The electric vehicle leasing program is becoming more popular with companies, but the average lease term is about half the price of conventional vehicles, according to a report by the nonprofit National Consumer Law Center.
It’s a good thing for the consumers who can get an affordable lease, said John Sorensen, director of consumer advocacy group Public Citizen’s Center on Auto Insurance.
But the problem is, electric vehicle companies can’t really predict what the future will bring.
The industry is still in the early stages of developing the technology to make cars that can drive themselves, which means there is no way to predict how much more electric cars will be affordable than traditional cars.
In order to keep costs down, companies have been using “variable lease pricing” that adjusts the price for the duration of the lease.
Variable lease pricing is designed to keep the cost of the car down for a certain amount of time after it’s purchased.
At the moment, a lease for a Honda Pilot will run about $2,500 per month, but after about four years the cost will be closer to $1,000, according the NRLC report.
For comparison, a conventional vehicle can run about four to five years on the lease, and the average American pays about $30,000 annually for the lease terms, the NRCC said.
This means that even if a vehicle is sold for about $5,000 after three years, the consumer will still be paying about $3,000 per month for the vehicle.
Some electric vehicle makers are looking to extend this model for longer periods of time, such as the Nissan Rogue lease term of two years or the Toyota Prius Prime lease term.
There are a number of reasons why variable lease pricing might be a better option than conventional leases, said Sorenen.
First, it reduces the amount of upfront payments that consumers need to make, he said.
Consumers would need to pay about $250 a month for variable lease terms.
Secondly, variable lease prices are likely to be lower than the traditional leasing model, so consumers can save money if they are able to choose the leasing model that suits them.
Third, variable leases allow electric vehicle manufacturers to reduce the upfront cost of leasing the vehicle to consumers by reducing the number of payments that are required.
That would save consumers money because they would be less likely to cancel the lease when the vehicle is not in use, Sorenten said.
Another advantage of variable leasing is that it helps ensure that consumers don’t pay a higher monthly rental fee when the lease ends than when it begins, said Michael Wirth, a senior analyst with the National Consumer League.
Because the car is a brand-new vehicle, customers may not have seen the vehicle before, so the leasing program will help ensure that customers don’t have a “feverish rental period,” Wirth said.
The NRCC report said that the average car rental cost is $8,400 for a new vehicle.
That’s less than half of the $25,000 average lease price, which is also a result of variable lease rates being lower than traditional leases.
According to the NRDC, variable pricing is one of several ways companies can lower the price consumers pay for a lease term, including using the variable leasing program to extend the lease beyond the term of the contract.
Electric vehicle leasing programs can vary widely across the country, so it’s important that companies understand the cost-benefit analysis, Sirensen said, adding that the NRC is also working with automakers to develop a uniform variable lease rate.
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