Motorists must go away and not buy an electric car to qualify for a $7,500 tax credit
Leasing an electric vehicle could be the easiest way to qualify for another federal tax cut, experts say.
Motorists can claim up to $7,500 in credits when they purchase specific models of electric cars, thanks to a rebate from the US Treasury Department in April.
But a bizarre regulatory loophole means those who lease rather than buy will have a wider choice of electric vehicles to choose as their next ride. The credits can be used to reduce their monthly payments for a lease car.
In April, lease contracts accounted for 41 percent of all electric vehicle deliveries – four times as many as in December.
The Treasury added the Inflation Reduction Act as a way to lower the cost of an electric car, which has historically been too expensive for the average consumer. But prices have come down as more companies make electric vehicles and technology improves.
Experts Recommend Leasing an Electric Vehicle Is the Easiest Way to Get a New $7,500 Federal Tax Cut
Motorists can get back up to $7,500 in tax credits when they purchase one of these ten electric vehicles
But the new rules are filled with complex qualifying criteria detailing how a certain percentage of battery parts must come from the US to qualify for the full $7,500 discount.
As a result, only ten of the 49 electric vehicles for sale nationwide are eligible for the full credit.
However, electric cars that are leased are defined as ‘commercial’ vehicles under the rules.
‘Company vehicles’ are exempt from the requirements, meaning borrowers have a wider choice to choose from.
The cost of electric cars has been falling steadily in recent years. Data from Kelley Blue Brook in March showed that the average cost of buying a new electric car is now around $58,940.
And the price of leasing has also fallen. Consumer intelligence firm JD Power found that the average monthly cost of ownership of an electric car leased for three years has dropped $403 since December, largely due to the tax cuts.
“Affordability of leasing has surpassed affordability of purchase,” said Elizabeth Krear of JD Power AP News.
Geoff Pohanka, president of a 21-dealer group in Maryland, Virginia and Texas, told the outlet he expects an increase in leasing.
Buyers, he predicts, will increasingly recognize that the tax credit will help minimize the cost of an EV.
“It certainly makes sense,” he said. ‘Stimulative measures can set the market in motion if it reduces the affordability between gas and electric cars.’
However, critics argue that the loophole benefits manufacturers who produce all of their vehicles abroad and have yet to build plants in the US – which some say was the goal of the law.
According to AP Newsthe Treasury denied creating a loophole, saying it was Congress that exempted commercial vehicles from the manufacturing and battery requirements.
When a dealer buys a vehicle and rents it to someone, it amounts to a commercial transaction. The dealer or a finance company receives the tax credit and retains ownership of the vehicle.
Experts warn that not everyone who leases a vehicle gets a tax credit, as automakers and dealers can decide whether to pass the discount on to their customers, but are not required to do so.
Krear added that some companies pass on the entire $7,500 credit to eligible consumers, while others pass on only a portion.
The Ford F-150 qualifies for the full tax credit. Prices start at $43,325
The Tesla Model 3 Performance was eligible for the full credit, but the Standard Range version is only half eligible
Buying a Jeep Wrangler, pictured, can net you tax credits of up to $3,750
Of the ten vehicles eligible for the credit, nearly all are produced by General Motors Co., Tesla Inc. and Ford Motor Co. Seven others qualify for a reduced tax cut of $3,750.
Ford and Stellantis NV each have a qualifying plug-in hybrid model listed.
However, three of those on the list — GM’s Chevrolet Silverado pickup and Blazer and Equinox SUVs — won’t be available until the summer or fall.
And some limits apply. The vans, pickup trucks, and SUVs with an MSRP of more than $80,000 are not eligible for the credit.
For cars, the MSRP limit is $55,000.
Many of the vehicles fall within these limits anyway. For example, a Chevrolet Bolt EV has a starting MSRP of $36,500.
Meanwhile, the MSRP of a Chrysler Pacifica starts at $38,615.
The deals do not apply to “used” cars – which are defined as any previously owned vehicle that is more than two years old.
These cars carry a separate tax credit of up to $4,000 or 30 percent of the sales price.