Majority of BMW, Audi, and Mercedes Electric Vehicles Are Leased

Why Leasing is Winning Over Buying for German Luxury EVs

The market for German luxury electric vehicles (EVs) has seen a significant shift, with nearly 90% of customers opting to lease rather than buy their Mercedes, BMW, or Audi EVs, according to J.D. Power data reported by Automotive News. This increasingly popular trend is largely influenced by changes initiated by the federal government.

Impact of the Inflation Reduction Act on EV Sales

The 2022 Inflation Reduction Act, America’s paramount climate legislation to date, has reshaped the landscape for the $7,500 federal clean vehicle tax credit. Previously, the tax credit was only limited by a cap of 200,000 credits per manufacturer. The revised version, however, imposes stricter criteria aimed at propelling domestic production and battery sourcing.

The EV Leasing Boom

Since the new tax credit rules became effective, buyers are more inclined to lease their vehicles. Given the high interest rates, depreciating EV values, and rapid advancements in EV technology, leasing presents several advantages. Under the stringent federal guidelines, only North American-built EVs with predominantly American battery components qualify for the full $7,500 credit. EVs built outside North America don’t qualify for any tax credits, and those with foreign battery components qualify for a reduced credit of $3,750. But, EV leases are exempt from these stringent rules, making all vehicles eligible for the federal tax credit.

Mercedes, BMW, and Audi have responded with aggressive lease deals to attract consumers. For instance, BMW has offered attractive leasing terms on its flagship EV SUV, the iX, which has garnered favorable reviews, including from automotive expert Tim Stevens.

Why Leasing Makes Sense

The data shows that a staggering 94% of Audi EVs are leased, as none of Audi’s EV models qualify for the tax credit due to their non-U.S. manufacturing locations. Mercedes has some qualifying models like the EQE and EQS SUVs, but their selling prices often exceed the $80,000 cap set for purchase incentives, making leasing a more viable option. Similarly, BMW leases out 89% of its EVs, the lowest among the three yet still a significant portion.

Historical Trend Toward Leasing

Leasing has always been a preferred option among luxury car buyers, including those of brands like BMW, Mercedes, and Audi, who often seek the latest tech and frequent model upgrades. Additionally, the high cost of maintaining these luxury vehicles out of warranty further tips the scale in favor of leasing. This preference also extends to other premium brands like Lexus, highlighting a broader industry trend. The federal government’s new policies have only accelerated this existing inclination, making leasing both a financially sound and environmentally friendly choice.

Conclusion

While the trend towards leasing luxury EVs might not be ideal for promoting long-term ownership, it undeniably aids in increasing EV adoption. Leasing allows luxury car enthusiasts to frequently upgrade their vehicles, staying abreast of the latest technology while benefiting from substantial tax credits. This practice may seem less beneficial for reducing consumerism or waste, but it’s a step forward in greener driving.

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William Kouch, Editor of Automotive.fyi