I have a few questions about the $7,500 tax credit on EV’s here in southern California. We have been shopping for EVs and have heard that we can get a lease that accounts for the $7,500 tax credit (BMW, Volvo, and Hyundai dealers said this).
How does this work? Do they take it off the residual or price of the vehicle, or are they just saying that and I will actually have to file for it in taxes. Also, my research indicates that an AGI over $300K yearly should not be eligible for the credit (which would preclude me), but many dealers told me that it doesn’t matter and one (volvo) said I’d need to talk to a CPA. Can anyone demystify this for me? Can I get $7,500 off or not?
First the manufacturer arbitrarily adds $10,000 to the MSRP.
Then their finance arm “gives you” an incentive of $7,500 or less, which makes people think they’ve accomplished something very special with their deal.
You cannot do this with a lease. The rules are very clear if you google them.
The inflated MSRP also fools people into thinking their lease payment is better than it is.
A Volvo subcompact with a $550 payment? Somehow most people think that’s better with an arbitrary $60k MSRP on the window sticker instead of an equally arbitrary $50k MSRP.
Whether a subcompact should be $500+ is a whole ‘nother discussion.
Best example on top of my head was the Chevy Bolt a few years ago pre Covid.
The lease deals got better when the tax credit went from 7500 to 3500, then got even lower after Chevy lost the tax credit.
Because the tax credit was a bribe to big auto to support the EV agenda. All that money went straight into their pockets, once it dried up the manufacturer was stuck having to incentivize these overpriced vehicles.
Still back fired as they’re losing billions on it. And we the people are stuck subsidizing it. Quite the quandary.
The tax credit on a lease is a loophole because it’s a commercial sale between the manufacturer and the captive finance arm (On paper, BMW sells the leased vehicle to BMW financial). They can claim the rebate and choose to pass it on or not pass it on. On a commercial sale, the rules around country if manufacturer/battery/income limits go out the window. I would expect the loophole gets shut down.
As others have said, see if the vehicle is actually worth the MSRP. On some vehicles it’s great, on others not so much.
It’s completely up to the manufacturer on whether to pass all or some of it along on a lease. I believe BMW passes it along on the i4 35e entry level model, but not if the i4 M50 performance model mainly because they have no problem selling those.
I have a hard time considering something a loophole when it’s following the law that specifically states it applies to leases. It’s not like it’s some weird legal argument that’s making it qualify by some weird interpretation or unintended consequences.
But it’s a loophole because it circumvents what the $7500 credit was for in the first place, to spur domestic production of EVs/batteries, provide this credit to vehicles in a certain price range, and be made available to certain income brackets.
I think the lawmakers/proofreaders missed that in regards to leasing… unless the intent was to incentivize leasing without those restrictions, which if it was, then it would specifically state that the lessors had to pass along credit/incentives which they don’t have to.
If the lessor does not pass anything either via credit or subvented MF/RV, then it’s not a “loophole”.
