How to pay for an electric car with today’s incentives: Buying vs. leasing

Shopping for an electric vehicle (EV) is similar to buying a gas-powered car in many ways—but financial incentives have long been a major differentiator. For years, EV buyers could stack federal, state, and local rebates and tax credits to shave thousands of dollars off the sticker price. That landscape shifted in 2025. 

The passage of the One Big Beautiful Bill Act on July 4, 2025, eliminated the federal EV tax credit, which officially ended on September 30, 2025. While the now-expired federal EV tax credit was a major piece of the EV savings equation, many state, utility, and local programs are still very much alive. New options—like a temporary car loan interest deduction—may also help offset costs for some buyers.

Rebates and incentives aren’t the whole story. How long you plan to keep your car, how you finance it, what it costs to charge, and how well it holds its value can end up mattering just as much—if not more—than a single rebate.

We’ll compare buying versus leasing an EV, walk through today’s financing options, and break down which incentives still apply, so you can choose the path that actually fits your budget, lifestyle, and long-term plans.

Whether buying or leasing makes more sense often comes down to the math. To compare options, look at the total cost over the time you expect to keep the vehicle, not just the monthly payment.

Here’s a simple way to evaluate each option:

If you’re buying (with cash or a loan):

• Purchase price (after incentives)

• Interest paid over the life of the loan (if financing)

• Estimated resale value when you plan to sell or trade in

Estimated cost of buying: Purchase price + interest − resale value

If you’re leasing:

• Total lease payments over the term (down payment + monthly payments)

• Fees at signing or lease end

• Buyout price (if you plan to keep the car)

Estimated cost of leasing:Total lease payments (+ buyout price, if applicable)

If the total lease cost over a few years is significantly lower than the depreciation and interest you’d incur by buying—and you value flexibility—leasing can be the better move. If lease payments are high or the buyout price pushes total costs close to (or above) the ownership cost, buying usually wins.

The takeaway: Great lease deals do exist, but they’re highly deal-specific. When leases are priced aggressively, they can offer flexibility at a modest premium. When they aren’t, buying—especially with cash discounts or low- or zero-interest financing—is often the smarter choice.

In a nutshell: Buying vs. leasing an EV

Purchasing an EV is better for you if…

Buying an EV typically unlocks more state and local incentives. Although the federal tax credit has expired, many states continue to offer substantial rebates—some worth thousands of dollars. Some states may still allow you to claim these rebates with a leased vehicle, but it’s not guaranteed. Ownership also means fewer strings attached: No mileage caps, no usage restrictions, and no surprise fees for wear and tear. If you want the freedom to drive as much as you like and keep your car on your own terms, buying is usually the better fit.

Leasing an EV is better for you if…

EV technology continues to evolve rapidly, making leasing a viable option if you prefer to upgrade to the latest model every few years. Leasing may also appeal if you want lower upfront costs or shorter commitments. Buying a car is a long-term commitment, and if you’re unsure what your family's needs will be in the next few years, opting for a lease may be your best bet. Just keep in mind that leases are less flexible than they appear—ending one early can be expensive, whereas a purchased EV can be sold at any time without penalty (though every car depreciates in value as soon as you drive it off the lot, so don’t expect to recoup your costs).

The end of the federal EV tax credit didn’t put an end to EV savings. State rebates, utility programs, and charging incentives are still on the table—and for many buyers, they make a real difference.

Federal EV tax credits have ended

Under the Inflation Reduction Act (IRA), buyers could previously claim up to $7,500 for new EVs and up to $4,000 for used models. Those federal tax credits expired for vehicles purchased after September 30, 2025.

State EV incentives

Many states continue to offer substantial incentives for EV purchases—in some cases, they’re more valuable than ever as they help fill the gap left by expired federal credits. These programs vary widely by location, so check with your state to see what's available.

Many utility companies also offer rebates for EV purchases or time-of-use rates that lower charging costs.

EV charging incentives

The federal Alternative Fuel Vehicle Refueling Property Credit (30C) remains available through June 30, 2026. If you live in an eligible low-income community or non-urban census tract, you can claim up to 30% of installation costs (up to $1,000) for home EV charging equipment placed in service before the deadline.

Many states, utilities, and municipalities also offer additional rebates for home charging station installations. Check with your local utility company and state energy office to stack multiple incentives and maximize your savings.

If you're not paying cash for your EV, both traditional and specialized financing options are available.

The process for acquiring an auto loan for an EV follows the same steps as any vehicle purchase: You'll find an auto lender, apply for the loan, undergo a credit check, confirm your interest rate and terms, and sign the contract. Payments typically begin within about 30 days.

Green auto loans

Green auto loans are specialized loans for climate-friendly vehicles that may offer lower interest rates, longer repayment periods, and other favorable terms compared to traditional auto loans. While not available at every lender, an increasing number of financial institutions are offering these products as EV adoption grows.

You're most likely to find green auto loans through:

• Local credit unions

• Green banks (specialized lenders created to finance clean technology transitions)

• Some regional and community banks

Maximize your financing strategy with the federal car loan interest tax deduction

The new car loan interest deduction makes your financing strategy even more important. For loans originated after December 31, 2024, up to $10,000 of interest per year is partially tax-deductible through 2028.

To qualify for the interest deduction, your modified adjusted gross income cannot exceed $100,000 ($200,000 for joint filers); Your vehicle must be new, U.S.-assembled, and for personal use. Verify your specific vehicle's eligibility by checking its final assembly location and VIN.

After purchase, your ongoing costs to charge your EV depend on where you charge, when you charge, and how much you drive. The fuel savings EVs offer remain one of the most compelling benefits of switching to electric driving.

Home charging costs

With an average electricity rate of just 18 cents per kilowatt-hour (kWh), home charging offers the lowest cost and greatest convenience for most EV owners. Charging at home overnight, when electricity rates are typically lower, can further reduce your costs.

However, you’ll likely have to invest in a professional EV charger installation to truly reap the benefits of home charging, which can come with higher upfront costs:

• Level 1 charging (standard 120V outlet): Usually no upfront or installation costs, but slow (3-5 miles of range per hour)

• Level 2 charging (240V): Installation costs $800 to $3,000 on average according to Qmerit; adds 25-30 miles of range per hour

Depending on your home's electrical panel, floor plan, and wiring, you may require additional electrical work, which could increase costs. However, many utilities and states offer rebates that offset installation expenses.

Public charging costs

Public charging averages about 37 cents per kWh—closer to gas prices—so relying on it exclusively won’t deliver the same savings as home charging. Still, free or discounted options are increasingly available at workplaces, shopping centers, and parking facilities, making public charging handy for road trips or when you’re away from home.

There’s no one-size-fits-all answer. It ultimately comes down to the specific deal in front of you. In today’s market, some EV buyers can score excellent purchase options, including discounted cash prices and even 0% APR financing, which can make buying especially attractive. Ownership lets you capture long-term fuel and maintenance savings, qualify for state and utility rebates, and avoid mileage limits or early termination fees.

That said, a strong lease deal can be hard to pass up. Leasing may make sense if you value flexibility, want to upgrade as EV technology evolves, or aren’t fully committed to keeping the same vehicle long term. In some cases, lease terms can keep total costs surprisingly low over the first few years while still leaving the door open to buy the car later if it turns out to be the right fit.

The key is to compare the full cost of each option: Upfront payments, monthly costs, incentives, interest rates, and what you’ll pay (or get back) when the term ends. Even without federal tax credits, EVs remain cost-effective for many drivers thanks to lower fuel and maintenance costs—and when paired with renewable energy, they also deliver environmental benefits that go beyond the balance sheet.