Hi all,
Anyone have good advice on how to claim the $7,500 EV credits available only to lessees (i.e., for cars that are no longer eligible via purchase due to IRA, such as Hyundai Ioniq 5), while still avoiding or undercutting the high money factor being offered by some of these captive finance arms?
Admittedly, the last time I leased an EV was in 2020 and a very different market, so I’m spoiled, but it feels like Hyundai’s HMF offering a money factor equivalent to 8+% for someone with excellent credit is hard to swallow, and goes a long way toward clawing back the rebate. (At least compared with Credit Union purchase APRs and captive “promotional” purchase APRs…)
Sure, I could just choose a Ford, Chevy or VW EV and get a purchase-based tax credit alongside my own financing, but I prefer Hyundai’s design and tech. And by next month, Ford/Chevy/VW may be in the same lease-only boat for credit eligibility due to forthcoming battery regulations…
I don’t think the rate environment is going to get better any time soon. So what’s the answer? One-pay? Lease followed by immediate buy-out? Do you predict any 3rd-party lease company like Ally, US Bank, some credit union, or a start-up will start passing through these tax credits just like the captive guys, in order to get market share on lease deals, or is leasing a stupid business to be in?
Maybe the answer is that I should just pay what it costs or go on my way, but if I felt that way about it I wouldn’t spend my time on Leasehackr…
: )
“The Treasury Department is working out ways to ease the pain and recently agreed to give EV imports a $7,500 tax credit — but just on leases. Hyundai and Kia plan to increase leases from 5% of sales to 30% as a result. There are more Treasury clarifications and rulings on the act’s byzantine requirements yet to come. And the Biden administration is considering “limited” free-trade agreements to address the issue, Treasury Secretary Janet L. Yellen said last week.”
This lease contract language is super helpful, thank you - but also jargon-y enough that I feel I may be missing something…
So are we really saying that I can sign the lease and on day 1 just go ahead and buy it right back out, and I’ll effectively pay only MSRP + tag/title/doc (no tax in NJ), MINUS the rebate, but no depreciation cost nor rent/interest? (Or maybe just a day or a month’s worth?)
Effectively it’s like the purchase rebate but without waiting for tax season and without being required to hold the car; I could just immediately buy and resell it?
(I wouldn’t; I would hold it for 1 to 2 years, but still…)
Huh? Where did you get that from what I said. The buyout value is Residual+(Depreciation x months remaining).
So for a $50k MSRP car with the $7500 applied as a cap cost reduction and residual at 49% will have a buy out around $42,000. You can see the calculator here
Depreciation and rent charge are 2 different things.
Yes you could buy and resell it once the buyout is done. Nothing shocking about this. People on here have been doing this for years.
Thanks for clarifying - yeah, I don’t know what I was thinking. Of course, residual + depreciation = the bulk of what I’d owe them. I think I get it now.
Thank you. So I visited the Hyundai dealership yesterday and dealer gave the following.
I wonder why the cap cost reduction is not the difference of $43700-$11500.
Dealer is suggesting to lease and then buy out in a month by paying the buyout price which will be residual value + remaining depreciation and no rental cost + 300 + Regn + title fees + no transfer tax in my state. Does this look right? Wonder if Hyundai finance allows this. Dealer seemed certain
Yea Hyundai financial would allow you to buyout within a few weeks after the deal is funded. This isn’t anything new. Happy to say the dealer is correct for once.
Hi - FWIW, I’ve since changed my view on whether this lease buy out deal on Ioniq 5 is too good to be true… unless you want to keep the lease for about a year and then sell the car; that may be the optimal deal in my view.
My thinking after slicing and dicing the math Is that refinancing to a credit union loan helps but doesn’t help all that much in the 1 year range compared to how much of a hassle it may be; you have to keep it longer than a year for the refinance to make sense, what with fees and such. And keeping the car for 2-3 years or more makes the refinance better than holding the lease but then the effective monthly cost for you over the life of your possession of the car starts to be controlled by depreciation value-loss at re-sale. The longer you hold it, the more that rebate you’re about to pocket becomes dwarfed by the ongoing depreciation of the car’s market value when you finally do get rid of it. And for a Hyundai, it feels like a LOT of depreciation…
(What with more low-cost EVs hitting the market from Chevy, etc., in the coming 2 years and Tesla engaged in a price war as their unit cost goes down due to the giga factories, I fear MSRPs will go down in the future on Hyundai EVs and drive down re-sale. As it is, the value drop off is already steep for last year’s models selling now.)
Again, I’m certainly no expert, but my point here is that If I lease an Ioniq 5 (and I still may do so), I’m either going to plan to ditch it in 12-18 months while monitoring trade-in value, or I’m going to get comfortable with the idea that I may really end up paying the monthly contractual cost of the lease without being able to count on positive residual value at re-sale, should I hold it longer.
Two other notes on your deal: Not sure of your state but that rebate looks great; however, I assume you’ve already tried to push back on the high VIN etching fee? Second, from MSRP it seems like you’ve got a “standard range” SE Ioniq 5 with a ton of accessories. If you do plan to hold the car a while, you may consider the bigger battery and fewer accessories if you can find it. As an EV owner with a 170 mile range (2020 Ioniq) I can tell you that even doing client visits 90 miles away in a normal business day is a pain in the ass; every little extra bit of range you can afford is money well spent. Ioniq 5’s charging speed may help but only if you find the right charger.
Good luck to you - if you do the deal I’m sure you’ll love the car! Enjoy!
This has been my mentality on EVs since forever. I generally refuse to buy one. Of course over the past few years there were a few examples where it could have made sense because of the crazy market, but generally speaking I feel it is better to not have the depreciation risk as these things age out and become, if not obsolete, old tech pretty quickly. It seems better to take the ones that manufacturers really really want to move and not to fight the market to make a deal palatable.
Thanks for a very detailed response. Some excellent tips for me for the future. For now, I am at the showroom and this is what the dealer is offering for a Kona Limited EV.
Do you see anything shady?
My plan is to pay it off with full cash in a month and not finance. Then maybe use it for a year and if possible just sell it off. I know the vehicle would have depreciated. But hopefully our rebates can cover some of it. This is a 43K vehicle. I am hoping even if I sell it for 33k, I wouldn’t have lost anything.
