The Leasing Loophole for EVs

Source: The American Prospect


More than one million electric vehicles were sold in the United States this year, and as technology and driving range improve and more charging stations are built, that number could continue to rise. The acceleration of EV take-up has been bolstered by the $7,500 federal rebate approved in the Inflation Reduction Act (IRA), bringing the price paid for EVs closer to parity with internal combustion engine vehicles.

Starting in 2024, that federal rebate, rather than being applied to the following year’s tax return, will be offered directly at the point of sale. So if the EV costs $50,000, customers will pay $42,500 immediately, rather than having to take a tax credit later.

There is one problem with this, however: New IRA rules to incentivize domestic sourcing for vehicle assembly and parts, including batteries and essential minerals, disqualify models that have components made in China or other foreign countries. For 2024, these rules tighten further, disqualifying the Tesla Model 3 (whose battery is Chinese-made), the Ford Mustang Mach-E (a made-in-Mexico vehicle that was previously eligible for half the credit), and others. Many automakers are unsure about whether their models will still qualify for the rebate, including GM and Volkswagen, whose ID.4 is made in Chattanooga, Tennessee (full disclosure: it’s the vehicle I purchased last year).

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