Update Jan.2023:
"And in the saddest news of this update, the 'Leasing Loophole' appears to be closing.
This still 'works' if you're actually interested in Leasing. However the whole point of the post was that you would buy out the lease almost immediately, and so get the benefit of the tax credit despite having insufficient taxable income to qualify.
What basically happened is the high resale values on used card during the pandemic plus the high demand for used EVs generally -plus- the now available $4K credit for used EVs has convinced the leasing agencies (Tesla, NMAC, GMAC - etc) to recind the option to buy out the lease. They make more money on the lease-take-back than they would otherwise. Also, somehow they're convinced that this maintains a higher used car price for their wares. In Tesla's case, this appears to be true. Not so obvious for the others. Bummer though, the little guy gets screwed again." Anyway, make sure you read the fine print before you try this.
Right this moment (and presumably for the remainder of 2022) Nissan, Hyundai/Kia, and most of the smaller EV players still qualify for the existing Federal rebate.
It appears that Nissan Leafs will be fine under the new rules next year given that they have the highest percentage of U.S. manufactured content of anyone excepting a few Teslas (and not generally the cheaper ones.) The 'new' Nissan? That's less clear.
Hyundai/Kia? that's also fine for now but less clear for next year due to manufacturing locations and battery materials. If you're thinking about these, I'd look sooner rather than later.
Hyundai/Kia? that's also fine for now but less clear for next year due to manufacturing locations and battery materials. If you're thinking about these, I'd look sooner rather than later.
Chevy Bolt/EUV may qualify (they don't right now) of more of the content is made 'onshore' (something like 55% was from Korea as of recently) and depending on how the battery manufacturing rules play out.
It seems likely that Tesla can work their manufacturing locations, processes and pricing around to make the rebate available next year sometime. On the Model3 the cheapest one (and therefore most likely to qualify on price) currently uses batteries made by CATL in China, but in theory that could be changed enough to meet the requirements. If the ModelY gets classified as an SUV then it can be made to qualify, if it isn't so classified then no rebate there. It's a debatable point if Tesla even needs this since they have a year long waiting list with no rebate assistance.
It seems likely that Tesla can work their manufacturing locations, processes and pricing around to make the rebate available next year sometime. On the Model3 the cheapest one (and therefore most likely to qualify on price) currently uses batteries made by CATL in China, but in theory that could be changed enough to meet the requirements. If the ModelY gets classified as an SUV then it can be made to qualify, if it isn't so classified then no rebate there. It's a debatable point if Tesla even needs this since they have a year long waiting list with no rebate assistance.
VW has a pretty good chance to qualify and that should be looked into soon.
Polestar would need to set up more NAFTA manufacturing to qualify.
The Audi, Jaguar, BMW, Honda, Mazda, Toyota and Mercedes all have such awful price/performance that they're not getting any attention here now.
More on this later. 'Watch this Space'
More on this later. 'Watch this Space'
Back to our original post:
More and more, electric vehicles are reaching the point where they make viable economic sense on their own merits. Still, with state and federal incentives available it would be kind of stupid to pass those up. Granted the Oregon and California state incentives can be a pain to get but some dealers will help you with that., ...and the federal tax credit remains, at least for now*.
But let's take a look at that federal thing for a minute. To fully make use of that you must have a full $7500 left in federal tax liability after adjustments to AGI, and other adjustments and credits. That (rough calculations) implies a gross income somewhere in the $80K-$120K range or above, depending on filing status and things like mortgage deductions - etc.
...so basically you have to be in the top 20% financially speaking to fully qualify. That kinda sucks. What about that other 80% of the folks out there who just don't make that much or are retired (early or not) or have been practicing a more frugal lifestyle? There may be a way for those folks to 'game the system' and get the advantages of the credit even with almost no federal tax liability. Note that the Oregon credit and the California credit(s) may not have any income tests to qualify.
OK, how do we get a federal tax credit without having any federal tax liability?
Well, there's a nice little wrinkle in the rules that's designed to benefit banks and finance companies. If you lease an EV, the finance company applies for, and gets the $7500. Some of them pass that on to you, like Nissan is a good example, ...and some of them are self-serving assholes and keep most of it for themselves, like for example GMAC/Chevy.
"But wait, I wanted to buy, not lease!?"
Remain calm, we'll get there. Obviously this is not intended as tax or financial advise. In fact lets dispense with dispensing advice and use our recent purchase as a
But let's take a look at that federal thing for a minute. To fully make use of that you must have a full $7500 left in federal tax liability after adjustments to AGI, and other adjustments and credits. That (rough calculations) implies a gross income somewhere in the $80K-$120K range or above, depending on filing status and things like mortgage deductions - etc.
...so basically you have to be in the top 20% financially speaking to fully qualify. That kinda sucks. What about that other 80% of the folks out there who just don't make that much or are retired (early or not) or have been practicing a more frugal lifestyle? There may be a way for those folks to 'game the system' and get the advantages of the credit even with almost no federal tax liability. Note that the Oregon credit and the California credit(s) may not have any income tests to qualify.
OK, how do we get a federal tax credit without having any federal tax liability?
Well, there's a nice little wrinkle in the rules that's designed to benefit banks and finance companies. If you lease an EV, the finance company applies for, and gets the $7500. Some of them pass that on to you, like Nissan is a good example, ...and some of them are self-serving assholes and keep most of it for themselves, like for example GMAC/Chevy.
"But wait, I wanted to buy, not lease!?"
Remain calm, we'll get there. Obviously this is not intended as tax or financial advise. In fact lets dispense with dispensing advice and use our recent purchase as a
Real world example:
We waltz into the out-of-state (WA) dealer with the best deals and plunk down about $3990 and waltz out with a car (Nissan Leaf S + Charging Package) and a couple weeks later they rebate the $500 they collected to handle the WA state title/registration/fees/licensing. So now we're out about $3500 and we still owe $57/month (It's an unusual example case...) for the remaining 24 months of the lease.
Lo and behold, right there on the first lease payment bill, which arrives promptly a couple weeks later, there's a buy-out offer. I can pay off the car in full this month for a little over $15,900.
Let's see. $3500 + $15,900 + fees = $20,400. WHEE, I just bought a $30,000 Nissan Leaf for $20K.
We waltz into the out-of-state (WA) dealer with the best deals and plunk down about $3990 and waltz out with a car (Nissan Leaf S + Charging Package) and a couple weeks later they rebate the $500 they collected to handle the WA state title/registration/fees/licensing. So now we're out about $3500 and we still owe $57/month (It's an unusual example case...) for the remaining 24 months of the lease.
Lo and behold, right there on the first lease payment bill, which arrives promptly a couple weeks later, there's a buy-out offer. I can pay off the car in full this month for a little over $15,900.
Let's see. $3500 + $15,900 + fees = $20,400. WHEE, I just bought a $30,000 Nissan Leaf for $20K.
How is that not like $10,000 off again?
Yes I'd probably owe the first month's payment, so go ahead and add $57 or $66 to that. I don't care. It's still a pretty sweet deal. And there's ~1.5K in monthly payments I'm not making.
Yes I'd probably owe the first month's payment, so go ahead and add $57 or $66 to that. I don't care. It's still a pretty sweet deal. And there's ~1.5K in monthly payments I'm not making.
This kind of thing applies to many electric cars and some plug-in hybrids, the ones that have enough electric range to qualify. Your mileage may vary (YMMV!) and some research required.
"If this is such a great deal, why aren't you taking advantage of it?" (ie: actually paying off the car first thing)
Well, a couple things:
A: Maybe I don't have $20K sitting around right now. or
B: There's still the small matter of the ~$500/mo. that these things are depreciating (see below, and if I was going to buy outright I'd probably get an off-lease 2015 Leaf for $10K) or
C: I fully expect the buy-out offer to march downward month-by-month in concert with my payments so I might decide to buy-out later with little real financial difference. This way gives me maximum flexibility.
Well, plus there's battery degradation. See later posts.
*Nothing lasts forever and both Nissan and Tesla will probably reach the 200,000 units sold which triggers the federal credit phase-out somewhere in late 2018.
[Edit in 2018]: Looks like Tesla and GM hit the limit. Nissan won't have that problem until mid-2022. Toyota - 2022? 23?.
"If this is such a great deal, why aren't you taking advantage of it?" (ie: actually paying off the car first thing)
Well, a couple things:
A: Maybe I don't have $20K sitting around right now. or
B: There's still the small matter of the ~$500/mo. that these things are depreciating (see below, and if I was going to buy outright I'd probably get an off-lease 2015 Leaf for $10K) or
C: I fully expect the buy-out offer to march downward month-by-month in concert with my payments so I might decide to buy-out later with little real financial difference. This way gives me maximum flexibility.
Well, plus there's battery degradation. See later posts.
*Nothing lasts forever and both Nissan and Tesla will probably reach the 200,000 units sold which triggers the federal credit phase-out somewhere in late 2018.
[Edit in 2018]: Looks like Tesla and GM hit the limit. Nissan won't have that problem until mid-2022. Toyota - 2022? 23?.
[Edit 2022] same still applies: A new Leaf S is $27-28K if you shop carefully. Leases (2yr) are $1K-$5K up front with buyouts in the $19K-$15K range depending on state rebates and stocking levels. You still end up between $18-20K if you're doing it right. The bigger battery models are about $8K more. ....we bought one after selling the old one for more than we paid for it, total!
Later edit: With shortages and a war on dealers are pricing things up like crazy. YMMV.
Wow that's incredible. I live in Michigan and there are no state incentives. Still based on this post, it seems I could take advantage of the federal tax credit even though I don't make enough to be able to take advantage of it through buying. How come Chevy doesn't do this?
ReplyDeleteSo I got a comment from someone at the Nissan dealership about this and it was almost unintelligible.
ReplyDeleteShe wrote to me that, "You can pre pay his lease and that is all.
You would get a tax credit if you buy the car. Nissans gives you the tax credit as down payment if you were to lease the car.
Does this make sense? "
Lindsay
Nissan Customer Care Specialist
I have no comprehension of this statement from a Nissan dealership employee.