Total Cost of Ownership: Leasing and Electric Vehicle VS. Standard Combustion engine
By, Nicholas Lalli
The United States in 2015 is beginning to break away from a time of recession. Unemployment is decreasing, along with energy costs, but the long lasting effects on our financial mentality have set in. This has been proven with the large increase in number of leased vehicles, which are over 3 times larger than seen in 2009. The benefits of leasing are clear, in that you can afford a newer and more expensive vehicle over a 3 year period, while paying a fraction of the MSRP. To clarify, leasing a vehicle is practically a long term rental, and you aren’t tied to the costs of repairing an older vehicle with higher mileage. Typically, leases are over a 3 year or 36 month period and restrict you to using 45,000 of the vehicles miles. The monthly lease payments are determined using sales tax which vary by state, a down payment ($2,000 in our model), and residual value of the vehicle (how much the vehicle is worth after the lease).
The model shows the specific variables attributing to the lease cost, in addition to outside expenses faced over that 3 year period. Rumor has it that Electric Vehicles have lower annual fueling costs, but does that make-up the difference in a higher MSRP? Luckily the United States government provides a $7,500 dollar incentive on the purchase or lease of a plug-in electric vehicle. These various factors facilitated my interest in the total cost of ownership for a leased electric vehicle and internal combustion powered vehicle. The calculations shown above are made using the tax, and average energy costs of New York State. The implemented incentive proved viable in reducing the TCO of leased vehicles over this 3 year period. The $15,000 dollar difference in MSRP of the Chevy Volt and VW Golf was voided due to the combination of lower fuel costs, and government credits associated with the Plug-in electric vehicle. The $7,500 dollar incentive decreased the payments to the Volt dealer to $15,439.43, still above $11,797.50 Golf. The Chevy owner begins to gain ground on the Volkswagen owner once fuel costs begin to accumulate. Over the 3 year period, the Chevy owner then saves more than $4,000 in fuel costs forcing the VW owner to spend slightly more over the 3 year period.
To clarify, a $35,000 dollar electric vehicle will save you money over 3 years compared to a $20,000 dollar gasoline powered vehicle. In every instance depicted above the electric vehicle was more expensive, yet costs less to own. If leasing a vehicle is really for those with financial conscientiousness, then they can really go above and beyond by leasing a Plug-in electric vehicle.
So an EV is not only a greener solution it is also a cheaper one.
For any questions mail me at: nicholas.lalli (at) et-ny.com
Want more information? Contact us or sign up for the newsletter