MOTORISTS SHOULD LEAVE NOT BUY AN ELECTRIC CAR TO QUALIFY FOR A $7,500 TAX CREDIT

  • Buyers only have the choice of ten models made in North America which qualify for the full tax cut 
  • A loophole in regulation means that a dealer can apply credit to any leased electric vehicle, no matter where it’s made
  • The average monthly ownership cost on an electric car leased for three years has dropped $403 since December, according to J.D. Power

Leasing an electric vehicle could be the easiest way to qualify for a new federal tax cut, experts say.

Motorists can claim up to $7,500 in credits when they buy specific models of electric cars thanks to a rebate in by the US Treasury Department in April.

But a bizarre loophole in regulations means that those who lease rather than buy have a greater choice in electric vehicles to choose as their next ride. The credits can be used to reduce their monthly payments on a leased vehicle.

In April, leases accounted for 41 percent of all electric vehicle deliveries - four times the amount in December. 

The Treasury added the Inflation Reduction Act as a way of reducing the costs of an electric car- which have historically been too expensive for the average consumer. But prices have come down as more companies make electric vehicles and the technology improves.

But the new rules are filled with complex qualifying criteria detailing how a certain percentage of battery parts must come from the US in order to qualify for the full $7,500 rebate. 

As a result, only ten of the 49 electric vehicles for sale nationally are eligible for the full credit. 

However electric cars which are leased are defined as 'commercial' vehicles under the rules.

'Commercial vehicles' are exempt from the requirements meaning borrowers have a wider selection to choose from. 

The cost of electric cars has been steadily falling in recent years. Data from Kelley Blue Brook in March found the average cost to buy a new electric vehicle is now around $58,940.

And the price of leasing has also dropped. Consumer intelligence company J.D. Power found the average monthly ownership cost of an electric car leased for three years has fallen by $403 since December, largely because of the tax credits.

'Lease affordability has surpassed purchase affordability, Elizabeth Krear, from J.D. Power told AP News.

Geoff Pohanka, president of a 21-dealership group in Maryland, Virginia and Texas, told the outlet he is anticipating an rise in leasing. 

Buyers, he predicts, will increasingly recognize the tax credit will help to minimize the cost of an electric car.

'It definitely makes sense,' he said. 'Incentives can move the market if that narrows the affordability issue between gas and electric cars.'

Critics argue, however, that the loophole benefits manufacturers that produce all their vehicles overseas and have yet to build factories in the US - which some believe was the purpose of the law. 

According to AP News, the Treasury denied creating a loophole and said it was Congress that exempted commercial vehicles from the manufacturing and battery requirements. 

When a dealer buys a vehicle and leases 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 will receive a tax credit as automakers and dealers are allowed to decide whether to pass along the cut to their customers but are not required to do so. 

Krear added some companies are passing the entire $7,500 credit on to qualifying consumers, whereas others are only passing on a portion. 

Of the ten vehicles which qualify for the credit, nearly all are manufactured by either General Motors Co., Tesla Inc., and Ford Motor Co. A further seven are eligible for a reduced tax cut of $3,750.   

Ford and Stellantis NV each have an eligible plug-in hybrid model on the list.

However, three of those on the list - GM's Chevrolet Silverado pickup and Blazer and Equinox SUVs - are not available until the summer or fall.

And some limits apply. The vans, pick-up trucks and SUVs with a suggested retail price (MSRP) of more than $80,000 won't qualify 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, a Chrysler Pacifica's MSRP begins at $38,615.

The deals do not apply to 'used' cars - which are defined as any previously owned vehicle which is older than two years.

These cars have a separate tax credit of either up to $4,000 or 30 percent of the price of the sale.

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2023-06-01T20:58:12Z dg43tfdfdgfd