As reported recently by ABC News, automakers have sweetened deals in recent months for plug-in electric cars to help boost sales and move vehicles off dealer lots as the year comes to an end. General Motors knocked 13% off the sticker price for the Chevrolet Volt this summer, while earlier this year Nissan dropped the price of its electric Leaf, offering a three-year lease at $199 a month.
Leasing offers mutual benefits for the lender, consumer, manufacturer and dealer: lenders can get a federal tax credit, which they cannot do in a loan arrangement. This helps to reduce monthly payments for consumers, as well as the risk assumed by lenders if a consumer were to default on payments because the application of the tax credit will have brought the principle amount closer to actual market value. These lower lease payments move more units, which ultimately benefits manufacturers and dealers.
Thus, for those interested in dramatically reducing their reliance on gas, the leasing discounts on plug-in electric cars are worth considering. However, owning an electric car has its limitations. While it’s important to note all six factors ABC News provided for those looking to drive off with a plug-in EV (type of driving you plan to do, knowing the car types, owning vs. leasing, tax incentives and timing), we want to highlight the last one: ABC News advises to avoid buying used. While we don’t advocate limiting consumer choice, we do believe that consumers should be fully informed when deciding whether to purchase a new or used vehicle of any type.
This past summer, we released a market analysis report on plug-in EVs, including a used price forecast; based on technology limitations, moderating gasoline prices and age concerns, we expect used plug-in EV depreciation to continue to outpace the overall market’s rate of loss by a significant margin in the coming years. We estimate that a plug-in EV worth $20,000 in 2012 will lose $9,792 of its value by the end of 2014. Similarly priced gasoline and hybrid vehicles over the same period are expected to lose $5,573 and $6,455, respectively. It should be noted that the value proposition of an EV becomes more favorable once prices have reached a certain point.
Considering the finite nature of fossil fuels and the negative repercussions associated with their energy use, there is certainly potential for plug-in technology to assume a large share of the automotive marketplace in the future. In addition, we do expect to see subtle improvements in the rate of EV depreciation over the coming years, as the technology develops more of a track record and earns more of a reputation for reliability. This would be directionally consistent with depreciation trends observed in early hybrids. In the near term, however, plug-in EVs appear set to remain a fringe alternative powertrain solution for years to come.
You can read the full ABC News article here.