50% Of EV Buyers Are Leasing, Including The Car Pro Jerry Reynolds!

"If you listen to my radio show, you know I always tell people who are interested in electric vehicles to lease them. (In fact, I just leased an all-electric BMW 5-Series from DFW-area CarPro dealer Sewell BMW Plano, pictured above.) My main reason is the volatile used EV market and the continuing drop in prices.  In addition, some people who choose an electric because it works for them today could have their situation change in the future and it will be much easier to get out of a short term lease versus a long term purchase. It appears some people are listening." - Car Pro Show host Jerry Reynolds

Consumers are leasing electric vehicles at a high rate  - accounting for nearly 1-in-5 of all new leases - according to new data from Experian. According to Experian’s State of the Automotive Finance Market Report: Q4 2024, more than 50% of new EV purchases were leases, and EVs accounted for nearly 20% of all new vehicle leases during the quarter. By comparison, EVs only made up 2.11% of new vehicle leases in Q4 2020.

“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.”

Here's a look at the most-leased EVs in Q4 leaderboard, with the Tesla Model 3 continuing to maintain its lead:

1. Tesla Model 3 (12.20%)
2. Tesla Model Y (9.08%)
3. Honda Prologue (8.84%)
4. Hyundai IONIQ 5 (6.88%)
5. Chevrolet Equinox EV (5.92%)

The Tesla Model 3 (2^nd), Tesla Model Y (5^th) and Honda Prologue (6^th) were also among the top 10 of all leased vehicles.

Experian says while the difference between the average monthly loan and lease payments are significant ($142), the difference in the average monthly loan and lease payments for EVs is even higher. In Q4 2024, the average payment difference between a loan and lease across all EVs was $175. Interestingly, non-luxury EVs generated the greatest payment difference at $205, meanwhile the difference between the loan and lease payment for luxury EVs was only $98.

A used car market shift?

The report also indicates a possible market shift in used car buying.  Researchers say year over year,  more people financed late-model vehicles (model years up to three years old) in the fourth quarter of 2024 than the year prior:

• More than 66% of loans were for vehicles up to three model years old in Q4 2024, up from 63.92% the previous year.

Experts attribute that in part to lower interest rates as well as average monthly payments for new vehicles. They say while the average loan amount for a new vehicle increased modestly in Q4 reaching $41,572, up $1,088 from the previous year, the average monthly payment dropped  $1 to $742.  Researchers say the stability in average monthly payment is likely driven by the decrease in interest rate during the quarter. In Q4 2024, the average interest rate for a new vehicle was 6.35%, down from 7.16% a year ago.

Here are other trends seen in the used car  market in Q4:

• The average loan amount for a used vehicle decreased $344 year-over-year to $26,468
• The average monthly payment dropped $10 to $525 over the same period.
• Similarly, the average interest rate declined from 11.97% to 11.62%.

Experian's report found that despite the lower average loan amounts and monthly payments,  used vehicle financing was down 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?”

Additional findings for Q4 2024:

• 30-day delinquencies increased from 3.08% in Q4 2023 to 3.17% in Q4 2024, while 60-day delinquencies rose from 0.96% to 0.99% over the same period.
• The percentage of used vehicles with financing reached 36.50% in Q4 2024, down from 38.72% a year ago.
• The average credit score for a new EV declined from 773 in Q4 2023 to 767 in Q4 2024.
• Bank market share for new vehicle financing grew to 24.83%, up from 20.17% the previous year. Meanwhile, banks saw their market share of used vehicle loans increase from 26.10% in Q4 2023 to 28.68% in Q4 2024.
• More than 30% of prime and super prime consumers are choosing to lease.

To learn more, watch the entire State of the Automotive Finance Market Report: Q4 2024 presentation on demand.

Photo credit: CarPro.