Unveiling the Truth: Buying vs. Leasing an Electric Vehicle in Germany

The electric vehicle market in Germany is experiencing significant growth and change. With the German government ending its subsidy program and the evolving landscape of the automotive industry, consumers are faced with the decision of whether to buy or lease an EV. This article provides an in-depth analysis of the current state of EV leasing in Germany, compares it with buying, and discusses the implications of recent changes in government policies.

‍

1. The Current State of EV Leasing in Germany

Leasing an EV in Germany is becoming an increasingly popular option. This surge in popularity can be attributed to several factors, including the flexibility leasing offers, the rapid technological advancements in EVs, and the ending government incentives.

‍

1.1 What Types of Leases are there?

There is two types of leases, each has their unique advantages and are chosen based on the individual's requirements and financial plans.
‍

1. Operational Leasing: In this type, the leasing company retains ownership of the vehicle. It's akin to a long-term rental and often includes benefits like maintenance and sometimes insurance. At the end of the lease, you simply return the car to the leasing company.
   ‍
2. Financial Leasing: This is structured more like a purchase plan. You pay monthly installments with the assumption that you'll either buy the car at the end of the lease period or pay a lump sum that covers the car’s residual value. It's a way of financing the vehicle purchase but with different contractual obligations compared to a traditional loan.

‍

1.2 How do You Qualify for a Lease?

To successfully lease an electric vehicle in Germany, certain documentation and criteria must be fulfilled. Let’s have a look!

1. Passport: As a primary identification document.
   ‍
2. Proof of Income: Pay slips or employment contracts to demonstrate a reliable source of income for lease payments.
   ‍
3. Residence Permit: Required if you're an expat, showing your legal status in Germany.
   ‍
4. Proof of Address: A utility bill or rent contract to verify your residence.
   ‍
5. German Bank Account: Some leasing companies might require payments to be drawn from a local bank account.
   ‍
6. Credit Checks: A Schufa check (Germany's credit rating system) may be conducted to assess creditworthiness. For expats or those new to Germany without a Schufa score, leasing companies might consider other financial stability indicators such as employment status and income.

‍

1.3 Government Incentives and Subsidies

Germany's electric vehicle subsidy program, known as the environmental bonus or Umweltbonus, came to an abrupt end in late 2023, earlier than its originally intended expiration at the end of 2024. This decision was a direct consequence of budget constraints following a ruling by Germany's constitutional court, which deemed the appropriation of funds initially set aside for Covid pandemic relief for climate protection projects as unlawful.

‍

Consequently, the German government had to revise its spending plans, leading to significant budget cuts, especially in the Climate and Transformation Fund (KTF).

‍

The environmental bonus was designed to encourage the adoption of electric vehicles as part of Germany's green transition efforts. The program had paid out about 10 billion euros since its inception in 2016.

‍

2. Buying vs. Leasing an EV in Germany

When deciding between buying and leasing an EV in Germany, several factors need to be considered. Let’s have a closer look at the determining factors:

‍

2.1 Total Cost of Ownership (TCO)

The TCO analysis of EVs, which includes factors such as depreciation, fuel, and electricity costs, plays a crucial role. All these factors are to be considered when purchasing an EV.
‍

1. Purchase Price: EVs can be more expensive than gasoline cars initially, but prices vary based on model, features, and battery size. Luxury models and those with larger batteries or advanced tech are pricier.
   ‍
2. Maintenance and Repair Costs: EVs generally have lower maintenance and repair costs compared to gasoline vehicles due to fewer mechanical parts. Studies show around 27% lower costs for EVs over a 10-year period.
   ‍
3. Fuel Costs: Operating an EV tends to be cheaper than a gasoline vehicle. For example, in Germany, the cost of driving an EV is about half that of a gasoline car per 100 kilometers.
   ‍
4. Depreciation and Resale Value: Contrary to common beliefs, EVs can retain their value well. Government incentives can affect calculations of depreciation, but recent studies suggest EVs like Tesla Model S hold their value better than average gasoline vehicles.
   ‍
5. Insurance Costs: Insurance for EVs can be slightly higher, but this is often offset by the lower maintenance and repair costs.

‍

2.2 Depreciation and Technological Advancements

Understanding the impact of rapid technological progress on EV depreciation is important when considering the financial implications of electric vehicle ownership.
‍

• Rapid Evolution: The fast pace of EV technology advancement leads to quicker depreciation, as newer models often come with significant improvements.
  ‍
• Leasing Benefits: This rapid evolution makes leasing attractive because it allows drivers to regularly update to the latest models without worrying about the depreciating value of their current EV.

‍

2.3 Flexibility and Affordability

The decision to lease an electric vehicle brings with it a suite of benefits in terms of both flexibility and cost-efficiency, making it an appealing choice for many consumers.
‍

• Short-term Benefits: Leasing provides a cost-effective short-term solution, especially beneficial for those who cannot afford the high initial cost of buying an EV.
  ‍
• No Long-Term Commitment: Leasing allows for flexibility to change vehicles as needs or preferences evolve, without the commitment of a purchase.

‍

2.4 Long-Term Investment and Ownership

Let’s unveil the long-term economic and practical merits of owning an EV, especially in the context of evolving battery technologies and vehicle longevity.
‍

• Ownership Advantages: Buying an EV is more suitable for those looking for long-term benefits, including no restrictions on usage like mileage limits.
  ‍
• Economic in the Long Run: Despite higher upfront costs, owning an EV can be more economical over time due to lower running costs and potentially less depreciation as battery technology and EV longevity improve.

‍

3. The Future of EV Leasing in Germany

With the German government ending subsidies and the EV market evolving, the future of EV leasing in Germany looks promising but faces challenges. The end in subsidies might slow down the initial boost provided to the EV market, but the increasing number of EV models and the continuous improvement in technology are likely to sustain the growth.

‍

Challenges and Opportunities

• Infrastructure: The need for more charging stations and better charging infrastructure is critical to support the growing number of EVs.
  ‍
• Market Dynamics: The competition among EV manufacturers is intensifying, leading to more options and potentially better deals for consumers.
  ‍
• Policy Shifts: Changes in government policies will continue to impact the market, making it crucial for consumers to stay informed.

‍

Conclusion

Leasing an EV in Germany offers flexibility and a way to stay abreast of the latest EV technologies without the high upfront costs of buying. However, buying remains a viable option for those looking for long-term investment and ownership. The future of EVs in Germany is shaped by the interplay of technological advancements, and market dynamics, making it an exciting yet complex landscape for consumers. As the EV market continues to evolve, staying informed and considering personal needs and preferences is key to making the right choice between buying and leasing an EV.

‍

‍

‍

FAQs

Are Government Subsidies Available for Leasing EVs?

‍No, the subsidies in Germany officially ended on 18. December, 2023.

‍

What Determines the Total Cost of Ownership (TCO) for an EV?

‍TCO includes purchase price, maintenance, fuel costs, depreciation, and insurance, with EVs often being more economical in the long run.

‍

How Does Rapid Technological Advancement Affect EV Leasing?

‍Rapid advancements can lead to faster depreciation, making leasing an attractive option to keep up with new technologies without the depreciation concern.

‍

Is Leasing an EV More Flexible and Affordable Than Buying?

‍Yes, leasing offers short-term cost benefits and flexibility without the long-term commitment and high upfront cost of buying.

‍

What Are the Long-Term Benefits of Buying an EV?

‍Buying is beneficial for those seeking long-term investment, freedom from mileage limits, and potentially lower costs as battery technology improves.

‍