A tax credit for leased electric vehicles is subject to laxer rules than those that apply to purchases of new EVs.
Consumers can get a $7,500 tax credit for buying a new EV. It may be challenging for cars and/or buyers to qualify due to certain requirements.Automakers may pass along the tax credit by lowering monthly payments.But many auto dealers are also passing along a $7,500 tax break to lessees, via a different mechanism called the"qualified commercial clean vehicles" tax credit.
That's because leasing is qualified as a commercial sale under the Inflation Reduction Act, according to Barclays. With a lease, the carmaker technically sells the vehicle to a leasing partner, which is the one transacting with consumers. The $7,500 tax credit enables dealers to charge low monthly payments for leases, thereby helping"stoke demand" for EVs, Barclays wrote. In 2024, dealers have leaned more heavily on such leasing promotions, in the form of subsidized monthly payments, analysts said.
Brian Moody, executive editor of Autotrader, a car shopping site, expects the majority, if not all dealers, to pass along tax break savings to remain competitive.Consumers may consider doing the rough math on leasing versus buying before making an ultimate choice, including tallying potential tax breaks, interest costs, total car payments and resale value, experts said.
Buyers waiting for"next-generation EVs" from certain carmakers around 2026 to 2028 can"maintain flexibility," while also providing a benefit to those"wary of technological obsolescence given the rapid pace of EV/software-defined vehicle development," Barclays wrote.
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