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Comment by usefulcat | Hacker News Reader

That makes no sense. Why would the lessor scrap the car rather than sell it at the end of the lease?

Let me explain how these leases work, MSRP for OPs Chevy Spark EV is in the 25k ball park, lessen the 7k government incentives is 18k. If OP is paying 80/mo (we don't know if that payment includes sales tax but let's say even if it doesn't) that's 2880 paid over a typical 3 year/10k mile a year lease. So now the balance on the car is 15k. Looking at cars.com a comparable EV Nissan Leaf (Spark EVs haven't been around for that long) 3 years old with 30k miles are going for 7-10k range. Now who do you think pays for that difference? And that's even assuming these cars all can be sold. Scraping is a bit extreme but is definitely not unheard of. The issue with EVs is that where most ICE cars can be sold at auction and exported to other countries, EVs aren't desirable to that market since there's a lack of infrastructure for them to be usable in, let's say, Latin America or Africa.

I don't follow the maths. A leasing company has a vehicle that they've got 15K "left" to pay off on, and they can only sell it for 10K so they'll just pay money to scrap it instead? How does that make sense for them?

If there is some monetary incentive for them to do this, you've not outlined who is paying it to them. And even if it exists, that's the problem, not the up front incentives.

In the case of these ultra cheap EVs the bank is the financing arm of the manufacturer. Of course no normal financial institution will take such a loss but because of CAFE regulations the only way they can kee selling high profit margin, gas guzzling SUVs is by offering these 'highly sponsored' EVs.

Are you saying they would rather "scrap" the car than get the $7k -$10k? Why in the world would that happen?

Secondly, OP is subtracting the $2,500 rebate from the car payments he's making, so the manufacturer is actually getting ~$6k instead of $3k, which is a significant chunk of the difference between residual and current resale value.

Yes scrapping is a bit extreme and I'm sure someone will buy them for way below the residual value but I just used it to get the point across of the economics of these cheap leases. It just doesn't add up.

> It just doesn't add up.

Yes it does, you're just a variable: California requires car companies to sell a certain number of EVs in order to sell other cars in the state.

So companies take their cheapest model, convert it into a passable EV, then their financing arm offers nice incentives to get them out the door and the parent company eats the difference as a cost of doing business in California.

Exactly, what I mean by doesn't add up is not sustainable long term. I really wonder in 1-2 years from now when all these EVs flood the market. 3 year old Leafs already sell for 6-7k, crazy!

California is not the only electric car market, I think they will phase out the subsidies there over time. They were jump starting the market in a useful direction. That's all that these rebates are trying to do. In July 2012, even the tesla model s had not come outer - that is slightly more than 4 years ago. Look at all the choices now! It's amazing to me how well cali rules plus the us tax subsidies kick started the market.

People buy teslas, leafs, i3s everything in my northwest state and we don't have a state rebate or requirement like California. Leafs were ~$250/month here. You see tons of them; when they increase the range a bit, I predict sales will really go up.

The tax subsidies were never meant to be a long term solution, so they don't need to be "sustainable," whatever you mean by that.

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