An increase in electric-vehicle leases is underway, as consumers try to stay ahead of the likely elimination of the current $7,500 tax credit on EVs. Many EVs only qualify for the tax credit if they are leased, as opposed to being purchased with a loan or cash – a loophole the Trump Admin. has vowed to end.
“More than 50% of new EV purchases were leases, and EVs accounted for nearly 20% of all new-vehicle leases during the quarter,” says Melinda Zabritski, head of automotive financial insights for Experian Automotive, referring to data from the fourth quarter of 2024.
At the same time, automakers have upped lease incentives on EVs to reduce excess unsold inventory. Dealers are glad to see EV inventory that more closely reflects consumer demand, according to earnings reports from the big, publicly traded new-vehicle chains.
“Battery-electric vehicle sales were up more than 25% from a year ago and represented about 8% of our sales for the quarter, and 8% of ending inventory,” says Thomas Szlosek, chief financial officer of AutoNation Inc., Fort Lauderdale, FL.
“OEM actions and uncertainty regarding the longevity of government incentives likely contribute(d) to stronger BEV sales from traditional OEMs during the quarter,” Szlosek says. In contrast, he says AutoNation unit sales for vehicles with internal-combustion engines were up just 3% in the fourth quarter vs. a year ago.
According to Experian, leases accounted for 31.2% of all U.S. new-EV purchases in the fourth quarter of 2023In turn, that’s a big increase from 9.2% in Q4 of 2022
The leasing loophole, introduced by the Biden Admin., provides a way for EVs produced overseas– and-or with too much foreign content– to avoid being disqualified for the tax break, on the theory that leases are for “commercial” customers as opposed to individual consumers.
Five years ago, in the fourth quarter of 2020, new-vehicle supplies and OEM incentives were low, and the domestic-content rules hadn’t been introduced. Back then, EVs made up only 2.1% of all new-vehicle leases, according to Experian’s State of the Automotive Finance Market report for the fourth quarter of 2024.
Roger Penske, chairman and CEO of Penske Automotive Group, Bloomfield Hills, MI, says that earlier in 2024, EVs accounted for 30% to 40% of inventory for the group’s luxury brands, but that declined to about 11% by the end of 2024.
Danny Wieland, vice president, investor relations and financial reporting for Sonic Automotive Inc., Charlotte, NC says the group finished the fourth quarter with BEVs accounting for 10% of its inventory. That’s appropriate, considering BEVs accounted for 11% of its sales for the quarter. “That was down from 14% at the end of the third quarter,” he says.
