Leasing has taken the lead in how Americans are choosing to drive electric. According to Experian’s Q4 2024 State of the Automotive Finance Market Report, more than half of new electric vehicle transactions in early 2024 were leases, a big shift from past years, when most buyers either paid in cash or financed their vehicles with traditional loans. So what’s behind this trend?
The General digs into the key drivers: tax incentives, upfront cost differences, and policy uncertainty. These factors are reshaping how consumers approach EV ownership and could continue to do so well into 2025.
Rethinking Ownership: How EVs are Shifting the Car Financing Equation
For decades, most Americans bought cars the traditional way—through loans. This offered long-term value: Drivers built equity, avoided mileage caps, and eventually owned the car outright. It was ideal for those planning to keep a vehicle for years.
Leasing offered lower payments and newer models but came with trade-offs: mileage limits, wear-and-tear fees, and no ownership. It rarely made sense for long-term use.
Electric vehicles are flipping that script. With fast-evolving tech and uncertain battery repair costs, owning an EV long-term feels riskier. Leasing offers a flexible way to try EVs, especially now that tax credits and lease-specific perks make it more appealing.
The Electric Vehicle Market Transformation: Why Leasing is Surging
Electric vehicles have surged in popularity. In Q3 2024, Experian reports EVs made up 10.06% of all new vehicle financing, marking a 30% year-over-year jump. As EV options grow and charging infrastructure expands, more buyers are choosing electric, but they’re also rethinking how they pay.
For years, most new EVs were bought outright or financed with loans. That changed in 2024. For the first time, leasing surpassed loans, with 46.6% of EVs leased versus 36.8% financed. By early 2025, leasing hit 50.1%, while loans lagged at 38.9%.
The shift toward leasing is apparent in the chart. From 2019 to 2022, loan financing ruled. Leasing fell to a low of 14.1% in 2022, but then it surged more than 36 percentage points in just two years. Loan usage, on the other hand, peaked at 62.8% in 2022 before falling sharply. Cash and unknown purchase methods held steady, bouncing between 16% and 27%.
This reversal highlights a bigger trend. As battery costs, resale uncertainty, and fast-changing tech raise questions about long-term EV ownership, more Americans are choosing the flexibility and lower upfront costs of leasing. Tax credits sweeten the deal even further, making leasing not just an alternative, but the preferred way to go electric.
Financial Benefits Fueling the EV Leasing Boom
Leasing is gaining ground not just because it’s flexible, but because it saves people money. From lower monthly payments to reduced risk and maintenance costs, leasing offers a cost-effective way to enter the EV market without the financial weight of ownership.
Lower monthly payments
The monthly cost gap between leasing and financing is wide and growing. In Q3 2024, Experian reported the average EV lease payment was $198 less per month than the average EV loan. For nonluxury EVs, that difference jumped to $205 in Q4 2024, with average lease payments at $504 versus $709 for loans. In a high-interest-rate market, that kind of monthly relief matters.
Less risk, lower upfront cost
EVs still come with a higher price tag. The average EV in 2024 cost $56,328, nearly $8,000 more than the average price of all vehicles. Leasing reduces the sting; it often requires a smaller down payment, skips the risk of long-term depreciation, and gives drivers the option to walk away at the end of the term if prices or technology shift.
Reduced maintenance costs
EV maintenance is cheaper than gas-powered vehicles, and lessees benefit the most. Consumer Reports found that EVs cost about half as much to service, averaging just $0.031 per mile versus $0.061. The National Automotive Dealers Association estimates $300 in savings over five years, even for drivers who don’t keep the vehicle long-term.
Overall, leasing offers a cheaper, lower-risk entry into EVs; it is ideal for first-time or cost-conscious drivers.
The Tax Credit Advantage: How Leasing Unlocks EV Incentives
Tax incentives have always played a big role in driving EV adoption, but in 2024, whether you leased or bought can determine whether you actually get those savings. For many drivers, leasing is the key to unlocking benefits that might otherwise be out of reach.
Fewer EVs qualify for the full credit when purchased
Strict eligibility rules under the Inflation Reduction Act have narrowed the list of vehicles that qualify for the $7,500 federal tax credit. As of mid-2024, only 15 EVs make the cut. Battery sourcing, final assembly, and vehicle price all factor in, leaving many popular models excluded from the incentive.
Leasing loophole widens access
Leasing gets around these restrictions. Because leased EVs are classified as “commercial vehicles” under federal rules, they qualify for the full $7,500 credit regardless of battery origin or where the car was assembled. This loophole reopens eligibility for high-demand and imported models that wouldn’t qualify if purchased outright.
Dealers pass savings to consumers
The dealership claims the credit and often passes some or all of that value to the customer. Dealers often apply these savings as reduced lease payments, lower down payments, or added incentives, boosting affordability without the buyer ever filing a tax form.
State and local incentives sweeten the deal
On top of federal perks, many states offer their own EV incentives; like rebates, tax exemptions, or utility bill credits. Kelley Blue Book highlights that these programs can knock thousands more off the cost, especially when combined with federal leasing benefits.
For buyers who want access to incentives but don’t meet purchase requirements, leasing offers a smarter — and often more rewarding — path to going electric.
Why Leasing is Winning in Today’s EV Market
Tax credits may be boosting EV leases, but they’re not the only driver. Broader market forces — from high prices to tech turnover — are nudging more consumers toward leasing. In an uncertain economy, the flexibility of a lease feels less risky than long-term ownership.
EV sticker shock and limited supply
EVs cost more than gas models, and supply chain issues have kept inventory tight. To stay competitive, automakers use lease offers to ease the upfront burden, without requiring a long-term financial commitment.
Tariffs threaten more price hikes
Vehicle costs could climb further. Tariffs on imported autos could add 4%-7% to vehicle prices, roughly $2,000 to $3,500 more per car. Added steel and aluminum tariffs may also push production costs even higher. With these unknowns on the horizon, leasing helps buyers avoid being locked into a depreciating asset that’s getting more expensive to build.
Fast-changing tech and resale risks
EV tech evolves fast. Better batteries and software roll out constantly, making it risky to commit long-term. Leasing also lets consumers upgrade regularly without stressing over resale value.
With prices rising and tech changing fast, leasing gives drivers financial flexibility and a way to keep up without getting stuck.
Consumer Trends and the Rise of EV Leasing
Leasing’s growth isn’t just a response to financial incentives or supply chain issues; it’s about how buyers want to experience EVs. They’re choosing leases to try new tech, stick with trusted brands, and keep their options open in a fast-changing market.
Top leased EVs
Experian data shows a clear pattern: Consumers lean into familiar brands and models when leasing. The Tesla Model 3 is the top leased EV, making up 12.2% of EV leases, followed by the Tesla Model Y at 9.3%, and the new Honda Prologue at 8.84%. These cars are ideal for drivers who want the EV experience without a full commitment, offering a strong mix of performance, price, and prestige.
Financing still in the mix
Leasing may be trending up, but it’s not the only option. Credit unions and nontraditional lenders are stepping up to attract EV buyers with competitive loan rates, especially as big banks pull back or raise interest rates. These institutions are trying to undercut leasing deals with flexible loan packages, pushing financing back into the spotlight for well-qualified borrowers.
Leasing as a trial run
Most importantly, consumers see leasing as a way to ease into EVs. Battery performance, resale value, and charging availability still raise concerns. Leasing a car for three years gives drivers time to test the tech, understand range and maintenance needs, and evaluate lifestyle fit without worrying about long-term depreciation or being stuck with outdated hardware.
Buyers aren’t just following the money; they’re making calculated decisions in a space that’s still evolving. Leasing gives them room to adjust, upgrade, or walk away.
What’s Next for EV Leasing? Policy, Pricing, and the Shifting Market
Leasing has fueled the EV boom, but its future depends on decisions far beyond the dealership. As policymakers weigh changes and the used EV market gains steam, the next phase of growth might look very different.
Federal tax credits face uncertainty
The leasing boom stems largely from a loophole: Leased EVs count as commercial vehicles and qualify for the full $7,500 tax credit. But if Congress tightens the rules, demand could drop fast. The EV market reacts quickly to policy shifts, and 2025 may bring change.
Dealers and automakers adjust
To sustain demand, automakers stack federal, state, and local incentives. States like Kansas show how these deals slash monthly lease costs and keep EVs accessible despite high sticker prices.
Used EVs could shake things up
Early leases are ending, flooding the market with used EVs. This could lower new car prices and give buyers a cheaper alternative to leasing, especially as battery tech improves and resale values stabilize.
Leasing may stay relevant, but its dominance isn’t guaranteed. What comes next — be it more used sales, better loans, or new incentives — will define the next EV phase.
Should You Lease Your Next EV? What to Know Before Deciding
Leasing makes it easier to dip a toe into the EV world, but it’s not the right move for everyone. Understanding how leasing fits your budget, driving habits, and long-term goals can save money and hassle down the road.
Who Benefits Most from Leasing?
Leasing an EV tends to work well for people who:
- Want lower monthly payments.
- Drive fewer than 15,000 miles per year.
- Prefer new tech and updated models every few years.
- Don’t want to deal with battery repairs, depreciation, or resale.
High-income drivers, urban commuters, and those with consistent driving routines often get the most value from leasing, especially when dealers pass through the federal tax credit.
Questions to Ask Before You Sign
Before locking into a lease, it’s smart to ask:
- Does the lease reflect the $7,500 federal tax credit in the pricing?
- What’s the mileage limit, and what are the penalties for going over?
- What’s the car’s residual value, and are early termination fees reasonable?
- How does the total cost compare to a loan over the same period?
Use a cost comparison calculator that includes fees, down payments, and interest, not just monthly payments.
Choosing What Fits Your Needs
Leasing offers predictability, convenience, and tech upgrades, but limits flexibility. Buying gives you ownership, customization, and long-term value, but requires more upfront commitment.
There’s no universal answer. The best choice depends on your lifestyle and how you want to experience your EV.
The Road Ahead for EV Leasing and Ownership
Leasing EVs has gone from fringe to mainstream, driven by high prices, tax breaks, and the appeal of trying before buying. Leases now outpace loans for new EVs, marking a clear shift in consumer behavior.
This trend is reshaping more than sales. Automakers are rethinking inventory, dealers are adjusting incentives, and policymakers are weighing credit changes. Buyers have more options and more decisions.
Whether you lease or finance, choose what fits your needs. Think about how you drive, what you can afford, and how long you’ll keep the car. The EV market is moving fast; make a choice that fits now and flexes for later.
This story was produced by The General and reviewed and distributed by Stacker.
