Pre-Paid EV Lease Bargains

I opened a can of worms on the Car Pro Show last Saturday when I suggested to a caller that it might be better to consider a pre-paid lease on an electric car rather than purchasing a used car for his child since he wanted to spend $10,000 tops.  I had recently seen a deal on the Honda Prologue a listener did for $6,000 plus tax and license up front, so a total of a little under $8,900 out the door. Unfortunately, the listener with the Prologue leased at the end of June when there was a special deal on Prologue leases. I got a LOT of questions about this, so thought I’d take some time to explain.

We know the used car market is sky high and getting higher.  Finding that $10,000 used car that is not going to be in the shop every other week is a challenge.  In fact, we know from last week’s newsletter that even $20,000 used cars are getting really hard to find.  Financing on used cars always have a higher interest rate and a shorter loan term, and the monthly payments are often a shock to people.    The people I feel the sorriest for are the ones that save and save for a used car, gather up their $10,000 and then can’t find anything decent.

So, what is a pre-paid lease?  Opting for a pre-paid or one-pay lease offers several advantages for car shoppers looking to simplify the leasing process and save money. By paying the entire lease amount upfront, lessees can often secure a lower overall cost compared to monthly payments, since dealers and finance companies may reduce or waive interest charges and fees. A one-pay lease also eliminates the risk of missed or late payments, which can protect your credit score and provide peace of mind. Additionally, some manufacturers offer incentives or discounts specifically for one-pay leases, making them an attractive option for buyers with the means to pay in full at signing.  It makes sense they would give additional incentives since they are using your money, all upfront.

I’ve done three pre-paid leases myself in the last 10 years or so because of the savings versus a regular lease.  The other advantage versus a used car is you are under warranty for the entire time you pay for it, the electric cars have no gas or maintenance to do, and you likely won’t need to even buy a set of tires.  I would suggest a home charger, but many of the automakers supply those or they give you a credit at a charging station.

I asked one of my Honda dealers to run me some pre-paid lease numbers on an in-stock Prologue EV.  He is in Texas and used a Prologue with an MSRP of $52,305 and a sale price of $50,245.  Rolling $3,231 for Texas sales tax and registration, and you write a check for $9,996 and nothing more to pay for 2 years.

So, the amount financed is $53,900.  You out of pocket is $416 per month, except paid in a lump sum.  If you want to purchase it after 24 months, the price will be $26,675.

If you look at that same deal on a 60 month regular finance contract on the same car, you’d be financing the same $53,900 and let’s say you have perfect credit and could get a 4% interest rate, the payment would be $992 per month.  For the sake of argument, same deal exactly, only this time we put the $9,996 we have as a down payment on this 60 month purchase.  Payment is still $808.

The deal with the Honda Prologue made me wonder about other electric cars.  I checked with my Toyota dealer about a similar scenario on a Toyota bZ4X, similar to the one we reviewed last week, but not as well equipped.  The results were even better.  We were looking at an MSRP of $41,368 before the rebates, and bear in mind, this car does not get the $7,500 from the Feds because it is made in Japan.  The money factor is .00001, which is the closest you can get to 0% on a lease.  The residual value for 24 months is $19,857 and this one allows 12,000 miles per year.  Total cash upfront for a two year pre-paid lease? $8,805. Although this Toyota does not get the $7.500 money from the government, Toyota has kicked in enough rebates to cover that amount, so they are competitive with other automakers.

I decided to look at one more, one of my favorite electrics, the 2025 Chevy Equinox that I reviewed not too long ago. The one I am looking at is a 2025 LT with an MSRP of $35,290.  These are made in Mexico so no $7,500 federal money, but there are plenty of other incentives.  I looked at the 24 month pre-paid lease, at $10,000 miles per year with a money factor of .000249 which is roughly 5.9% APR.  Residual value is $28,232.  Total out of pocket for two years: $6,862.  But get this:  If you are a CostCo member, the out of pocket drops to just $5,789.

Of course, the clock is ticking as all electric car deals with or without the $7,500 is going away.  Then, the automakers will cut EV production making the need for big EV incentives like on the cars above, go away.  But if you want some cheap driving and have the available cash, to me, doing a pre-paid lease on an EV makes a lot of sense versus what you can get for the same money with a used car currently.  Who knows, you might even love an electric, most people are very happy with them.

My fear now is when these numbers get out, there won’t be an EV available anywhere.  See more on pre-paid leases in today’s CarPro Advice column.