New, Stricter Requirements for EV Tax Credits in 2024 are Inspiring EV Lease Credits
You’ve probably heard about the revised federal electric vehicle tax credit (now officially named the “Clean Vehicle Tax Credit“) that offers up to $7,500 for the purchase of new electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs) sold in the United States. On the plus side, the revisions created in the Inflation Reduction Act brought back the possibility for the purchase of PHEVs and EVs from popular manufacturers to be eligible for tax credits again (Tesla, GM, and Toyota had previously run out of eligibility). The purchase of used vehicles became newly eligible for up to a $4,000 tax credit as well.
One not so great change was the new restrictions that were added that required EVs to meet strict battery component and material sourcing and vehicle assembly requirements in order to be eligible for the tax credit for new vehicle purchases. Those restrictions will have the long-term impact of dramatically increasing battery, component, and vehicle manufacturing jobs in North America, but they dramatically restricted the number of vehicles that are eligible for Clean Vehicle Tax Credits in the short-term.
How dramatic? Before the new requirements went in to place, 147 vehicle models were eligible for the previous generation EV tax credit. After the new requirements were fully implemented (and with more EVs on the market), we’re currently down to 18 vehicle models that are eligible for the full $7,500 Clean Vehicle Tax Credit and 9 models that are eligible for a partial ($3,750) tax credit (here’s a current list of all vehicles still eligible for the EV tax credit). Only 3 EVs on the list of the cheapest electric vehicles in 2024 – the Chevy Bolt and Chevy Bolt EUV (which also made the cheapest new cars list), and the Volkswagen ID.4 – are currently eligible for an EV tax credit.
What is the EV Lease Tax Credit Loophole?
But, as with most things in the U.S. tax code, there’s a loophole. And, oh what a gaping loophole it is. Let’s refer to it as the “EV lease tax credit loophole”. What is the “EV lease tax credit loophole”? In short, leased vehicles are considered “commercial vehicles”. And, under the Inflation Reduction Act, commercial vehicles are eligible for up to a $7,500 tax credit without any of the pesky sourcing, battery, or North American assembly requirements that are in place for new consumer EV purchases.
If you want to get more specific, the tax code that created the EV lease tax credit loophole is referred to as the “Commercial Clean Vehicle Credit“. And, really, the only requirement for eligibility for a $7,500 Commercial Clean Vehicle Credit is that the EV battery be at least 7 kilowatt hours (I’ve yet to find a battery EV that does not meet that requirement, and many plug-in hybrid or PHEVs meet it as well).
This Rivian is just one of many EV models currently with an EV lease tax credit offer.
Aside from the absence of sourcing and manufacturing limitations, there’s a few other bonuses with the EV lease tax credit loophole as well:
- new purchaser income restrictions for the EV tax credit for new and used EVs does not apply to leased vehicle lessees.
- the tax credit is owned by the lessor, so the lessee does not have to worry about claiming the tax credit when they file their tax return.
Does this mean that anyone in the market for a new auto can lease any EV and go home with an EV lease tax credit? Not quite.
How Does the EV Lease Tax Credit Loophole Work?
With leased vehicles being “commercial vehicles” not available for resale – technically the tax credit goes to the lessor (the leasing company for the automaker), and not the lessee (the consumer). So, in order for a lessee to get any of the EV lease tax credit, the lessor has to voluntarily decide to pass along the credit to the lessee within the terms of the lease. This could come in the form of a rebate, reduction in monthly payments, or otherwise.
Fortunately, many EV leasing companies are now doing just that. The EV lease tax credit loophole is coming with many different names, some seemingly hiding that it has anything to do with an EV tax credit. Here are just a few:
“Lease Tax Credit”
“EV Lease Credit”
“EV Lease Tax Credit”
“Federal Tax Credit Lease Support”
“EV Incentive”
“EV Lease Incentive”
“EV Lease Bonus”
“EV Bonus Cash”
“Lease EV Bonus Cash”
“$7,500 Retail Bonus Cash”
… you get the idea. If you find an EV or PHEV with lease terms that have a significant offer around $7,500, it’s likely the auto lessor passing along the EV tax credit to lessees. In effect, many of the EV models that don’t have tax credits for direct purchases (and even some that do), do have something similar through leases, in the form of this loophole, making the models more attainable for many consumers.
The downside? There really is nothing official or consistent about the EV lease tax credit loophole. It’s a loophole, after all. The details around lessors passing on the EV lease tax credit to lessees are a little murky, given that it is a loophole and the lessor has discretion here. The passing along is voluntary, not a requirement. And offer amounts could change, be added, or removed at any time.
Which EV Models Have EV Lease Tax Credits Offers?
Here is a list of every PHEV and EV model with an EV lease tax credit offer (as of this article’s publish date):
Audi
Audi EV lease credit offers recently seen:
- Audi e-tron eligible models: “Limited time $7500 EV Lease Bonus”
BMW
BMW EV lease credit offers recently seen:
- BMW i4 Series: “$7,500 EV Lease Credit”
- BMW i5 Series: “$7,500 EV Lease Credit”
- BMW i7 Series: “$9,900 EV Lease Credit”
- BMW iX Series: “$9,900 EV Lease Credit”
- BMW XM Series: “$7,500 EV Lease Credit”
Buick
Buick does not sell any EVs in the U.S. market currently. The Buick Electra E5 is expected to launch in late 2024.
Cadillac
Cadillac EV lease credit offers recently seen:
- Cadillac Lyric: GM has said the Lyriq should regain EV tax credit eligibility in early 2024. Until then, “Select LYRIQ leases with GM Financial benefit from a Clean Vehicle Federal Tax Credit of up to $7,500 though a residual enhancement applied by GM Financial.”
Chevrolet
Chevrolet EV lease credit offers recently seen:
- Chevy Bolt and Bolt EUV: eligible for a $7,500 EV tax credit in 2024 (no EV lease credit offers)
- Chevy Blazer, Equinox, and Silverado models are launching in 2024 and it is expected they will be eligible for the EV tax credit. GM has said that any EVs not eligible for a federal tax credit in 2024 will be eligible for a $7,500 EV lease credit.
Chrysler
Chrysler EV lease credit offers recently seen:
- Chrysler Pacifica Hybrid: $7,250 in “federal tax credit lease support” on leases or eligible for a $7,500 EV tax credit in 2024
Ford
Ford EV lease credit offers recently seen:
- Ford Escape PHEV: eligible for a $3,750 EV tax credit in 2024 (no EV lease credit offers)
- Ford Mustang Mach-E: “$7,500 RCL Customer Cash”
- Ford F-150 Lightning: most trims are eligible for the $7,500 EV tax credit in 2024 (no EV lease credit offers)
Genesis
Genesis EV lease credit offers recently seen:
- Genesis GV60: “$7,500 EV Lease Bonus”
- Genesis Electrified GV70: “$7,500 EV Lease Bonus”
- Genesis Electrified G80: “$7,500 EV Lease Bonus”
GMC
GMC EV lease credit offers recently seen:
- Hummer EV: “Select Hummer EV leases with GM Financial benefit from a Clean Vehicle Federal Tax Credit of up to $7,500 though a residual enhancement applied by GM Financial.”
Honda
Honda does not sell any EVs in the U.S. market currently.
Hyundai
Hyundai EV lease credit offers recently seen:
- Hyundai IONIQ 5: “$7,500 Retail Bonus Cash”
- Hyundai IONIQ 6: “$7,500 Retail Bonus Cash”
- Hyundai Kona Electric: no current EV lease credit offers – MSRP on purchase price dropped significantly
Jeep
Jeep EV lease credit offers recently seen:
- Wrangler 4xe PHEV: “$7,500 EV Incentive” on leases or eligible for a $3,750 tax credit in 2024
- Grand Cherokee 4xe PHEV: “$7,500 Federal Tax Credit Lease Support” on leases or eligible for a $3,750 tax credit in 2024
Kia
Kia EV lease credit offers recently seen:
- Kia EV6: “$7,500 EV Lease Bonus”
- Kia Niro EV: “$7,500 EV Lease Bonus”
Lexus
EV lease credit offers recently seen:
- Lexus NX 450h+: “$7,500 Lease Cash incentive”
- Lexus RZ 450e: “$15,000 Lease Cash incentive”
Lincoln
Lincoln EV lease credit offers recently seen:
- Lincoln Corsair Grand Touring: eligible for a $3,750 EV tax credit in 2024 (no EV lease credit offers)
Mazda
Mazda EV lease credit offers recently seen:
- Mazda CX-90 PHEV: “$7,500 PHEV lease cash offer”
Mercedes-Benz
Mercedes-Benz EV lease credit offers recently seen:
- Mercedes-Benz EQB: “7,500 Lease Bonus cash”
- Mercedes-Benz EQE Sedan: “7,500 Lease Bonus cash”
- Mercedes-Benz EQE SUV: “7,500 Lease Bonus cash”
- Mercedes-Benz EQS Sedan: “7,500 Lease Bonus cash”
- Mercedes-Benz EQS SUV: “7,500 Lease Bonus cash”
MINI
MINI EV lease credit offers recently seen:
-
MINI Cooper SE Electric Hardtop: “$9,900 EV Lease Credit”
Mitsubishi
Mitsubishi EV lease credit offers recently seen:
- Outlander PHEV: “$6,200 EV Lease Customer Cash”
Nissan
Nissan EV lease credit offers recently seen:
- Nissan ARIYA: no EV lease credits offered up-front in terms
- Nissan LEAF: no EV lease credits offered up-front in terms
Polestar
Polestar EV lease credit offers recently seen:
- Polestar 2: “$7,500 Polestar Clean Vehicle Credit”
Rivian
Rivian EV lease credit offers recently seen:
- Rivian R1S: “$7,500 EV lease credit” on leases or eligible for a $3,750 tax credit in 2024
- Rivian R1T: “$7,500 EV lease credit” on leases or eligible for a $3,750 tax credit in 2024
Subaru
Subaru EV lease credit offers recently seen:
- Subaru Solterra: “$7,500 EV lease credit”
Tesla
Tesla EV lease credit offers recently seen:
- Model 3 RWD: “$7,500 EV lease incentive distributed across lease term”
- Model 3 Performance: “$7,500 EV lease incentive distributed across lease term” on leases or eligible for a $7,500 tax credit in 2024
- Model S: “$7,500 EV lease incentive distributed across lease term”
- Model X Dual Motor Long Range: “$7,500 EV lease incentive distributed across lease term” on leases or eligible for a $7,500 tax credit in 2024
- Model X Plaid Tri Motor: “$7,500 EV lease incentive distributed across lease term”
- Model Y AWD: “$7,500 EV lease incentive distributed across lease term” on leases or eligible for a $7,500 tax credit in 2024
- Model Y Performance: “$7,500 EV lease incentive distributed across lease term” on leases or eligible for a $7,500 tax credit in 2024
- Model Y RWD: “$7,500 EV lease incentive distributed across lease term” on leases or eligible for a $7,500 tax credit in 2024
Toyota
Toyota EV lease credit offers recently seen:
- Toyota bZ4x: “$7,500 TFS Lease Cash”
- Toyota Prius Prime: “$4,500 TFS Lease Cash”
- Toyota Rav4 Prime: $6,500 TFS Lease Cash”
Volkswagen
Volkswagen EV lease credit offers recently seen:
- Volkswagen ID.4: “$7,500 EV lease bonus”
Volvo
Volvo EV lease credit offers recently seen:
- Volvo C40 Recharge: “$9,000 lease bonus cash”
- Volvo XC40 Recharge: “$9,000 lease bonus cash”
- Volvo XC60 Recharge: “$8,000 lease bonus cash”
- Volvo XC90 Recharge: “$7,500 lease bonus cash”
Some EV Lease Tax Credit Warnings
If you’re not familiar with leases – do your homework, get everything in writing, and be careful. Here’s just a few things to keep in mind with EV lease tax credit offers and leases in general:
- EV lease incentives may voluntarily be offered by the lessor (leasing company), not the dealer. The lessor is not required to offer them (and many of them are not).
- Some PHEVs and EVs currently with EV lease tax credit offers may also simultaneously be eligible for a Clean Vehicle Tax Credit on new purchases. If that’s the case, it may be more beneficial to purchase than lease.
- You can negotiate the price of the car prior to the dealer applying the lease terms (which may also be negotiated in some cases).
- If your goal is to get the most value from an EV lease credit, make sure any credit is offered as a cash back rebate to you (best) or a capitalized cost reduction (2nd best) that is subtracted from the total price in the beginning, like a down payment. This is particularly important if you want to buy out the lease ASAP (get in writing that this is an option) with the goal of avoiding lofty finance charges (ideal).
- Always confirm with the dealer what the current lease specifics are and get everything in writing. The automaker websites will often disclose some of the lease details if you poke around enough.
- Be aware of any possible state EV tax credits as well, and if they are attainable through a lease, and what the requirements are.
- Lease offers can change at any time. New offers may be added, current offers may be revised, and offers will expire.
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