I have friends looking into leasing a Volvo XC90 PHEV. Given the likelihood that the $7500 EV credit is going away, I’m interested in your thoughts on how that may impact incentives. Do you think dealers will start dumping their EV inventories before the credit expires? Wondering if it would be best to wait a few months.
This is a great question. They are also exposed quite heavily to the new 25% tariffs. So units on the lot pre-tariff may get heightened demand from those that want a Volvo and circumvent the tariff.
The $7,500 federal EV tax credit for leases, known as the Commercial Clean Vehicle Credit (Internal Revenue Code 45W), is set to be repealed after December 31, 2025, under the proposed “One Big Beautiful Bill” passed by the House on May 22, 2025. If the Senate approves this bill without modifications and it is signed into law, the credit will no longer be available for leases starting January 1, 2026. This means dealers will not be able to claim the $7,500 credit for leased electric vehicles (EVs) or plug-in hybrids (PHEVs) and potentially pass savings to consumers, as they can under current law.
Dealers do not claim the $7,500 credit in any way. In a lease, it is the financial institution (i.e. Volvo Financial) claiming the EV/PHEV credit and generally passing part or all of it on to the customer in the form of lease cash.
With that said, manufacturers will likely have to continue to heavily incentivize EV’s/PHEV’s in one way or another, regardless of credits coming from the federal government or not.
Agree manufacturers will have to eat this and continue to incentivize to move EVs. If they are hard to move now, it’ll be impossible next year otherwise.
You never know. Everything is chess at this stage. Obviously Elon/Trump divorce is a mess and rebates are near the center. We don’t need to discuss their divorce and who you like or don’t like, and any “I told you so.” Fact of the matter is we just don’t know until we see the final language of that bill.
If we see the credit go away, you should absolutely expect manufacturers to push the movement of PHEV and EV. There is probably a version of a Tesla friendly bill provision as well. Such as a rebate that makes it very hard for anyone besides Tesla to qualify for. Again, no one cares if you like/dislike Tesla or Trump. Just stating facts.
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If Sections 30/45W of IRA are eliminated by passing the Budget bill, those incentives will drop to $0 as soon as the manufacturers are no longer eligible for them. They may eventually adjust MSRP as most EVs have over the past couple years.
Smart dealers will take advantage of FOMO as they did with Tariffs, close their fence-sitting customers and sell what they have. I wouldn’t anticipate a fire sale unless an OEM throws some cash on the fire. Many would just grind their month until they realized after the change. Someone noticed that there is a Hyundai dealer still selling new Ioniq 5s, so expect the range of reactions-inactions.
History has shown these things can change in a blink. Whatever reconciliation horse-trading is needed to pass the budget could still change the timing or the phaseout without notice much before it’s signed - if one were serious I wouldn’t risk or try to time the best deal, I’d get serious and do something sooner than later.
Get your hands on the latest Car Wars report if you can. Also an interesting analysist piece yesterday about first half auto sales.
Many Section-45’d vehicles have lease cash well in excess of the $7,500 that the bank claims from the govt on the back end.
It’s all supply and demand.