Quick Facts About Leasing vs. Buying an Electric Vehicle
- The federal $7,500 EV tax credit expired in September 2025, slowing sales. Some states and automakers are still offering rebates and other incentives on EVs.
- While tax credits and incentives initially made leasing a more favorable option in most cases, economic shifts are making used EV ownership a more compelling option for many.
- Financing and leasing interest rates remain higher than normal, though projections suggest these rates will begin to decline throughout 2026.
If you’ve done your research and determined that your next car will be an electric vehicle (EV) rather than a car with an internal combustion engine (ICE), then your next key decision will be whether you want to lease or buy. There’s a lot shifting in the economy these days, so we’ll walk you through the pros and cons of both buying and leasing an EV so that you can confidently make the best decision for your situation.
- Today’s Automotive Environment
- What’s the Difference Between Leasing and Buying?
- What About Leasing or Buying a Used Electric Car?
- Should You Lease or Buy an Electric Car in 2026?
What’s the Difference Between Leasing and Buying?
When you buy a car, you own it outright. You can drive it for years, gift it, trade it in, or resell it. But unless you buy a warranty, you’re responsible for all repairs and maintenance.
When you lease a car, you’re only paying to use it for a set term (usually two or three years). At the end, you return the car to the dealership. Repairs and maintenance generally aren’t covered, either.
Leases usually have lower monthly payments than loans because you don’t end up owning the car. After years of payments, you hand back the keys with no asset—that’s why leasing is essentially a long-term rental.
Leasing also often comes with annual mileage limits, early termination penalties, and stricter credit score requirements, among other drawbacks.
KBB Pro Tip: Check out everything you need to know about leasing in Kelley Blue Book’s Leasing Guide.
Pros and Cons of Buying an Electric Car
| Pros | Cons |
|---|---|
| + The possibility of equity. Whether you pay cash or finance your EV purchase, you will eventually have equity in the car. In the case of cash, that equity is immediate. If you finance, you begin to gain equity at some point along the way, and you will own the vehicle outright when the loan is paid in full. | — Higher payments. Your monthly loan payment amount depends on several factors, including the loan length, down payment amount, and interest rate. However, a monthly loan payment will generally be more than a monthly lease payment. This difference could be hundreds of dollars. |
| + Greater customization options. If you want to make your EV stand out or personalize it, you may customize it to your liking. You can change the wheels, install a leather interior, or apply a protective wrap to the exterior. But because a leased car is not yours and won’t be when the payment terms are fulfilled, it must be turned in as you received it. | — Bigger down payment. Because electric cars often cost more than ICE vehicles, buyers will need to come up with a bigger down payment. That down payment could be hefty if your credit has a few dings. |
| + More freedom. At any time during the terms of your loan, you can sell or trade in your EV to acquire another vehicle. As long as you pay off any outstanding balance to the lender, the car is yours to do with as you please. | — Easier to get underwater. Although you can sell or trade your electric vehicle at any time, you always run the risk that you owe more than it’s worth. That’s also called being underwater or upside down. In other words, you must make up the difference between the amount you receive for the car and what you still owe. The dealer can roll that difference into the new financing when trading it in on another vehicle. However, that means you will be even more upside down on your next car. |
| + Refinancing potential. If, at some point during the electric vehicle loan, you decide you can get a better interest rate or want to extend the payments for another year, you can refinance the loan. Again, if the refinancing isn’t through the same lender, any outstanding balance will need to be paid. |
MORE: Hidden Costs of Owning an Electric Car
Pros and Cons of Leasing an Electric Car
| Pros | Cons |
|---|---|
| + New EV tech is always evolving. For drivers who always want the latest and greatest, leasing allows for replacing an electric car every two or three years, depending on the term length. This is usually a straightforward process of turning in your current EV, signing another lease, and driving off in a new car. | — Zero equity. The greatest negative of leasing an EV for the average consumer is that the lessee has nothing at the end of the lease. In other words, the lessee doesn’t have a vehicle and doesn’t have anything to put down toward acquiring another car. |
| + Little skin in the deal. Typically, a consumer with better-than-average credit can get into a lease with minimal upfront money. Leasing companies often only require a deposit, a fee or two, and the first month’s payment. Generally, you can secure a lease with less upfront cash than a loan requires. | — EV bondage. While there’s a sense of freedom when handing over the keys and walking away at the end of the lease term, leasing bounds the lessee to the EV for the duration of the lease. Sure, you can get out of a lease early. But it will usually involve hefty early termination penalties. Sometimes, these penalties include paying the total of any remaining monthly payments. |
| + Under warranty. Leasing provides lasting warranty protection because most new EV leases are for two or three years. In the U.S. every new-vehicle factory warranty on the market is for a minimum of 36 months or 36,000 miles. In other words, the factory warranty will always cover a leased EV if you don’t exceed the annual mileage cap. | — Wear and tear. Leasing is really extended renting. In other words, you are essentially borrowing the vehicle and paying for that privilege. The leasing agent expects you to return the car in the condition it was in when you borrowed it, minus normal wear and tear. Anything a lessor deems beyond normal wear and tear will cost you, including interior and exterior damage. What is “normal” is subjective and up to the lessor. |
| + No fuss. Unless you’ve mistreated your leased EV or exceeded the annual mileage cap, you can hand over the keys and walk away when the lease ends. Even if the EV is worth less than the lessor projected it would be at lease end, you won’t owe a penny more. | — Mileage cap. Lease contracts include an annual mileage cap restricting the number of miles a lessee can drive a car each year. Exceeding that cap triggers a per-mile charge for each excess mile. The average cap is 12,000 miles per year or 36,000 miles over a 36-month lease. A typical penalty is about $0.25 per excess mile. Therefore, if you exceed that 36,000-mile cap by 4,000 miles, the lessor will assess an extra $1,000 at the lease termination. |
| + Option to buy. You can buy the electric vehicle at the end of a lease rather than turn it in. The lease-end purchase price is contractually stated in the lease. Here’s the good news: Because the lessor projects the EV’s projected book value at the end of the lease, you may find buying the vehicle a bargain. Why? If the lessor projects wrongly and pegged the value at the end of the lease to be lower than the future book value, you get to buy it at that lower price. |
KBB Pro Tip: Although the popular $7,500 federal EV tax credit has expired, various manufacturers still offer rebates and other incentives to help offset the cost of an EV purchase. Check out the latest updates in Kelley Blue Book’s How Do Electric Car Tax Credits Work and Electric Car Rebates and Incentives: What To Know by State.
Lease or Buy an Electric Car?
We recommend buying over leasing for most car shoppers in a normal market. But this isn’t a normal market just yet. Furthermore, we’re discussing EVs. On average, EVs carry a higher price tag than comparable ICE vehicles and depreciate more quickly. Unfortunately, the expiration of the federal EV tax credits means that many new EV leases lost the built-in $7,500 credit that had previously lowered payments. Unless captive lenders heavily subsidize money factors and residuals, ownership (especially CPO or longer-term keepers) could calculate better later in 2026. That being said, EV owners who are sensitive to the latest technology and prefer to upgrade to newer models with minimal fuss every few years may still find leasing advantageous.
MORE: Do Electric Cars Have Transmissions?
What About Leasing or Buying a Used Electric Vehicle?
You may consider leasing or buying a used EV, depending on the mileage and age. In the U.S., carmakers warranty EV batteries for at least eight years or 100,000 miles. Consequently, if there is still time and miles left on the battery warranty, a used EV may be a good deal.
Used EV sales continued to grow steadily in 2025, reaching 40,569 units and pushing market share to a new high at 2.8%. Through September, used EV sales were up 75.6% year over year. The top five makes by unit volume were Tesla, Chevrolet, Ford, Audi, and Volkswagen. As of September, the days’ supply of used EVs dropped to 30 days, its lowest level since March 2022. EVs remained below ICE levels for the vast majority of 2025.
One of the biggest considerations when buying a used EV is the battery lifespan. Replacing an EV battery is no cheap endeavor. However, if the car is relatively new and the battery has been maintained in excellent condition, a used EV could be a solid option if it fits your budget and lifestyle.
Today’s Automotive Environment
One of the biggest automotive stories of 2025 was Congress ending the federal $7,500 EV tax rebate. At the start of the year, buyers could cut many EV prices by $7,500 with federal support; now that it’s gone, many automakers have stepped in with their own discounts on some models.
As the tax credit expiration date approached, the market saw a late push to buy, followed by slowing sales in Q4 that are expected to stay soft into 2026. Even so, EV affordability in the used market is improving as price gaps narrow and total cost of ownership becomes more appealing. New-vehicle prices remain near record highs, yet sales are steady — supported by luxury and EV demand, with a sharp EV sales spike before credits ended in Q3. Recent Fed rate cuts haven’t yet meaningfully lowered auto borrowing costs but are expected to do so in 2026.
MORE: How Much Does It Cost to Charge an Electric Car?
KBB Pro Tip: Use our car payment calculator to see an estimated monthly car payment for either a new or used electric car.
Advantage in 2026?
Leasing benefits those who like being a part of the newest tech, prefer two- to three-year car cycles, and can find manufacturer-subsidized offerings. For everyone else? It may be more advantageous to buy.
Editor’s Note: We have updated this article since its initial publication. Russ Heaps contributed to the report.
