Drivers want electric vehicles. But can they afford them?

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WINDSOR – For all the technological advances and excitement generated by an auto industry transitioning to electric vehicles, the business remains all about the bottom line.

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Just how to finance a new product with a limited history is still being sorted out by financial institutions and automakers’ financial arms.

Plug’N Drive CEO Cara Clairman calls financing one of the most important hurdles to clear to help encourage mass adoption of electric vehicles. Plug’N Drive is a non-profit organization offering education and encouraging adoption of electric vehicles.

In particular, Clairman said the option of leasing is relatively limited.

“I’d like to see the banks come up with something a little more creative in financing EVs,” Clairman said. “It’s still more expensive to finance an electric vehicle than a gas-powered one. The theory for that is financial institutions don’t know the residual value at the end of a lease.

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“With EVs being on the road for 10 to 12 years now, we’re getting enough data to show batteries are outlasting the bodies of the cars themselves.”

Windsor Family Credit Union president/CEO Eddie Francis said the conundrum for financial institutions is that, without an agreed residual value for electric vehicles, banks can’t plug any numbers into their algorithms that determine financing rates.

Francis said WFCU, which has an extensive network of auto dealer partnerships throughout southern Ontario, has financed many electric vehicles but no leases.

“We’re not doing leases yet,” Francis said. “There are still too many unknowns. What are the cost liabilities and lifespan of the car? The biggest issue is the battery and what commercial value does it have long-term?”

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Francis said financial institutions are waiting for experts in the auto and battery industries and the used car market to figure out the numbers required. At WFCU, he added, finance rates to purchase an electric vehicle are no different than for a gas-powered vehicle.

Clairman feels many of these concerns will no longer be issues in two to three years. In the short-term, she sees opportunity for banks to grab financing market share.

“I think financial institutions should be looking at new ways and new programs for financing EVs,” Clairman said. “The change is coming and I see an opportunity for a bank that can carve out a niche for itself on the financing side.”

With average prices for electric vehicles in Canada starting at just over $40,000, higher financing rates are one financial discouragement too far for some customers.

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“There will be market opportunity for early adopters, but it won’t take long for others to follow suit,” Francis said.

“We’d absolutely be interested (in EV leasing). We were one of the first institutions that would deal with the marijuana companies because the banks wouldn’t.”

Revenberg Chevrolet general manager Jerry Revenberg expects there’ll be more financing options available once EV supply improves.

Currently, 90 per cent of the Revenberg auto group’s financing is done through the major banks. His group also includes GMC, Buick, Volkswagen, Kia, Nissan and Infiniti.

“Financing is not there (from the automakers) right now,” Revenberg said. “That’s going to be subject to getting product and new programs.

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“We haven’t heard anything yet. They’re pretty tight-lipped with what they’ve got planned.”

Revenberg said they don’t have any EVs on their lots currently, but are expecting a pre-ordered electric Hummer to be delivered this spring. The electric Equinox and Blazer SUVs are scheduled to start arriving later in the year.

Revenberg said financing for the Hummer was 5.49 per cent while a gas-powered Silverado pick-up truck can be had for 3.49 per cent.

“Right now, gas-powered is a little better interest rate,” Revenberg said. “That could change as more EV product arrives.”

Revenberg said the interest is certainly there among consumers if the product was available.

“We have people making reservations,” Revenberg said. “We expect most of those will be more in 2024.”

Dwaddell@postmedia.com