Electric Cars: Buy or Lease?

Last Updated Aug 3, 2010 11:56 AM EDT

When it comes to electric cars, some people find a $41,000 price shocking. In announcing that figure last week for its Volt -- battery powered with an auxiliary gasoline generator -- Chevrolet came out with what is usually a luxury brand price tag. But both Chevrolet and competitor Nissan with its Leaf (priced at $32,780) offer three-year leases at $350 per month. If you want an electric car and live in the right place to get one (See Should You Buy an Electric Car?) those leases look like the best deal.

The leases -- with payments comparable to ones for many mid-size gasoline-powered cars or SUVs -- also make sense for another reason. With a brand-new technology, leasing an electric car hedges your bets against potential repair problems. Though both Volt and Leaf offer eight-year, 100,000-mile warranties on their batteries, such plug-in vehicles have yet to be tested in real-world conditions. If other problems arise, you'll be able to get out of the lease when its term ends in three years.Chevrolet Volt

Chevrolet says its Volt price --$8,220 higher than the Leaf -- is justified because it is a much different vehicle. The battery-only Leaf can go 100 miles before it needs recharging. The Volt goes 40 miles on a full charge and then an auxiliary gasoline generator kicks in, adding another 300-mile range. Some analysts agree with this argument. "The Leaf would need to be a second car used for commuting," says James Bell, chief market analyst for Kelley Blue Book. "The Volt could be a replacement car." The Leaf seats five vs. four for the Volt,  but the Volt has more rear leg room.

Chevrolet expects a majority of its Volt customers to opt for the $350 a month lease with $2,500 down at signing. It equates with Nissan's previously announced $349 a month Leaf lease with $1,999 down. (Only three-year leases are offered.) Chevrolet says it can match Nissan Leafthe lease price despite its higher selling price because it expects the Volt -- as a more versatile vehicle -- to have a higher resale price as a used car. But at this point no one knows if consumers will be eager to buy used electric cars or for how much.

The Volt will begin selling in California, Connecticut, Michigan, New Jersey, New York and Texas. The Leaf will sell principally in California, Oregon, Arizona and Tennessee.  If you are weighing buying vs. leasing an electric car, look at these factors:

Check the mileage allowance. These $350 leases allow 12,000 miles a year with penalty payments if you drive more. That's about 33 miles a day for a full year or 48 miles per business day. If you need to be on the road more, that could be a problem.

Compare the tax credits. Both these cars qualify for the $7,500 federal tax credit and additional tax credits in some states if you buy them. In California,instead of a tax credit  the zero-emission Leaf will  be eligible for a direct $5,000 rebate but the Volt won't because of its gasoline engine and emission control system. You'll be able to get the national tax credits if you lease, but not any state credits.

Photos Courtesy of the manufacturers

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    Jerry Edgerton, author of Car Shopping Made Easy, has been covering the car beat since Detroit companies dominated the U.S. market. The former car columnist for Money magazine and Washington correspondent for Business Week, Edgerton specializes in finding the best deals on wheels and offering advice on making your car last.