By Kyle Stock, Bloomberg
A Mercedes EQB starts at $53,000 in the US, but at the moment, the swanky SUV is one of the cheapest cars in the country.
In July, Mercedes dealerships were leasing the EQB for $352 a month, including the down payment, more affordable than nearly every other car in the country, according to Edmunds.com. In fact, on a list of cheapest leases, the EQB is third, one of five EVs parked in the top 10 slots.
Affordability, or the lack thereof, has long been a major stumbling block for electric vehicle adoption. But with a wave of deeply discounted offers, EVs on average are cheaper to lease than gas-powered cars. All told, the average EV lease works out to $624 a month (including a down payment), compared with $670 for internal-combustion cars and trucks, according to Edmunds. Though for certain cars at certain dealerships, bargain hunters can find a monthly payment below $100.
“I always hate to say ‘it’s unprecedented’ with the auto industry, but we’ve never really seen anything like this,” said Kevin Roberts, director of industry analytics at CarGurus, an online listings platform.
Indeed, car companies are offering screaming deals on battery-powered machines in a push to lock in loyal customers before losing federal tax credits of up to $7,500 per transaction at the end of September. The low prices are also intended to move a backlog before next year’s models start rolling off assembly lines en masse. Much of the current inventory is made up of machines that were made before tariffs drove up their cost, so there’s more room to discount while maintaining some margin.
Leasing vs. Buying
Leases now comprise nearly three out of four EV transactions and that’s largely by design. Car dealerships and buyers alike realize that lease contracts have fewer restrictions when it comes to qualifying for federal subsidies. And for the wide swath of drivers who are both curious about and skeptical of EVs, a lease is far easier to swallow than an outright sale.
“Leasing is the least worrisome path to testing the waters on new technology,” said Edmunds.com analyst Ivan Drury. “People fear battery degradation, poor residual values and being stuck with outdated tech on an outright purchase; but with a lease, you side step all those concerns.”
For auto executives, leases of 24 or 36 months offer a convenient way to move vehicles without cutting sticker prices. Dealers can also bake federal, state and local incentives into the lease deal.
Hyundai Motor Co. is offering its Ioniq 5 for $260 a month after the down payment, while Volkswagen’s ID.4 can be had for just $4 more. Honda Motor Co. Ltd. has gone a step further with a streamlined offer on the Prologue, its first EV: $4,800 for 24 months — $200 a month.
Some local dealers are going a step further. Emich VW in Boulder, Colorado, which has a clock on its website counting down the seconds until the federal EV tax credits end, is advertising the ID.4 for $39 a month. Stockton Honda in Stockton, California, is offering a 24-month Prologue lease for $7,500, thanks to a stack of incentives from the carmaker and the government, which works out to $313 a month.
The strategy seems to be resonating. Over the past two years, lease rates for electric vehicles have rocketed from 51% to 71%, compared with the industry average hovering around 16%, according to Edmunds.com.
CarGurus, a listings platform that captures most of the cars on the US market, said EV transactions surged 44% from July to June, spiking after Trump signed the legislation to kill EV subsidies.
Andy Small, a retired finance executive on Long Island, said he’s not “a lease guy” or “a car guy,” but he checked both boxes when he got a new Hyundai Ioniq 5 in July. With a stack of about $15,000 in incentives, including the federal IRA credit, the machine was far more affordable than the hybrids he was looking at from Toyota and Volvo.
“The game changes October 1, so I wanted to get it while I could,” he said. “And I absolutely love the car.”
Sunset in September
Nathan Niese, global lead for electric vehicles and energy storage at Boston Consulting Group, says the current wave of EV deals is a way for carmakers to lock in loyalty among customers. Once a driver goes electric, they seldom go back to gas. And leases are particularly useful in keeping a customer in-house — making them “sticky” in sales-speak.
“There’s never been a better time as an interested buyer,” Niese said. “I am shouting from the rooftops to move now and it’s not just because I drink the Kool Aid on EVs every day.”
Come October, EV deals may be harder to find, though some states are moving to sweeten EV incentives. Already, some car companies are shifting some production away from electric vehicles. That said, there’s a network effect working in favor of electric vehicles, as those who make the switch tell their friends and neighbors. Pricing in October is an unknown, according to Roberts at CarGurus, “but I rarely come across anyone who has made the move to EVs and says ‘I don’t like them.’”
And since it’s still early days for EVs, car companies will still be trying to build a loyal base of buyers, so discounts may continue with or without federal tax credits. Ford Motor Co. on Tuesday unveiled a plan to release a small, electric pickup truck in 2027 for around $30,000, which Chief Executive Officer Jim Farley framed as a “Model-T moment,” name-checking a Ford machine that made private automobiles both affordable and ubiquitous.
“Who is going to be able to profitably build sub-$40,000 vehicles that customers want,” Niese said. “That is the more important long game that is being played here.”
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