I am considering leasing a compact sedan EV - with Nissan Leaf being the most likely choice (not too many options in this category at this time). I have previously leased a Hyundai Ioniq EV. I realize the car market today is very different, but that is the reason for the following question.
When I had leased the Ioniq, I was credited the full $7500 federal EV rebate towards (reducing) the purchase price of the car as part of the lease agreement. In the current market, Nissan dealers in Northern California are not crediting this amount with a lease. However I am being today by a couple of dealers that if I buy the vehicle instead of leasing it, then I can claim the full $7500 rebate as a credit on my tax return.
This made me wonder if I should opt to purchase the vehicle instead of leasing it (I can manage the finances related to a purchase). If “all other things are equal” and purchasing allows me to take an extra $7500 credit, it may be worth purchasing now and selling the car 3-4 years later and potentially still come out ahead.
Has anyone else dealt with this question? What is the experience of other EV leasers in terms of manufacturer/dealer crediting the federal rebate to them? Is it true that if I buy the car I can indeed claim the $7500 credit on my taxes (my tax liability will be greater so that is not a problem).
Any help, advise or insights will be appreciated. Thank you very much.
Yes, as long as you purchase or finance you can claim the full amount as a tax credit, like you said, as long as you have that amount of tax liability.
With today’s car market, it’s not surprising that captives won’t pass the savings onto the customer for a lease, but that changes from manufacturer to manufacturer.
Hello @Supakimchee, thanks for your response. Yes, no Nissan dealer in Northern California is willing to pass on the Federal EV credit in the case of a lease.
I guess I was writing to confirm, that if I do buy the vehicle, the dealer/manufacturer cannot still take that credit in how the paperwork is structured and prevent me from claiming it on my tax return. If I buy the car “today”, I will have to claim it in my 2022 return filed in 2023, so I don’t want to find out in April 2023 that because of the way the purchase was structured, I am ineligible to get that tax credit.
Also, unlike the CA state EV rebate, which has income related restrictions on the eligibility to claim the rebate, I believe the Federal rebate has no such limitation - as long as your tax liability exceeds $7500, you can claim the rebate. Is this correct?
I have a follow on question about your last bullet “You have to pay $7500 in taxes to get a tax refund of $7500.” I am trying to understand what you mean by the above. If I buy a car I will pay sales tax on the full value of the car. If I lease the same car for 3 years and looking at current residual value numbers, I will pay sales tax on about 40% of the value of that car. So yes, with a purchase I am paying additional sales tax on about 60% of the car value. For a Nissan Leaf, considering a nominal $30K sales price (base model), that would come out to about $1800 in incremental sales tax.
I understand that in the case of premium luxury cars that cost a lot more, the difference in sales tax will be higher (while the rebate amount is fixed at $7500), but for the “small compact sedan” category of cars, is the approximate calculation above correct, or am I missing something that makes the tax liability much higher for a purchase?
The “normal times” depreciation curve on Leafs and most Nissan cars has been wretched and while the latest version may be better with range in a few years you’ll probably want something better like the rest of the world and recoup only a small fraction of your purchase price, IMO.
You must pay $7500 to the IRS in Income tax to get back $7500 on a purchase. You would be very surprised (I was) with the number of people who can afford an EV but don’t seem to make at least $40k (Which is roughly $8k in income tax)
When you purchase or finance the car, you’re the registered owner, even if you have a lien on the car from whoever funds the loan. That means the tax credit belongs to you. The dealer or manufacturer cannot claim that tax credit.
In a lease, the captive holds the credit because they’re essentially letting you “borrow” the car. I know that term isn’t popular here but I feel it’s easier to put it in those terms because you don’t actually own the car.
So I just want to assuage your fears that the captive can somehow take the credit away from you if you purchase or finance the car. That’s purely between you and the IRS.
Also, this is the exact way solar panel tax credits work. If you lease your panels, generally the bank will own those credits - I haven’t done enough research to see if any bank will pass those to the leasee.
If you finance or purchase, the tax credit will belong to you when you file your taxes. In terms of the solar credit, it’s a percentage and not a flat dollar amount.
It’s Nissan financial aka NMAC that credits the rebate. Not Nissan dealers.
That being said, they are indirectly crediting it with an inflated RV on 18m leases. It just doesn’t show up as “$7,500 rebate” on any paperwork. It’s a hidden credit.
Cheap lease is a cheap lease, regardless of how they get there.
The taxes in question related to the ev tax credit have nothing to do with sales tax.
The ev tax credit is based on your federal income tax liability. Sales tax is a state thing based on a purchase. They’re unrelated in this conversation.
Thank you @max_g for the response. Understand from your post (and a few others) that crediting the rebate is up to NMAC, and not for the dealer to decide, so no wonder the answer is consistent from the few dealers who responded to my query.
Don’t know about 18 month lease, because I asked for and was quoted a 36 month lease and the RV is not obviously inflated for me to believe that was because of a significant part of the rebate being used towards it. And the lease was not cheap - more expensive than quoted on the Nissan website.
Fortunately (for the purpose of the EV rebate discussion) or unfortunately (general rant/complaint about taxes - apologies for it! ) my federal tax liability is going to be well over $7500 so getting the credit will not be a problem.
Was it actually more expensive or did just show all the costs? The leases quoted on the websites usually have a big fat asterisk on them for tax, title, fees, etc extra
) my federal tax liability is going to be well over $7500 so getting the credit will not be a problem.