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Electric Vehicle Financing through Battery Leases

Transport Feasibility Studies


The problem

Compared conventional vehicles, Electric Vehicles (EVs) come with lower operating costs but higher acquisition costs. There are many cases for EVs where the Total Cost of Ownership (TCO) over the life of a vehicle is significantly lower than the TCO of conventional vehicles. Even when other advantages for EVs are considered (lower risk with fuel cost increase, more productive time available since maintenance is greatly reduced…), buyers are usually unable to make the move due to the formidable barrier of dealing with increased initial cost and lack of knowledge about life cycle savings.

Our Solution

Thanks to innovative financing solutions, our clients can acquire EVs with an immediate payback and total savings of 10% or more per month compared to what it would cost to continue using a conventional vehicle.

How we do it

The financing models we have developed are based on the following fundamental key principles

  • Thanks to our battery leases, EVs can be purchased without the battery pack at a price that is competitive with traditional vehicles
  • Our battery leases are offered over a period of time that allows us to recover our battery investment while at the time allowing our clients to save on operating costs
  • We have special arrangements with various technology and financial partners that allow us to cover battery warranties over the whole lease at unbeatable conditions

Why do we need a long term lease?

EVs cannot efficiently be sold like traditional vehicles. Typical financing of conventional vehicles is done over a period of 36 to years 60 months, in rare occasions up to 72 or 96 months for commercial leases. Short leases do not make financial sense for electric vehicles. There is an optimal time to finance vehicles based on the type of financing. Conventional vehicles loans are not 1 or 2 years for a good reason. There is so much depreciation in the first 2 years after buying a new vehicle that it someone needs to use a vehcile for 5 years of more, it does not make sense to buy new vehicles every two years. Most of the high maintenance cost of traditional vehicles happens after 5 years, which is the reason why most people do not trade for new cars before 5 years and why the average length of ownership of vehicles is 11 years (at least in Canada).  

Another key point is that traditional vehicle leases do not work financially for electric vehicles. By separating the lease from the EV Without Battery (EVwB) from the rest, this allows clients to finance EVwB lease or financing to be done is similar and more competing terms compared to ICEVs. This also reduces the overall financing cost as the EVwB can be more competitively financed over a shorter period.

Because EVs are more expensive to purchase than conventional vehicles when the battery cost is included, they incur a comparatively much higher depreciation cost over the initial 3 to 5 years of ownership. Unlike with conventional cars, operation and maintenance costs stay much lower for EVs between years 5 and 10.

On the other side, breaking down the cost of an EV allows the EV cost to be compared more fairly with ICEV. Without the battery cost, a $55,000 EV may be sold at a competitive price possibly less than $20,000. The difference can be considered like a pre-paid fuel reserve, and sold over the operating life of the vehicle. Renault has been doing that with its very popular Zoe model in Europe (number one selling car in that market, selling more than all other EVs combined). There are different models proposed by GPEKS for commercial vehicles, either using a competitively priced battery lease scheme, or a fee per km travelled.  

Example of impact of depreciation

For example, for a 25,000 ICEV, depreciation cost over 1 year ownership would be in the range of 7,000, while for a 5 year ownership, average annual depreciation would be about $3,900, and over a 10 year ownership, average annual depreciation would be about $2,325. We can fairly estimate the average total operating cost of an ICEV of that class to be in the $8,000 to 12,000. So if we use $10,000 this means that we have a balance of O&M costs of $4,100 annually over the first 5 years, but $7,675 when a ten year ownership is factored in.

Let’s compare these to the costs of a long range EV (after rebates) of $55,000. Depreciation over 5 years may be a prohibitive $8,600 versus about $5,100 over 10 years. On the other side, overall O&M cost are much lower for EVs, and it is not be unrealistic to expect values at least 60% lower. So that translates into O&M costs of close to $3,000 per year, including higher financing cost and battery replacement. Note that batteries will likely be 75% or less than the current cost when they need to be replaced (battery cost have gone down 70% from 2010 to 2016 and 50% down from 2014 to 2017). What is more, with an inflation of 2%, the Net Present Value of each $100 worth of possible battery replacement cost in 8 years would represents only $85.25 in today value.

So over the first 5 years, the annual TCO of an EV maybe in the $11,600 range versus $8,100. In other words, in this example, over 5 years, the EV would cost on average $1,600 more annually, but over 10 years, it would cost $1,900 less annually, almost 20% less than the annual cost of an ICEV.

What we offer

Working in partnership with OEM EV manufacturers , finance and energy storage companies, GPEKS provides solutions that allow corporate fleet owners to transition their fleets to electric fleets today at lower cost than if they continued to operate ICEVs. We buy batteries from OEM EV manufacturers in exchange for battery leases from their EV users.

We also help EV users quantify savings from converting vehices to EVs and to find the best financing formula. Finally, we offer training on EV savings evaluation and EV financing, as well as complete due diligence services for fleet electrification.

Why deal with us?

From the perspective of the OEM EV manufacturers, GPEKS provides more flexible and competitive solutions. One of the reasons for this is that we can get better conditions than what individual OEM EV manufacturers could obtain one their own since we aggregate battery purchases and management from various EV vendors, across various market segments and geographical sectors out of each for individual OEM EV manufacturers. This provides us the ability to deal with economies of scale and volumes that reduce our cost of doing business. We also offer the ability to provide to their clients (EV users) lower cost leases thanks to cheaper and better extended warranties on batteries we can obtain with our reputable O&M partners. Another key is that we are focussed and specialized on Battery leases for EVs and therefore understand that business more than other Leasing companies that do general equipment leasing.

Because we can get better conditions, this allows us to buy the batteries from the OEM EV manufacturers for a better price, which allows them to sell the EVs without battery cost at a price that makes their EVs more competitive with ICEVs.

We do not necessarily compete with car leasing companies as the EV without battery cost can be leased with traditional leasing companies. On the other side, our offering is more competitive than the offering of Leasing companies that lease EVs with batteries (without us handling the battery lease), as these leasing are typically offered over shorter period of time or conditions that are not as good for the battery leasing portion.