VSG
Well-Known Member
No, it's not a "loophole" in the current EV tax credit regulation, it's a completely separate commercial tax credit with a different set of requirements. Maybe this is just semantics, but these two credits are separate and deliberate and intended for different reasons. The consumer credit was passed to subsidize production of new models of EVs - to give them a "leg up". The consumer credit went away after a manufacturer reached a certain production volume in order to not "play favorites" in the long term. The consumer credit was later modified to put on income restrictions, after it was observed that high income people were collecting the vast majority of the credits. Then it was modified to put restrictions on battery material sourcing and assembly, because "China". The commercial credit was put in place to help businesses that rely on leasing, because the consumer credit was acting as a discouragement to leasing.
Leased vehicles are purchased by the leasing company - the leasing company can take a $7,500 tax credit (which just happens to be the same as the maximum consumer tax credit). The leasing companies can, but don't have to, pass that credit on to the lessee. In actuality many do but many also juggle the numbers so that they still make as much (or more) money off of the lease than they would without the credit - people get lured in by that $7,500 capital cost reduction and don't notice it's recovered on the back end. Even if you immediately buy out the lease, you're going to lose a thousand or more of that credit to paperwork costs, which is pure profit (and immediate profit) for the leasing company. That could be to the benefit of both parties, but don't assume it always is.
And yes, like @tjrivian said, the dealer lobby used their power to make this consumer credit happen. Dealers get a *lot* of money by leasing vehicles to people who can't afford to buy. Some vehicles, like BMWs, are sold *predominantly* by leasing (77% of BMWs are leased ...).
Because of this, it's important to do as much research as you can - don't just look at the monthly payment, but look at the total cost of leasing vs buying (especially if you intend to buy out the lease).
Leased vehicles are purchased by the leasing company - the leasing company can take a $7,500 tax credit (which just happens to be the same as the maximum consumer tax credit). The leasing companies can, but don't have to, pass that credit on to the lessee. In actuality many do but many also juggle the numbers so that they still make as much (or more) money off of the lease than they would without the credit - people get lured in by that $7,500 capital cost reduction and don't notice it's recovered on the back end. Even if you immediately buy out the lease, you're going to lose a thousand or more of that credit to paperwork costs, which is pure profit (and immediate profit) for the leasing company. That could be to the benefit of both parties, but don't assume it always is.
And yes, like @tjrivian said, the dealer lobby used their power to make this consumer credit happen. Dealers get a *lot* of money by leasing vehicles to people who can't afford to buy. Some vehicles, like BMWs, are sold *predominantly* by leasing (77% of BMWs are leased ...).
Because of this, it's important to do as much research as you can - don't just look at the monthly payment, but look at the total cost of leasing vs buying (especially if you intend to buy out the lease).
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