Yes, an electric vehicle, or EV, can be a good option for a leased car if you qualify. Leasing one can be a good way to drive one without having to commit to buying it in the end. However, almost all leases — EV or gasoline-powered — are generally only for brand-new cars and could be hard to qualify for if you have bad credit. If you’ve got your eyes set on leasing an EV, here are some things to consider.
Leasing an Electric Car With Poor Credit
With bad credit, it can be difficult to qualify for a lease since leasing companies typically have high credit score requirements for their programs. If you’re able to qualify for a leased vehicle, you may only qualify for a higher money factor (leasing's equivalent of an interest rate), and a longer lease term.
When you lease a vehicle, you're not paying for the entire value of the car, only for the depreciation, plus interest, of the lease while you have it. Since you're not paying the full sticker price, leasing can look like a better deal over financing, typically carrying a lower monthly payment than an auto loan on the same vehicle.
Leases typically only last two to three years, after which you usually have the option to lease again, buy it, or simply turn in the vehicle and walk away. If you don't like driving an EV there's no obligation to buy your leased car or to lease an EV again. A leased car isn't something you typically think of keeping, and so it can become a process that you have to repeat every few years.
And, sure, when you look at the numbers, leasing sounds like a good deal because it tends to have a lower monthly payment than financing. But is it actually a better deal in the long run?
Leasing vs. Buying an EV
Leasing, like buying, typically comes down to what you can afford and whether or not you qualify to lease or finance a vehicle. There are pros and cons to both, and it ultimately comes down to what fits your situation.
It can be hard to put into numbers what options a borrower may have when it comes to leasing and buying because it can be such an individual process. However, you should know that leasing typically has lower monthly payments because they're predetermined and depend on the length of your lease, your money factor, and the estimated residual value of the car you're leasing.
Buying may come with higher monthly payments and probably a longer term than a lease, but when it's all said and done you own the vehicle and its equity.
Let's look at a few points you can compare:
| Attribute | Leasing | Buying |
| Vehicle Choice | Leasing gets you a new car | Choose from new, used, or certified pre-owned vehicles |
| Ownership of Vehicle | Not unless you choose to buy | Yes |
| Up-Front Costs | Typically includes the first monthly payment, a security deposit, an inception fee, taxes, destination fees, and possibly a down payment | Generally requires a down payment, taxes, dealer fees, and a destination charge |
| Mileage Limits | Yes, mileage packages can vary but are always required | No |
| Vehicle Condition | You're required to return the vehicle in the best condition possible | No requirement |
| Maintenance and Repairs | Typically covered under warranty | Possible warranty coverage, depending on the vehicle you choose |
| Residual Value | Pre-determined, if you're not planning to purchase the car, the residual value only helps set your monthly cost | Whatever's left in your vehicle is equity which can be used toward another vehicle if you sell or trade-in |
| End of Term | When your lease is over you have the option to return the vehicle and walk away, lease a different vehicle, or buy your leased car | Once you make your final payment the car’s yours free and clear |
If you're curious about what kind of lease deals you might qualify for, CarsDirect can help! Click here for more information on the latest lease deals in your area.
The True Cost of Leasing a Vehicle
Leasing a car with poor credit may be possible in some cases, but it may not be the most cost-effective choice — especially when it comes to leasing an EV. When you lease there are many costs involved in starting the process, and if a leased vehicle isn't returned in acceptable condition, there can be a lot of additional charges on the back end.
At the end of your lease, if you're not purchasing the car, the dealer inspects the vehicle to make sure that it's within its mileage limits, that there's no excessive wear and tear, and that there's no major damage to the car. If you exceed the limits, it leads to additional fees
Over-mileage charges typically come in around 25 cents per mile, while excessive wear and tear can vary greatly by leasing company. These extra expenses often come out of the required security deposit which is typically a required up-front payment for a lease with bad credit.
If you're leasing an EV, expect those same charges, but don't forget to include the charges you're likely to incur for setting up a home charger and getting charging supplies, such as a Level 2 charging cord, that may not be included with your lease.
Lastly, if you're looking for an EV to lease you may end up paying more to begin with since EVs have relatively low resale value. Their lower residual value in leasing means that you end up with a higher lease payment, paying more over a shorter time.
And, let's not forget about the fact that in a few short years you typically don't have anything to show for your lease — when your lease is over you still don't own a vehicle and you have to start the process over.
Looking for an EV With Bad Credit?
If your heart’s set on the latest electric vehicle, but your credit isn't up to par for a lease, you might try for a bad credit auto loan instead. That lower resale value we talked about could be just the ticket to trying out an EV without spending a fortune the first time around.
Be aware that used EVs come with a whole different set of issues than used gas-powered cars, so it's important to do your research before starting the process of getting an electric vehicle.
If you're looking for a dealership to get your bad credit lending process started, CarsDirect wants to help. We've been connecting borrowers with bad credit to special finance dealers that are signed up with subprime lenders for over 20 years, and now it's your turn.
The process is free, simple, and easy to get started — just fill out our auto loan request form, and we'll get right to work making the connections you need for your next vehicle.