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The Leasing Conundrum: As Electric Vehicle Values Plummet, Leasing Costs Skyrocket

Low Resale Prices Force Doubling of Lease Rates in Europe

The Shift from Ownership to Leasing

In Europe, a growing number of consumers are opting to lease rather than buy cars due to spiraling costs and economic uncertainty. In Germany, the continent's largest auto market, leasing has become the preferred choice, accounting for nearly half of all new car purchases.

The Impact on Electric Vehicles

This shift has had a profound impact on the electric vehicle (EV) market. Once seen as an investment with potential for high resale value, EVs are now facing significant depreciation. This has forced leasing companies to increase their monthly rates to offset the risk of losses upon resale.

Factors Contributing to Falling Resale Values

Several factors have contributed to the decline in EV resale values: * **Range and charging anxiety:** Concerns over limited driving range and the availability of charging stations have dampened consumer demand for EVs. * **Influx of affordable Chinese clones:** The market has been flooded with low-cost EV models from China, further driving down resale prices. * **Tesla's dominance:** Tesla's position as a market leader has allowed it to set prices that influence the entire EV industry.

The Lease Price Dilemma

As a result of falling resale values, leasing firms have been forced to double their rates for EVs over the past three years. In August 2021, the average monthly lease payment for a €45,000 EV was €284, significantly lower than the €473 for a comparable gasoline-powered model. Today, that gap has narrowed, with EV lease rates now competitive or even higher than their fossil fuel counterparts.

The Future of Leasing

The long-term viability of EV leasing remains uncertain. If resale values continue to decline, leasing companies may become less willing to offer attractive rates. This could lead to a shift back towards ownership or the emergence of new financing models.

Conclusion

The rapid decline in EV resale values has disrupted the leasing market in Europe. As leasing firms adjust to this new reality, consumers must carefully weigh the pros and cons of leasing an EV versus purchasing one outright. The future of EV leasing remains uncertain, but it is clear that the industry is undergoing a significant transformation.