EV tax credit loophole

Who doesn’t enjoy a tax loophole?  Thanks to a loophole that incentivizes car shoppers for leasing an electric vehicle, leasing has become an unexpected jackpot for automakers. Last summer, the Inflation Reduction Act introduced new rules for electric vehicles to qualify for crucial tax credits, but less than a dozen pure electric vehicles currently meet the requirements. However, automakers can tap into the available commercial EV credit by leasing electric cars that would otherwise not qualify for the de facto new EV discount. This credit, which was designed to encourage commercial fleets to go electric, goes to the company that owns the vehicle.

Automakers can keep the credit earned from owning the EVs they lease or pass it along to the customer through a lower monthly lease payment. Lucid and at least 10 other automakers, including Mercedes-Benz, Volkswagen, Chrysler, Jeep, Genesis, and Volvo, are leveraging the commercial credit through lease bonus cash or other bonuses. Automakers that pass along the amount have seen EV leasing penetration grow from 25% at the start of this year to 52% in early February.

Leasing electric vehicles could be a key component for both consumers and car companies in the race to accelerate EV adoption as the auto industry pours $1.2 trillion into the transition over the next several years. Consumers may want to lease EVs as a way of trying the technology without committing to a costly purchase, while automakers are interested in leasing EVs partly due to the commercial and used EV tax credits. Being able to pass along the commercial EV credit could bring in customers who might not have otherwise considered electric, and getting those vehicles back after their lease and putting them into the used market could open opportunities to bring in more customers via the used EV credit.

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