Why You Should Lease A New EV, But Buy A Used One

Here at The Morning Dump World Data Center, our diligent staff of news elves is committed to avoiding the pitfalls of other morning automotive news roundups by embracing nuance and refusing to paint with a broad brush. Also, when it comes to the EV market, please allow me to paint a picture with a brush as wide as the Río de la Plata.

Consumers who wanted an EV as fast as they could get their hands on one probably already have an EV. It’s debatable, but I think a lot of people who were even tilted toward an EV purchase likely have entered the market as well. That brings us to the third tranche of people who could use an electric car without issue (people with regular commutes and charging ability at/near their homes) and are open to it. Today’s advice, based on the latest data, is for them.

Speaking of data, the EPA has issued final rules on fuel economy requirements, and they’re not too bad if you’re an automaker. The car industry won this round, but I think it’s still aggressive enough to be achievable.

Life is a game of numbers and odds, but that doesn’t mean you should submit yourself to fate. The most successful out there tilt the universe to improve their odds, which is what Elon Musk is trying to do with his compensation hanging in the balance. The National Automobile Dealers Association is trying to do the same by getting the latest rules on dealers blocked.

Why Used EVs Are Such A Good Deal, And Why I’d Be Hesitant To Buy A New One

The big existential question for me in the automotive world is not whether Chinese EV automakers will crush everyone else, it’s whether or not this generation of electric car is worth buying.

It varies a lot by automaker, but the general sense I have is that the answer is: probably not. On the extreme end of advancement are cars like the Lucid Air, Rivian R1S/T, and the Tesla Model Y. These all represent approximately the best you’re going to get out of the extant anode/cathode chemistry. Will these cars continue to improve and get better over time? Absolutely. Could something come after that’s just much better and cheaper? I think there’s a strong possibility that the answer is yes.

For most other automakers, even their best electric cars are imperfect in some way. GM’s Ultium platform is too heavy, Ford’s EVs are fine but also interim products, and most of the European cars are too expensive for what you get. Basically all the Japanese EVs are also-ran vehicles. Probably the best non-Tesla/Lucid/Rivian EVs are from Hyundai-Kia-Genesis, but those vehicles don’t have incentives if you buy one and are thus $7,500 more expensive than everything else.

Here’s why a next-gen EV might be better, depending on the company:

• It might be cheaper. Tax incentives aren’t going anywhere and almost every foreign automaker is trying to build a plant in the United States to make EVs that qualify for tax credits.
• The tech might improve dramatically. Toyota is working on solid-state batteries and they’re not alone. Elon Musk is trying to build cars with even more advanced driverless aids.

You can also add to these concerns the fact that we’ve been in the middle of a massive price war that’s made new electric cars cheaper while also undercutting people who just bought electric cars by lowering their residual values, which means they’ll be worth less when it’s time to sell.

Ok, so what are you to do with this information if you need a car now?

Lease an electric car.

Leasing is not ideal in every situation, but at the moment the lease deals are insane for new EVs for a number of reasons. The biggest one is a loophole that allows cars not built in North America to qualify for the $7,500 tax credit. Also, if the tech gets way better or prices drop it’s not really of big concern to you since your price is locked in already.

Buy a used electric car.

The latest Manheim Used Value Index is out and it shows the value of a used EV is down 16.0% year-over-year in May, compared to just an 11.6% adjustment for non-EVs. The massive drops in new EV pricing, combined with Hertz offloading thousands of Teslas, means the premium for these cars has been absorbed to the point that you’d have to get a lemon to be unable to get your value back.

Obviously, there are some big exceptions here (the Model Y and new Equinox EV are competitively priced, and cars like the Mach-E do have a lot of incentives), but I think this advice works for most people.

Fuel Economy Rules Should Result In 50.4 MPG By 2031

Many groups lobbied hard against huge increases in fuel economy requirements that were initially proposed by the Biden Administration, which initially called for big fines and changes that would see the nation’s average fuel economy for most passenger vehicles to rise to 58 mpg by 2032. The new requirements revise that down to about 50.4 mpg by 2031, and 35 mpg for big trucks and vans.

Here’s what the National Highway Traffic Safety Administration is saying about the changes:

In this final rule, fuel economy will increase 2% per year for model years 2027-2031 for passenger cars, while light trucks will increase 2% per year for model years 2029-2031. These increases will bring the average light-duty vehicle fuel economy up to approximately 50.4 miles per gallon by model year 2031, saving passenger car and light truck owners more than $600 in fuel over the lifetime of their vehicles

Heavy-duty pickup truck and van fuel efficiency will increase 10% per year for model years 2030-2032 and 8% per year for model years 2033-2035. This will result in a fleetwide average of approximately 35 miles per gallon by model year 2035, saving heavy-duty pickup and van owners more than $700 in fuel over the lifetime of their vehicles.

“Not only will these new standards save Americans money at the pump every time they fill up, they will also decrease harmful pollution and make America less reliant on foreign oil,” U.S. Transportation Secretary Pete Buttigieg said. “These standards will save car owners more than $600 in gasoline costs over the lifetime of their vehicle.”

The other big news here is that the massively proposed fines have been pared back a lot. It’s possible that many automakers can avoid them altogether. Obviously, automakers are happy about this. Here’s the head of the big nationwide lobbying group in a Reuters article  via the Detroit Free Press:

John Bozzella, who heads the Alliance for Automotive Innovation trade group representing major automakers, praised the revisions that will dramatically reduce projected penalties that his members had feared.

“Those fines wouldn’t have produced any environmental benefits or additional fuel economy and would’ve foolishly diverted automaker capital away from the massive investments required by the electric vehicle transition,” Bozzella said.

Again, environmentalists aren’t happy (one told Reuters that NHTSA had “caved to automaker pressure.”)

I consider myself an environmentalist and I’m not too disturbed by the rule change. These seem like much more achievable goals and this will push way more automakers/people towards hybrids. Plus, it’s not like this is going to be achievable only with hybrids, automakers are going to have to sell a lot of electric cars to make the math work.

And, finally, politics plays into this a lot. The Biden Administration seems to want inflation down so it’s not a campaign issue and so that the Fed cuts rates this summer, thus setting off a potential positive economic swing that makes consumers feel better about the economy.

Tesla Needs Small Shareholder Stans For $56 Billion Payday

If you voted your TSLA shares, you have the chance to attend our Giga Texas tour with @elonmusk & @woodhaus2 as your guides → https://t.co/DrGCyD4xQN

— Tesla (@Tesla) May 28, 2024

Tesla CEO Elon Musk seems kinda desperate to get small shareholders to back his bid to get the highest paycheck in human history, even as some larger shareholders are indicating they’re going to vote against Musk.

I have no Tesla shares directly, so it’s a not-my-pig/not-my-farm type of situation. I do share Musk’s penchant for LOLs, and so whatever is going to be the most amusing outcome is sort of the outcome I want, which could be Tesla losing and Elon Musk performatively quitting the company.

The gamble Musk is making (and, in our version of capitalism it makes 100% sense for him to do whatever he can to get $56 billion) is that smaller shareholders probably love him and don’t want to see him quit.

Per Reuters:

Although small investors have an array of opinions, experts in corporate vote campaigns say the size and CEO-friendly nature of many individual investors at Tesla make them an obvious target.

“The man ends up 10x-ing my investment and he’s given nothing? It doesn’t seem right or fair,” said Andrew Theyken Bench, a lawyer in Allentown, Pennsylvania with fewer than 5,000 Tesla shares, who voted by proxy with management on all items at the meeting, including Musk’s pay.

The big issue is that “retail” investors don’t typically vote in these things, so Tesla needs to incentivize them, which explains the contest in the tweet above.

Some Dealers Don’t Like The Idea Of Consumer Protection

The Federal Trade Commission issued rules last year to try to protect consumers from specific types of dealership behavior, including sneaking in random fees and products into the final cost.

Dealers are trying to kill this rule by using Congress to specify in the FTC’s new budget that it can’t spend any money rolling out or enforcing the rule according to Automotive News:

U.S. House subcommittee on June 5 advanced a $23.6 billion Financial Services and General Government Appropriations bill that includes $388.7 million in FTC funding for the fiscal year ending Sept. 30, 2025 — and prohibits any of that money from being spent rolling out or enforcing the CARS Rule.

FTC spokesperson Jay Mayfield said the agency had no comment on the bill.

The full House Appropriations Committee has yet to vote on the legislation. But Chairman Tom Cole, R-Okla., said prior to the subcommittee’s vote June 5 the measure made “sensible cuts to federal financial and consumer protection agencies and prohibits funding for their overreaching, harmful, regulatory policies.”

As a reminder, these “harmful” regulatory policies include banning bait-and-switch claims, advertising vehicles that are not on the lot as available, and misleading buyers about the availability of discounts/rebates.

What I’m Listening To While Writing TMD

I’m a big fan of Jamie xx and his band The xx. He’s got a new album coming out later summer and, when it’s out, I’ll be sure to share a track. I’m actually such a fan of Jamie xx that I excitedly volunteered to clear a track from one of his albums for a commercial project I was working on, which ended up being an enormous, almost 5-month-long PITA. It sucked so hard and I had to spend so much time groveling to Brian Wilson’s lawyers. And, yet, I still am a fan of the band.

The Big Question

What’s the best used EV deal you’ve seen? Or new EV lease?