PolyPlus – another Californian company (why are all green tech companies based in California?) – are working on a ground-breaking Lithium/Air concept which is theoretically capable of delivering 700Wh/kg. At this rate the range would actually touch the 500-mile mark.

The final development of these batteries will take at least 3 to 5 years. In the meantime, base your decision on financial interest – if owning and operating an electric car is likely to save you money, lease one and possibly by the time your car leasing contract ends, there will be better batteries will be available, along with a much wider range of electric cars.