Leasing Circumvents Tax Credit Limits

People with their eyes on electric-vehicle models that don’t qualify for a federal EV tax credit are abuzz about word that they can lease those vehicles and still get the cost break.

The credits, authorized under the Inflation Reduction Act passed last year, can save EV buyers up to $7,500, depending on the model they choose. But they’re restricted to vehicles that undergo final assembly in North America, don’t exceed buyer income and vehicle price caps, and whose battery materials are largely sourced in the U.S. or in a free-trade partner of the U.S.

Under recently narrowed qualifications, just 16 domestically made models qualify for the tax credits for purchases.

But it turns out that leasing a vehicle allows an end around the credit restrictions. The IRA defines leased vehicles as commercial for the purposes of applying the credits, and they’re therefore exempt from the limits. Auto dealers can then pass on the credit savings to leasing consumers via lower lease rates.

In fact, consumers who go the leasing route can lease any model and get the tax credit savings.

The IRA included the lease exemption to encourage rental car providers, municipalities and other fleet owners to go electric, the New York Times reported.

LEARN MORE: Credit-Qualifying EV Models Winnowed

Originally posted on Auto Dealer Today