Podcast: Unlocking EV potential through leases, used market 

James Van Bramer   0:12
Everyone and welcome to the road map from auto Finance news. Since 1996, the nation’s leading newsletter on automotive lending and leasing.
Today we have a special edition of the road map where I’m joined by two guests, Alina Chicotelli, who is the host and producer of the Ebes for Everyone Podcast, and Jean Pasumado, founder and CEO of Drive it away. Today, Elena, John and I will chat about EV le.
But first, let me start by sharing some recent data points to keep in mind during our conversation. According to experience, recent report, EVs have reached 8.35% of new purchases and are leased at over 46% and the average payment difference between a LE.
And loan across all EV models is $88 US retail sales of used E VS has jumped 70% in the first half of the year, according to market research.
Cox Automotive the average price of a used EV has fallen below $30,000, I see.
Iseecars.com said in June, noting that they become less costly than typical gas powered vehicles.
I’ll start with you, John. It feels like we’ve been hearing about EV leasing for a while now, although it only gets more interesting over time.
What have you made about some of those data points that I just listed out and what would you say about the current state of the EV market in regards to leasing?

John Possumato   1:40
Well, I gotta say I I think it fits and and the growth is.
Predictable, right?
I think it dominates because it actually fits the consumer financially and culturally, and it fits the OEM, financially and culturally.
What do I mean by that?
Well, the consumers are nervous about new propulsion systems I took.
The Elector can identify with your phone. You wanna be locked into your phone long term contract so it it it kind of handles the issue by by you know trying it out before you buy it before you own it.
What a typical lease does.
But there’s a financial aspect of it too, right?
Very few vehicles get the full $7500 tax credit passed on to the the consumer, but with the Treasury exclusion commercial use, the lessor gets the 7500 which they typically pass on all or most to the consumer.
So it fits financially and it fits culturally with the OEM.
Even more so again that 7500, they have access to as opposed to the sourcing requirements where where they usually don’t.
And you know, again, as old retail kind of veteran, right?
It’s always fit the manufacturer to move leasing, particularly for vehicles that that are maybe a little bit more expensive, right?
Sub vented leasing has been around since there’s been leasing, right?
And rather than cash on the hood, much easier to get someone into a payment into a lease. And I I just read that an unnamed OEM has guaranteed their residual up to three years to be at least 50% ally, which.
Created their numbers.
I know they’re up like 60% or so, right?
So that’s something. And leasing has always been a way to move the metal with EVs.
Now you know, combine the 7500 tax credit and it makes sense for the manufacturer. It makes sense for the consumer.
And again, a lot of consumer motivation is, is is based on price, right?
And payment. And this satisfies price and payment.
Elena, from a from a consumer’s point of view, as opposed to an auto retailer’s point of view.
What do you say?

Elena Ciccotelli   3:48
Well, excited to be here on this maiden voyage here. So I do want to like kind of drill down to a couple examples that I thought were really compelling when John was talking about, you know that that lease payment, why it makes so much sense, right? So we?
Got the Toyota BZ4X right if you don’t know what this vehicle is, it’s a two row SUV about the size of a red 4.
It was, according to experience, automotive Finance Q2 report.
It was 87% of transactions.
Were leases for this BZ 4X try and say that five times fast, but really so if you look at the numbers though, the lease is going for about $300.00 a month as opposed to a loan payment that’s coming in at $700.00 a month.
Of course, people are going to be leasing these, right?
You take the Hyundai Ionic 5, right?
Coming in at 76%.
Leased transactions because you can get a lease for around 400 a month versus a loan at 700 a month, right?
So it’s like really, really making a ton of sense for people who are scared, skeptical, not sure if an EV is going to EV is going to fit into their life style.
And not to mention the fact that we’ve also got new technology happening just being developed and launched into these new models and similar to the iPhone analogy that John just gave, it’s you want to be in the most recent technology and so you know the this leasing I.
Guess we can say loophole, right is.
We’ve it’s it’s actually pretty genius, right?
Because we know that these least vehicles are gonna be back in the market as as preio.
Is in three years potentially eligible for the used EV tax credit.
And because you know more Americans are used to buying used cars and used Ev’s are such great values, like, of course, this is going to help accelerate adoption.
So I’m just excited to see some of these numbers coming in again.
Experian, amazing partner of the show.

John Possumato   5:58
Yeah.

Elena Ciccotelli   6:00
They’ve done a great job of just really highlighting some of these key points.

James Van Bramer   6:06
Totally, yeah.
So I have a few follow up questions based on what you both said. You know, I’ve actually had folks kind of described Evie Lee Steele as essentially free.
I know, Elena.
You kinda just went into that a little bit, but I was wondering if both of you kind of think that there are some kind of broader implications that nearly half of evb half of Ev’s are being leased. Considering those concerns that some folks have over you know?
The residual values, battery health and things of that.
Nature.

John Possumato   6:39
Yeah, I’ll, I’ll jump in.
You kill.
You can’t look at this topic without looking at the the crashing used EV values right over the last year, year and a half and you take a step back and say, OK, these things are coming out 2-3 years from now with more brand new EV product, right?
On the market, what’s gonna happen?
And that’s a big questions always a question with a subvented residual, right?
So if you go back in Tesla’s history at the beginning, hey, they leased everything and they guaranteed the residual and it it worked out for them.
Around, you know ’cause, it was just that, you know, when they’re these guys are coming back just at the beginning of the the car shortage and everything.
So yeah, I think it to some degree.
You gotta say it’s kicking the can down the road.
Right. On the other hand, you know, part of this big hurdle is getting people just to drive them and realize that they fit in their lifestyle.
So we are accomplishing that.
So you know, while there there is a financial potential risk in guaranteeing residuals.
The rewards immediate.
So you know, I guess that’s a that’s a.
A convoluted way of saying we’ll see.
I think there’s a market for these cars coming off lease and that I’ll touch on maybe a little bit later. But yeah, I mean there is a risk when you guarantee a 50% residual in anything, not just an EV right after three years.

Elena Ciccotelli   7:58
I know, I know of a really smart person that came up with a really great business model.
His name is John Possumato, and it’s actually the Microlease, right?

John Possumato   8:08
Yeah.

Elena Ciccotelli   8:08
There’s this guy and his name is John.
No. So really what John has done and I think he’s done it in a really, really smart way.
And I’m not, you know, biased or anything, but I I really feel like the use case here that we’re talking about for these use D vs.
You’re coming into the market with again, you’re partnering with a dealer who needs this asset utilization needs this vehicle off their lot.
They can be.
They can have someone experience an EV for the first time with a reasonable payment payment terms that are not gonna break the bank, and at the same time it’s just like this triple win across the board and and also by the way, helping people get transl transportation that.
Really need it the most.
So again, kudos to John for.
For actually getting this into the wild and forgetting people to understand that.
That this is an this is a business model that makes so much sense.
How dare you make so much sense, John?

John Possumato   9:11
Well, you gotta remember too in the residual end, you know, EVs have an advantage that no other vehicle has. Assuming that the used EV tax credit stays in force, right.
You got $4000 on these cars. You know when they come out in retail. So you don’t have that on a gas unit.
So that’s kind of a safety net as well.
So I I think programs like ours and programs the manufacturer will come up with will again you know take full advantage of.
Hey this is.
This is sort of the the.
The the the cheaper car of the future ’cause.
There aren’t cheap cars anymore, right?
I mean, it’s very, very few cars, new cars. You can take cheap.
Alright, but this is a inexpensive transportation that I think begins to replace the 100 and 5200 thousand mile units that are now kind of in circulation for the, you know, for the lower tier subprime consumer.
I mean, they’re out there, right?
They used to be 150,000.
Now they’re more like 200,000. You know, the car crunch. This replaces that in a in a much more reliable way, right?
‘Cause again, while the battery will degrade, it will not collapse and maintenance is very little and and these cars can go a long distance, right?
Because there isn’t a motor to essentially blow up so.

Elena Ciccotelli   10:25
If I can just piggyback really quickly.
Sorry, James, if I’ve just cutting you off right here.

James Van Bramer   10:27
Go ahead.

Elena Ciccotelli   10:29
What John was saying about battery, right?
So I just did an episode regarding the EY study that just came out right saying that they found that 34% of consumers planning to buy a car in the next two years is is considering EV and that number is down and the two biggest.
And the two biggest parts of concern lie in battery replacement and charging accessibility.
So back to what John was saying about we don’t how long these things are lasting.
There are really, really smart people out there that are solving this problem already, like shouts to a couple of companies that I know are doing this really, really well.
There’s a company called Battery for Life.
They’re doing that new and pre owned EV battery warranties, so you have that Peace of Mind if if.
Something were to go awry.
You know, we’ve got recurrent in the marketplace with their battery.
Health reports.
So we’ve got all of these companies out there solving problems and you wanna make sure.
That people know about them, that they’re available because.
There’s also kind of like this underlying subculture where folks are so quick to dismiss because of the unknown.
But I’m here to tell you like there are a lot of people working on these problems and they’re really, really great solutions. So and then also.
Too, like what we were talking about.
EV batteries.
We actually don’t know. According to JD Power how long these things are gonna last, right?
10 years.
20 years could even be, you know, comparable to ice vehicles.
So Long story short, the consumer needs to be educated.
The consumer needs to know that these things actually exist.

James Van Bramer   12:19
For that Elena, actually, I was just going to ask you about that recent podcast and that data point.
So thank you for bringing that up. And I think and I, but I also I think this is like a really great follow into kind of the next thing I wanted to quickly talk about. You know, I’ve had friends that even a former professor of mine say hey.

Elena Ciccotelli   12:25
For what?

James Van Bramer   12:36
James, you know you write about EVs all the time.
He was like one of them were like, you know, I saw this like, really, really cheap evidence.
I was wondering what the deal was right?
Like, why is it so cheap?
How should I get it should?
Get it? And as I mentioned before, I’ve had folks tell me that, you know, leasing an EV is like essentially free.
But I’ve also heard folks kind of say the same thing about a used EV, and I know we kind of went into some of those concerns, such as the battery, but I think we also touched a little bit on that education, such as you know, for example with.
Those warranties for those batteries, right?
So when it comes to, you know, affordability and kind of looking for that best deal out there, you know what can kind of be done to sort of?
Fail the concerns consumers have about used Ev’s because it really is.
Sort of a really good deal out there in a market where there’s not many great deals.

Elena Ciccotelli   13:29
John, you wanna go bed?

James Van Bramer   13:29
Like to tackle that one first, yeah.

John Possumato   13:31
You you tackle that one first this this is right here.

James Van Bramer   13:33
Go ahead.

Elena Ciccotelli   13:34
I don’t.
I don’t wanna, you know, rehash what I just said.
I I I think.
I think when it comes down to is having a dealership be this is, this is gonna make some people, like scream having dealers be all in on EVs. And it sounds trite, and it sounds very cliche, but.
Here’s the deal.
I’m actually I talk pretty regularly with GM at checkered flag.
VW.
Jaguar and he does a really, really great job with his staff, helping to educate consumers on the whole gamut, right.
So that VW has the ID four. What does that look like?
You on a lease on a on a loan and is really, really.
Really forward thinking.
And not only over delivering on the customer experience, but then also too like implementing loaner programs to get people acclimated with these vehicles. And understanding does this fit into my life?
And oh, by the way, my house is not gonna blow up if I charge it at my home or.
You know, so just getting folks butts and seats, getting people to experience what this is like. And at the end of it, I remember he said to me one day he’s like Elena.
Sometimes they come back.
They’re like, this isn’t for me.
He’s like, OK, no harm, no foul.
But I just want you to experience it and then maybe a hybrid is more up your alley, you know, let’s let’s look at API of like, what does that look like? So again, as we’re getting into the nitty gritty and the details, also think about the real life.
Stories think about the stories of the consumers that are that.
Are you know they’re pinching pennies here, right?
They’re looking at what that monthly payment’s going to be. What does that?
What is that going to do to my monthly budget and is it going to am I going to be able to grab the kids?
From school I didn’t charge my car.
What does that look like?
So again, I give huge, huge kudos and shout out to Michael Wood.
GM checkered flag.
He’s doing it right.
He is making sure that people are educated on this because it’s confusing.
We have an EV messaging problem and you know, hopefully you know this podcast with James.
My show and what John is doing in all in the industry, we can have these open conversations.
I’ll get off my soapbox now.
John, you can go.
And you can go tackle go in there.

John Possumato   16:17
Sure. I just say that that that that’s the really cool thing about a microlease because, you know, people can try it for as long as they want it and then buy it if they want to and get it out.
But let me give you a true story, James.
I’m gonna use DV.
You just have to do the math in my opinion, so.
I’ll drive it away.
I’m in and out of our cars all the time and we’ve got some 2022 bolts that are time to roll over.
Normally we would just, you know, sell them.
So get this one in my driveway and I’m looking at with the wholesale value is it’s like 14 and change and I’m saying to myself.
14 and change.
Hey, that’s like stupid.
We should buy this car immediately, right?
I’m in a New Jersey which is a state that still has a 10 year warranty on the battery, right?
So I got 7 years left, right? If I got half that, it would be a bargain, right?
It’s perfect for less.
A perfect sort of second car. It’s like, where can I get really good transportation? Like, you know, all the bells and whistles?
For 14,000 bucks now, if you know if I had access to the 4000 tax credit as well, this would be a $10,000 car.
It has at least seven years life in it.
Where can I find that in the open market today?
Right, it just doesn’t exist.
So I’m using a real life example saying this is stupid. I you know we’re public company. I gotta disclose everything.
But I had to buy this car, right?
Those wholesale rate, it’s just so much value for so little money that.
You can’t ignore it, right? And and and it’s not like a stripped down car. It’s got everything in it, right, so.
It’s just, and I think, Elena said.
It’s just more consumer exposure, right?
It’s like here. Try this out. You know, try this.
Take a look at it.
Compare this to other things you can get for 14,000 or 18,000 or 20,000, right?
And you know the stark numbers alone sort of sell it now.
I understand there’s infrastructure issues in some areas of the country and there’s a lot of other considerations, but then you even take a step back and and I’ve heard so many times from our clients.
Yeah, but, you know, once a year I take a trip into the mountains or Florida and I got to drive, you know, 3000 miles or 1000 miles. And I can’t use, OK.
So the rest of the time you have enough savings, right?
Go rent a car for a week. You’ve still saved a ton, right?
You know in everyday driving.
So again, it’s a comparison of hey, look, get get folks exposed and see what you can get for 14 or $20,000 in an EV versus which you can get in a gas unit. And there really is a stark contrast.

James Van Bramer   18:49
That’s those are great points.
Both you, John and Elena. Again, thank you both so much for joining us in our first special edition of the road map.
We will have much more coming in the future, but that about does it for today’s episode. As a reminder, registration is open for the 2024 Auto Finance Summit and Power Finance Summit, returning to Las Vegas in October.
More more information can be found at auto finance dot live.
Thanks for joining us on the road map and be be sure to follow.
Us on X and LinkedIn.
We will see you online at autofinancenews.net and here next time. Again, thank you so much, Elena and John, for joining us on this special edition.

Elena Ciccotelli   19:32
Thank you, James.