EVs Accounted for Nearly 20% of all New Vehicle Leases during Q4 2024

The electric vehicle (EV) market continues to grow, and a noticeable trend is emerging: more and more consumers are opting to lease rather than purchase their EVs. Recent data from Experian’s State of the Automotive Finance Market Report: Q4 2024 highlights this shift, showing that over 50% of new EV purchases in the fourth quarter of 2024 were leases. What’s even more striking is that EVs now represent nearly 20% of all new vehicle leases, a significant jump from just 2.11% in Q4 2020.

This surge in EV leasing aligns with a growing preference for leasing in the broader vehicle market, where consumers often find it more affordable than purchasing outright. The financial comparison between loans and leases reveals that while the gap between average monthly loan and lease payments is already substantial at $142, this difference is even more pronounced in the EV segment. In fact, the payment gap between loans and leases for EVs reached an average of $175 in Q4 2024. This trend is particularly noticeable among non-luxury EVs, where the gap rises to $205, compared to just $98 for luxury EVs.

“Leasing has always been a cost-effective alternative for consumers hoping to drive away with a more palatable monthly payment—EVs are no different,” said Melinda Zabritski, Experian’s head of automotive financial insights. “But it’s not just affordability. Leasing offers consumers the opportunity to buy an EV without worrying about the potential resale value down the line. With many EVs set to come off-lease in the next few years, it will be interesting to see how the used EV market unfolds.”

Among the most popular leased EVs, the Honda Prologue, Hyundai IONIQ 5, and Chevrolet Equinox EV are included in the list, with the Honda Prologue making a particularly strong showing, securing a spot in the top 10 most leased vehicles overall. This reflects the growing appeal of EVs across a variety of price points and models. Additionally, the report highlights broader financing trends, noting that more loans are being taken out for late-model vehicles, particularly those up to three years old. In Q4 2024, over 66% of loans were for vehicles up to three model years old, up from 63.92% the year prior.

The shift toward leasing, particularly for EVs, can be attributed in part to favorable financial conditions, such as lower interest rates and stable monthly payments. Although the average loan amount for a new vehicle rose slightly to $41,572, the average monthly payment remained relatively unchanged at $742. This stability is largely due to a decrease in the interest rate, which dropped from 7.16% to 6.35% in just one year.

The used vehicle market has also seen positive changes in Q4 2024, with the average loan amount for a used vehicle dropping by $344 year-over-year to $26,468. Additionally, average monthly payments for used cars fell by $10, bringing the figure to $525. Interest rates for used vehicles also saw a slight decrease, from 11.97% to 11.62%. Despite these improvements, however, the used vehicle financing market experienced some declines across all risk segments.

“With manufacturer incentives, the continued resurgence of leasing and lower interest rates, we’re seeing consumers across the board shift back into the new market,” continued Zabritski. “That said, the market remains fluid. Similar to EV market, as vehicles come off lease over the next 2-3 years and late-model vehicle availability increases, how will that impact consumer purchasing behavior?”

As part of a broader shift in the vehicle financing landscape, delinquencies saw a modest increase. In Q4 2024, 30-day delinquencies rose from 3.08% to 3.17%, and 60-day delinquencies also edged up from 0.96% to 0.99%. Additionally, the percentage of used vehicles with financing dropped slightly from 38.72% to 36.50% over the same period.

Notably, the average credit score for new EV buyers declined slightly, from 773 in Q4 2023 to 767 in Q4 2024, suggesting that while EVs are attracting a wide range of consumers, including those with lower credit scores, the overall market remains solid. The report also noted that banks have seen their market share grow in both new and used vehicle financing, with their share of new vehicle financing increasing from 20.17% to 24.83% and their share of used vehicle loans rising from 26.10% to 28.68%.

Overall, the fourth-quarter data from Experian reflects significant shifts in consumer preferences, with more buyers opting to lease electric vehicles as they become a more common and accessible choice. These trends suggest a growing comfort with EVs and their financial accessibility, with leasing offering an attractive option for many consumers seeking lower monthly payments and the ability to drive a newer model with more advanced technology.

Experian is a global data and technology company that creates opportunities for individuals and businesses worldwide. The company plays a pivotal role in redefining lending practices, preventing fraud, simplifying healthcare processes, delivering digital marketing solutions, and providing valuable insights into the automotive market.

Benefits of Leasing an EV

Leasing an electric vehicle (EV) can offer several benefits, especially in today’s rapidly advancing automotive market. One of the key advantages is that it allows drivers to experience the latest technology without the concern of owning an outdated model, as technology in the EV world evolves quickly. Leasing typically comes with lower upfront costs, making it more accessible for those who may not want to commit to the higher price tag of a new EV. Another significant benefit is the opportunity to take advantage of tax credits that might not be available when purchasing an EV. Additionally, leasing eliminates the hassle of selling the car at the end of the ownership period. Instead of dealing with depreciation and the sale process, you simply return the car to the leasing company once the lease term ends.

EV Lease Tax Credit Loophole

But there’s more to leasing an EV than just these straightforward advantages. Enter the so-called “EV lease loophole.” Under the Inflation Reduction Act (IRA), leased electric vehicles are classified as “commercial vehicles,” which makes them eligible for the full federal clean vehicle credit of up to $7,500. This is a huge bonus for those who lease, as it opens up the opportunity to benefit from tax credits that typically come with more stringent requirements, such as battery and sourcing standards.

What does this mean for potential EV leasers? If you decide to lease, you might have access to a wider range of electric vehicles at a reduced cost, provided the dealer agrees to pass the savings from the tax credit on to you. However, it’s important to note that while the dealer receives the tax credit, the savings typically don’t go directly to you. Instead, you may see those savings reflected in the form of a rebate or a reduced lease price. But keep in mind, not all dealers are willing to pass on those savings, so it’s worth confirming with the dealership ahead of time.

Another advantage to leasing an electric vehicle, especially in terms of tax benefits, is that your income does not affect your eligibility for the credit. Since the dealer is the one who claims the tax credit, income limits typically associated with the EV tax credit don’t apply in the same way they do for purchases. This opens up leasing to a wider range of consumers who might otherwise find themselves excluded due to income thresholds when buying an EV.

$7,500 EV Tax Credit Under Threat

Kiplinger reported that the Federal EV Tax Credit of up to $7,500 is under threat by the misguided new administration. So, EVinfo.net recommends making your EV lease or purchase decision sooner rather than later, to take advantage of the credit. EVinfo.net recommends all Ford, Chevrolet, Rivian, Honda and Hyundai EVs, with the exception of fuel cell vehicles.