EV lease payments climb as $7,500 credit expires, pushing buyers to hybrids

Hybrids outpace EVs among California new-car sales in first half of 2026

Former electric-vehicle leasers are encountering higher prices and fewer options after the expiration of the Biden-era $7,500 federal EV tax credit in September 2025, and many are switching to hybrids or the used market.

Mark Block and his wife Ida were among the consumers drawn in by the deals. After seeing his friend land a lease on a 2024 Hyundai Ioniq 6, Block leased the same sleek, electric $50,000 car for $340 a month after a $4,000 down payment. But when their lease came due and they went looking for a similar deal, the couple faced higher prices and fewer options, ultimately taking home a hybrid Honda Civic. The home charger they got for the Hyundai is still in their garage, with no car to plug into.

“Never in my life have I looked at the car market and gone, ‘God, there’s just nothing I want,’” Mark Block said.

The tax credit had helped entice buyers to go electric, and many automakers offered heavily subsidized lease deals and discounts as regulations pushed them toward battery power. Today that is no longer the case: the credit is gone, automakers are less motivated to push for an electric future, several EV models have bowed out of the market, and prices are up.

Ahead of the credit’s expiration, dealers were eager to clear their lots, and average monthly EV lease payments hit a low of $538 in July 2025, according to Edmunds data. Some dealerships offered lease deals with monthly payments of less than $100. As of June, average monthly EV lease payments had risen to $707, compared with an average of $607 for a non-EV, Edmunds data show.

The situation is testing longstanding data showing that when people go electric, most stay electric. A February study from J.D. Power found that 96% of polled EV owners said they would consider purchasing or leasing another — but that outcome is contingent on having options in the EV market. Nationally, second-quarter new EV sales and leases were down 20.5% year over year, according to Kelley Blue Book.

“There is defection from that EV market,” said Ivan Drury, an Edmunds automotive analyst. “I think the one biggest problem—it is a mental hurdle to say, ‘Man, I used to be paying $200 a month. Now you guys want $500?’”

Karl Schmidt said that at his Mazda, Subaru, and Kia dealerships in Los Angeles, the enticing deals had drawn buyers to EVs. Now, he said, people who leased an EV and come in hoping for another are in for a rude awakening.

“It’s always a difficult conversation when somebody comes in and you have to show them a $250 to $300 higher payment,” Schmidt said.

Some buyers set on keeping an EV have decided to absorb the higher cost. Srivatsa Srinivasan, a now-retired Virginia resident, used the EV tax credit to get an $819 monthly payment after a roughly $11,000 deposit on a 2024 Rivian R1S Quad-Motor, a car that would cost $121,990 to purchase. Leasing another example of the same model in May, when his term was up, would have cost him $1,900 a month. Instead, Srinivasan bought a similar R1S with a zero-interest financing plan and now pays $2,100 a month, choosing to keep the car and continue using his home EV charger despite the higher price.

“I said, ‘You know what? I’m going to take the plunge—take a hit on this,’” he said.

In California, the largest EV market in America, lawmakers are trying to replace the lost incentives. A new program signed into law by Gov. Gavin Newsom in July offers first-time EV buyers $3,500 off new electric vehicles priced under $50,000, and $1,750 off used electric vehicles selling for less than $25,000. Buyers who have previously leased an EV are not eligible.

For the past four years in California, buyers took home more new EVs than hybrids. But in the first half of 2026, hybrids made up 22.1% of new cars sold, compared with 15.9% for EVs, according to data from the California New Dealers Association. Part of the trend reflects hybrids becoming more commonplace, by choice or by default: America’s top-selling SUV and top-selling nonpickup vehicle, the Toyota RAV4, is now available only as a hybrid, as is the popular Camry sedan.

Many EV drivers are turning to the used market. Ryan Williams, a Portland, Ore., software engineer, is paying $389 a month to lease an Audi Q4 e-tron. When his lease expires next April, he plans to look at the used lot and said he is willing to get a model a few years old to find something cheaper.

“All options are open, but I would definitely prefer to stick with an EV,” he said.

Used EV prices are generally low because of depreciation, but they are beginning to climb even as supply increases with more EVs coming off lease. Prices for electric cars under $20,000 have risen the most since January, according to Recurrent, a data-science company that provides a battery-monitoring tool for EVs. Scott Case, Recurrent’s co-founder and chief executive, sees the increases as reflecting growing consumer demand for EVs, driven in part by high gas prices.

Drury said that consumers who leased EVs when prices were at a low got a once-in-a-lifetime deal.

“You won, you won once, it’s probably good enough—it’s probably gonna have to be it,” Drury said.