Lease vs. Buy? Rivian Is Giving Customers a Choice That Should Help Demand.

“We launched the newest way for customers to get behind the wheel of a Rivian with the introduction of leasing for the first time,” said the company in an emailed statement. The program has rolled out in California, New York, Florida, and Texas. “Rivian’s leasing program offers the adventure of owning a Rivian with more flexibility.”

It’s a bit of good news that opens up another bit of the automotive market to the startup battery-electric vehicle maker. Roughly 20% of new cars are leased.

Of course, people can buy cars for cash or borrow the money, but leasing is a popular option for many buyers. In a loan, buyers borrow the money, less what they choose to put down, and typically pays it back to the bank each month over 48 to 72 months. When the loan is done, the buyer owns the car free and clear.

In a lease, buyers agree to pay a monthly rate for a period. But they don’t own the car at the end, unless they opt to plunk down more money then and purchase it. Normally, the leasing company takes the vehicle back and is responsible for selling it.

In a lease, buyers don’t finance the entire amount of the car. They finance the difference between the new price and the projected end-of-lease value. The result is lower monthly payments.

The leasing option means that people who like leasing instead of buying will consider Rivian. That represents a small boost to demand, which hasn’t really been Rivian’s problem. Reserving an R1S SUV today? The website says to expect delivery in 2024.

Rivian’s problem has been ramping production. Things have been improving on that front. Rivian produced 16,304 units in the third quarter, a record, and up from 13,992 produced in the second quarter of 2023. It expects to make about 54,000 units in 2023, up from 24,300 produced in 2022.

Wall Street expects 2024 deliveries to hit 69,000 units. Deliveries and production should closely mirror one another.

Rivian stock isn’t getting a bump though. Shares were down 1% at $16.50 in early trading Tuesday. The
S&P 500
and
Nasdaq Composite
were both down roughly 0.2%.

Through early trading Tuesday, Rivian shares were down about 43% over the past 12 months. Rising interest rates and fears of slowing EV demand have sapped some investor enthusiasm for shares of EV start-ups that don’t make money yet.

Wall Street doesn’t expect Rivian to produce full-year profits for several more years.

Write to Al Root at allen.root@dowjones.com