The EV Incentive Leasing Loophole
Episode 23
In this episode, Elena and John discuss the breaking news about the federal tax incentive for electric vehicles and plug-in hybrids (PHEVs), revealing a major loophole that dealers can take advantage of to get the full $7,500 tax credit. They explore how this loophole can impact the mainstream adoption of EVs and the potential benefits for both dealers and consumers. Not only is this loophole expected to propel the mainstream adoption of EVs, as it significantly reduces the cost of these vehicles for consumers, but it also levels the playing field for foreign manufacturers and those sourcing batteries from different locations, making more EVs eligible for the tax credit.
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Transcript
Elena: Here with John Possumato, Founder CEO of DriveItAway and we are at Auto Intel, but we thought we would do a really quick episode about the breaking news that is happening with the federal tax incentive and how there is a giant loophole that dealers can now take advantage of all of this tax credit.
John: Absolutely. Thank you, Elena, I think this needs to be said there are a lot of kind of information on vehicles that don’t qualify for the full 7500 tax incentive. And that is true for an EV or plug in hybrid sale. Right. What there’s less emphasis on is the major loophole that I say you could literally drive a tractor trailer through or use a tractor trailer and that is the commercial leasing solution 45 W. What it essentially says is any vehicle that’s leased under 14,000 pounds will get the full 7500 tax credit doesn’t matter where the battery is made doesn’t matter where the vehicles made, right. No exclusions whatsoever. Vehicles above 14,000 Get 40,000 tax incentive. It just has to be on a commercial lease program. Now I have a vested interest because we do a subscription program that counts as a commercial lease. But if you take an average Hyundai EV, for instance, dealer sells that 00 incentive no 7500 dealer leases that full 7500. Right. Now, in addition to that, of course, if a vehicle is over two years old, the first sale by a dealership gets another 4000 cash on the hood, that’s cash on the hood, the customer can sign it over to the dealership in 2024. So an example I run by as a bolt up or or take a Ford Escape plugin scars retail for about 33,030 $4,000. Right? A dealer that again, uses a commercial lease buys it as a commercial lease to put it down on the lessor subscription gets the full $7,500 Tax Credit, right on a $33,000 car. Now they’ll run it a couple of years in a lease or subscription, maybe two, three years, get that car down to 20,000 or so. There’s another 4000 on the hood to the consumer. So yeah, while there’s a lot of publicity on Hey, only thing is 12 cars or 13 vehicles now, EV or PHE V get the full 7500 They all get very simple the 7500 as long as the commercial lease, we see a lot of new resurgence now, I think in the independent leasing companies and the dealer base leasing companies, because there’s a lot of cash on the hood.
Elena: I have a question and that is what does this do for mainstream adoption of EVs?
John: Well, I think it’s going to propel it dramatically. Again, when you look at something like a bolt, Evie at 33,000. You personally lease it now hopefully the dealer or the commercial lessor, bring some of that money back in the reduction of the monthly payment or cap cost, right. And then if that same person is driving it wants to buy it two years again, it’s got to be two model years old, right? You’ve got another 4000 on the hood. So that’s 11,500 in Uncle Sam incentives on a $33,000 car. That’s a third of the price. We’re talking, you know, historically large cash on the hood numbers here. It’s very exciting.
Elena: This is great. So more to come on this. We just wanted to do a really quick episode and just get everybody informed and educated on this gigantic loophole.
John: Yeah, exactly. I have to think it’s not publicized because they don’t want to call it a loophole, but it does put everybody in the game now right foreign manufacturers, manufacturers that may be getting the battery source someplace else. It is a loophole large enough to literally drive an EV tractor trailer through.
Elena: Thank you, John, thanks for sharing your knowledge and for your never ending expertise.
John: Always fun to be here call me anytime.
Elena: Oh, I will.