Not too long ago, vehicle leases were on the decline. So much so that it was affecting the used car market. Now, thanks to EVs, leases are making a big comeback. And thanks to tax credits, German luxury EVs are being leased now more than ever.
Automotive News reports that data from J.D. Power shows that in Q1 of this year, Audi, BMW and Mercedes had the highest EV lease rates in the entire industry. Nearly every one of each automaker’s EVs sold at the time were leases.
Audi, BMW and Mercedes-Benz had the highest EV lease rates in the U.S. in the first quarter of this year. Ninety-four percent of Audi’s EV sales were leases. Mercedes-Benz leased 93 percent and BMW leased 89 percent, according to J.D. Power. For all three brands, EV lease share jumped more than 20 points year over year.
You can thank the EV tax credit for these high lease rates. Usually, just 15 EV models qualify for the $7,500 federal tax credit when they’re being financed. Auto News says that with prices ranging from $51,000 to nearly $200,000, nearly every German EV is disqualified. However, thanks to a loophole in the Inflation Reduction Act that classifies leasing as a “commercial business”, almost any leased EV can get the full $7,500 credit. Because of this, German luxury EV sales are booming. And it’s helping dealers move metal that would otherwise be sitting.
Mercedes-Benz Financial Services’ VP of sales and marketing told Auto News that it’s helping the brand’s customers try the latest tech and getting them back into the dealer for another vehicle sooner than if they had financed a vehicle. “The only true difference between the programs currently is the tax incentive offered for leases,” he said.
Not all of the picture is rosy, however. Auto News says leasing costs over three years is still $1,800 more than a gas-powered vehicle. And vehicle savings, incentives and tax credits still aren’t enough to get some customers to even consider an EV. One partner at an Audi dealership outside of Cleveland, Ohio told Auto News how many customers aren’t even interested in talking about EVs.
Sales associates at Audi Cuyahoga Falls in suburban Cleveland struggle to convert gasoline vehicle buyers into EV buyers. Most customers “don’t even want to talk about it,” said Pat Primm, partner at Cascade Automotive Group, which owns the store. The dealership’s primary EV lease customers already know they want to go electric and decide to lease because of the incentives, he said.
EV inventory is up, as well, with data from Cox Automotive showing as sales slow, inventory is sitting on the lot longer. EVs are sitting for an average of 104 days, over a month more than gas-powered vehicles. Leasing also isn’t always the best way to get a vehicle, as our resident car buying expert Tom McParland has pointed out.