The EV Tax Credit Is Dead... or Is It? Here’s a New Loophole
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The last day to buy an electric vehicle and claim a now-expired $7,500 federal tax credit was Tuesday. However, several major automakers have announced that EV shoppers will be able to claim the credit on certain leases for a few more months through a new loophole.
General Motors and Ford worked behind the scenes in the weeks leading up to the credit's expiration to cement tax credit eligibility for some of their EVs that were already on dealer lots or in transit.
GM Financial and Ford Credit — the automakers' financing arms — made down payments on dealerships' EV models before the credit expired, according to company officials. Those down payments were enough to satisfy the tax credit requirements.
In August, the IRS confirmed that it was not necessary for shoppers to take possession of their EVs before the Sept. 30 deadline. "You can demonstrate acquisition by entering into a binding written contract and making a payment on the vehicle on or before Sept. 30," the agency's guidance read.
Ford and GM realized they could satisfy IRS rules for the tax credit on EV leases by making that initial down payment themselves. In the case of EV leases, the tax credit goes to the dealer rather than the buyer. Through their new workaround, dealers can continue passing tax credit savings along to the consumer.
"Ford is working to provide Ford electric vehicle shoppers with competitive lease payments on retail leases through Ford Credit until December 31," a Ford spokesperson told multiple outlets.
How to still get the EV tax credit
Ford expects to be able to offer this discount with EV leasing through the end of the year, according to multiple reports, while GM is confident it has enough inventory to last deep into the fourth quarter.
"We worked with our GM dealers on an extended offer for customers to benefit from the tax credit for leases," GM said in a statement to Reuters. Citing unnamed sources, the wire service reported that "Ford and GM devised their programs after discussions with officials at the Internal Revenue Service."
The lease deal announcements come as the automakers reported record EV sales in the third quarter, with Ford reporting 30,612 U.S. EV sales and GM announcing 66,501 deliveries. Sales ticked up as shoppers pounced on what they thought was their last chance to get the credit.
On Tuesday, Ford CEO Jim Farley said he expects EV sales to soon plummet with the elimination of the tax credit. As a share of all vehicle sales, EV market share could drop from about 10-12% last month down to roughly 5% when incentives are gone, he said during a company event in Detroit Tuesday.
However, he told reporters that the move to extend access to the tax credit on select leases should help keep Ford's EVs affordable in the near term.
"There's a period of time when we'll have to transition consumers out of the government's support," he said, according to the Detroit Free Press. "But as far as how long we do that, and how deep we do it, you know, we'll see."
As of press time, it was unknown how much the companies spent on these down payments — or how many vehicles are involved.
This week, EV-only automakers, including Tesla and Rivian, also edited their lease prices as the credit expired. Tesla Model Y lease prices went up by between $50 and $70 per month (depending on the trim). With a $3,000 down payment and a $6,500 Tesla lease credit, the cost is now $529 per month for 36 months for the rear-wheel drive version and $599 per month for all-wheel drive. That range is up from $479 to $529 per month. Tesla also set a sales record in the third quarter, reporting 497,099 global vehicle deliveries.
