By, Nicholas Lalli
Gas prices need to be $1.85 a gallon before leasing a regular vehicle is cheaper than leasing an electric one
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 above calculates 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? The fueling costs are calculated as the additional electricity charges on your utility bill, based on the convenience of fueling at home. 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 Nearly $10,000 dollar difference in MSRP of the Nissan Leaf 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 forced payments to the Nissan Leaf dealer down to $12,605.96, still above $11,797.50 Golf. The Nissan owner begins to gain ground on the Volkswagen owner once fuel costs begin to accumulate. Over the 3 year period, the Leaf owner then saves more than $2,100 in fuel costs forcing the VW owner to spend slightly more over the 3 year period. To clarify, a $29,000 dollar electric vehicle will save you money over 3 years compared to a $20,000 dollar gasoline powered vehicle.
Over the period of developing this model the United States saw a significant decrease in oil prices. My initial results of the TCO using gas prices around $3.25/gallon significantly favored the Electric Vehicle. Outdated prices in this model are in no way useful, therefore we adjusted prices down to $2.50 a gallon. Surprisingly, there is still a strong case supporting the Electric Vehicle; allowing one to own a much more valuable car for around the same total cost of ownership. But, how low do gas prices need to drop before the internal combustion engine is less costly to own? Continuing the comparison of the Nissan Leaf and Volkswagen Golf, we notice a $950 dollar difference in cost of ownership. For the VW’s TCO to match the leaf, their gasoline expenses must be reduced to $2,950 over that 3 year period. In order for this to occur, gasoline prices must be reduce to $1.85/gallon, which New York hasn’t seen consistently in over a decade.
If leasing a vehicle is really for those who are financially conscious, then they can really go above and beyond by leasing a Plug-in electric vehicle as a greener solution as well.
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