T&E: leasing companies overcharge EVs by up to €8.370 in 36 months

The ten biggest leasing companies in Europe, managing today a fleet of 12 million vehicles, are ‘overcharging’ electric cars systematically on average by 57% or €233 per month, and €8 370 over 36 months, compared to a similar vehicle on gasoline.

They claim lower resale values based on uncertainty on battery degradation, among others. Still, analysis of the second-hand market by the environmental lobbying group Transport & Environment (T&E) proves them wrong. Even reports by lease companies like LeasePlan show EVs are primarily on par in TCO with their ICE siblings or cheaper. So how do they justify the overcharging?

Higher profit margins

As the Total Cost of Ownership (TOC) best reflects the actual cost for the leasing companies rather than the higher EV list prices the general public takes for granted, one can assume the latter is used to mask substantially higher profit margins. And that hinders EV uptake, especially for private owners.

T&E isn’t saying this so boldly but questions the lease companies’ claim of environmental leadership and calls on them for more transparency in price setting and EV uptake. But nearly all top leasing companies are owned by banks (3) or car manufacturers themselves (6), while the lease market for company cars systematically drives new car uptake in Europe.

Especially in Belgium, where the government decided all new company cars must be zero-emission by 2026, and over 60% of all new vehicles registered yearly are not privately owned. So for the lease companies, everything’s hunky-dory.

Estimated depreciation

So what did the T&E analysis exactly dig out? “The business model of leasing companies is to own a car for a fixed period and charge the driver for the expected loss of value – the depreciation – of the vehicle over this period through a monthly lease, T&E explains. After three to five years, the lease cars are sold on the second-hand market.

“For a standard 36-month contract, a leasing company will compose a monthly lease cost that covers the expected depreciation of the car, services (e.g., repairs, maintenance, tires, insurance), interest, and a profit margin.” T&E found out that leasing companies charge consumers, on average, 57% more to lease a BEV compared to an equivalent gasoline model.

If the residual value is predicted to be too low, the company will lose money when selling it later on the second-hand market. If the actual resale value is underestimated, the monthly lease price will be ‘too high,’ and the leasing company will make higher profits. This could jeopardize their competitiveness between them, but not when all residual value committees within the leasing companies are judging by the same standards.

By analyzing 2,7 million used car prices in Europeʼs five most significant markets, T&E found out that “the assumptions made by the leasing companies are not in line with actual market data. The average resale value of BEVs across Europeʼs five largest markets is much higher than assumed by leasing companies.”

Battery degradation

The main reason EVs are estimated to depreciate more than ICE cars is the ‘uncertainty’ about the degradation of the battery and the effect of new technologies showing up, making the ‘old’ EVs less attractive. The general public’s perception that EV batteries degrade fast is fueled by EV carmakers offering a warranty of only eight years.

But in practice, these batteries prove to last longer than expected. An excellent example is the Nissan Leaf, one of the first BEVs that appeared a decade ago. They’re mostly all still driving around and only a tiny part of these batteries found their way to a second life as a stationary backup. Today, the average degradation of battery capacity is calculated at 2,3% per year, leaving still 77% of power after ten years.

End of ICE nearing

Battery capacity and the range of the car – a major concern for buyers of BEVs – have improved dramatically over the past decade. Thus BEV resale values are expected to increase, T&E explains.

Cars with classic combustion engines (ICE), on the other hand, are expected to degrade in value rapidly as more of them are banned from cities in low emission zones, and the end date Europe has set for selling them (2035) is nearing. A good example is the diesel car, which already today is virtually dead.