Nearly Free Electric Car Leases in a State Near You?

(Image credit: Toshifumi Kitamura/AFP/Getty Images)

Accustomed to their gas-guzzling counterparts, many Americans are hesitant to buy an electric or hybrid vehicle. But dealers and government incentives are luring drivers into the fold.

John O'Dell, senior green car editor for, has leased a Nissan Leaf with his wife for the last two years. He said he is not sure he would lease an electric car if the federal tax credit of up to $7,500 were not available.

In O'Dell's home state of California, he also received a state rebate of about $5,000.

"The state rebate made it even sweeter," O'Dell said.

Plug-in cars comprised less than one percent of total vehicle sales in the U.S. in the first four months of the year, according to But plug-in sales figures are double those of the first four months of last year, with help from discounts and incentives, as first reported by the Wall Street Journal. The drawbacks of an electric car include limited battery life or power per charge and lack of charging stations in some parts of the country.

The limited range of electric cars compared with gasoline models has been a drag on sales as drivers worry about being stuck far from home with a dead battery. The Nissan Leaf has an average range of 73 miles on a single charge, according to the EPA. Its city range is 129 miles while its highway range is 102 miles, says Nissan.

But the financial incentives are appealing.

People who purchase an electric car in or after 2010 may be eligible for the federal tax credit of up to $7,500, depending on the capacity of the vehicle's battery. (The federal tax credit amounts per vehicle are described on the website FuelEconomy.Gov. You can learn more about your state's incentives at the Energy Department's Alternative Fuels Data Center website.)

Electric car buyers who owe less than $7,500 in taxes won't get a full $7,500 in tax credits even if their electric car purchase is eligible for that amount. But some dealers who lease these cars are giving drivers a discount of the full $7,500 from the lease price.

Various states have different tax incentives. Among Georgia's offerings, for instance, is an income tax credit to people who buy or lease a new zero emissions vehicle. The tax credit is 20 percent of the vehicle cost, up to $5,000.

At the time O'Dell leased the Nissan Leaf, it had a MSRP (manufacturer's suggested retail price) of about $36,000. Today, its MSRP is about $35,200 before federal tax savings.

While O'Dell's commute is 110 miles round-trip, he can take advantage of a charging station by his office. He also happens to have a solar-powered home, so his electric bill is only about $45 a month. For longer trips, he uses one of his family's other three cars.

"The car pretty much pays for itself every month," O'Dell said of the Leaf. He said leasing an electric car worked "wonderfully" for him, but he knows not everyone in the country will have the same situation.

But as the price of electric cars falls and battery technology improves, O'Dell said it makes more sense to lease an electric car than to buy one.

"Batteries have a finite life and no one knows what that is yet," he said.

These days, he said monthly lease deals for electric cars can be as low as $199 a month, such as for the Fiat 500 EV. Cars like the Fiat 500 EV are only available in California, marketed there to meet the state's stringent emissions standards.

"A lot of these eclectic cars are not available nationally," O'Dell said. "They're expensive to build with a limited market."

Cars like the Ford Focus and Tesla S are marketed nationally.

Read more: Tesla S is Motor Trend's Car of Year

Eric Evarts, senior associate autos editor with Consumer Reports, agrees that it is better to lease an electric car than to buy one.

"I would say electric cars are the one thing where we would unequivocally recommend people lease," Evarts said, "especially with some of these low subsidized rates, depending where you live."

Evarts' advice extends to hybrids like the Toyota Prius, though he said the Prius has been around since 2000 and has a longer track record and higher resale value.

Evarts cautions drivers considering a lease to consider what they plan to do after their lease ends, which is typically two years.

"You can extend the lease, but it tends to be that longer leases are less financially good deals," Evarts said, adding that eventually repairs and updates like tire changes can lead to more expenses for a leased car.