Key Tips for Leasing an EV in 2024

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Key Tips for Leasing an EV in 2024

Electric vehicles (EVs) are gaining momentum. Cox Automotive’s data shows a significant increase in EV adoption, predicting a jump from 7.6% in 2023, a year with a record 1.2 million domestic sales, to an expected 10% by the end of 2024 in the U.S. car market. This growth, up from 9% in 2022, highlights the rising importance of EVs.

As EVs become more popular, manufacturers are expanding their offerings to meet this demand. This is the perfect time to try out an electric vehicle for your next car. However, be aware that the $7,500 consumer tax credit for purchasing an electric car now comes with stricter conditions. But, if you’re thinking of leasing, there’s good news: you can still get this credit when leasing an EV that’s assembled outside North America. Let’s dive into how you can take advantage of the EV tax credit when leasing your new electric vehicle.

Maximizing Benefits with Clean Vehicle Credits in EV Leasing

The Inflation Reduction Act has significantly altered the landscape of electric vehicle tax credits. This crucial piece of legislation introduces three types of Clean Vehicle Credits (CVC) designed specifically for new, used, and clean commercial vehicles. A key update in this act is the classification of leased EVs as commercial vehicles. This change opens the door for lessees to qualify for the full $7,500 Commercial Clean Vehicle Tax Credit. Unlike the Clean Vehicle Credit for individuals, this doesn’t come with strict requirements.

This shift in policy greatly expands the options for EV consumers. If you’re considering leasing an electric vehicle, you’re now looking at potential savings. These could come in the form of lower lease payments or rebates, thanks to the accessible tax credits. This development makes leasing an EV an even more attractive proposition for drivers looking to switch to electric.

Starting 2024, Americans eyeing an electric vehicle purchase can qualify for the Section 30D New Clean Vehicle Credit by meeting these criteria:

  • Income Limits: Buyers must have a modified adjusted gross income (AGI) under $300,000 for married couples filing jointly, $225,000 for heads of households, and $150,000 for other filers.
  • Price Caps: The electric vehicle’s manufacturer suggested retail price (MSRP) must be below $80,000 for vans, SUVs, and pickup trucks, and $55,000 for other vehicles.
  • Size and Battery Requirements: The vehicle should have a gross vehicle weight rating (GVWR) under 14,000 pounds and a battery capacity of at least 7 kWh.
  • Domestic Use: The vehicle must be primarily used in the United States.
  • North American Assembly: Final assembly of the vehicle must occur in North America.
  • Battery Component Origin: For the first $3,750 of the tax credit, a portion of the battery components must be manufactured or assembled in North America.
  • Critical Mineral Source: For the second $3,750 of the tax credit, a portion of the critical minerals must be sourced from the United States or a US free-trade agreement partner.
  • Avoiding FEOC Components: The vehicle’s battery should not include components made or assembled by a Foreign Entity of Concern (FEOC).
  • 2025 Update: From 2025, critical minerals in the battery must not be extracted, processed, or recycled by a FEOC.

The Commercial Clean Vehicle Credit offers a more relaxed approach compared to other tax credits. To qualify for this credit, vehicles need to meet certain criteria:

  • The vehicle must be manufactured by a qualified maker.
  • It should not have been claimed under another federal tax credit before.
  • The vehicle must be primarily used within the United States.
  • For light-duty vehicles under 14,000 GVWR, plug-in EVs need a minimum battery capacity of 7 kWh.

Leasing an electric vehicle (EV) opens up the possibility of benefiting from the Clean Vehicle Credit, without the stringent income or specific battery requirements that come with purchasing a new car. This makes leasing an accessible option for those who might find buying a new car challenging.

Tax Credit Advantages of Leasing an Electric Vehicle

Leasing an electric vehicle (EV) can be a smart financial move, especially when it comes to tax credits. Unlike buying an EV, where strict rules apply for the New Clean Vehicle Credit, leasing provides a more flexible approach. When you lease, the car’s MSRP, where it’s made, or your income don’t affect your ability to benefit from tax credits. The leasing company, which is considered a business, can claim the full $7,500 tax credit. They often pass these savings to you, meaning lower lease payments.

Here’s the simple part: EVs leased for company use are deemed “commercial vehicles.” This category faces fewer restrictions, allowing more models to qualify for commercial credits compared to consumer ones. This means leasing companies can use these advantages to reduce your monthly payments.

Another plus for leasing is that your income won’t limit your eligibility for the tax break. This differs from buying, where your income must meet certain criteria to get the tax credit. If you’re considering getting an EV, leasing not only presents financial benefits but also offers a way to enjoy tax advantages without the usual income restrictions.

Benefits of Leasing an Electric Vehicle

Leasing an electric vehicle (EV) is becoming a popular choice, as seen in the J.D. Power report of April 2023, which noted a 41% increase in EV leases. This trend, marking a quadruple rise since December 2022, is likely to keep growing. The increase in EV production and a wider range of options for consumers are driving this surge.

Choosing to lease an EV comes with several benefits. One of the main advantages is staying current with the fast-paced advancements in automotive technology. Leasing an EV means you can regularly upgrade to the latest models, which often come with improved battery life, faster charging capabilities, and overall cost savings thanks to technological advancements.

Moreover, leasing an EV can be a wise financial decision in terms of maintenance. Generally, newer vehicles, whether electric or gasoline-powered, tend to be more reliable in their first years. When you lease, you typically keep the car within its warranty period, thus avoiding unexpected repair costs. This aspect of leasing offers peace of mind and can contribute to a more stable budget for vehicle-related expenses.

Leasing an electric vehicle (EV) addresses a crucial concern many drivers have: depreciation. It’s tough to predict the future value of an EV due to fluctuating prices and rebates. Generally, EVs depreciate faster than traditional vehicles. Before the Used Clean Vehicle Credit was introduced, only the initial owner of an EV could benefit from a tax credit, impacting the vehicle’s resale value.

By choosing to lease, you shield yourself from this depreciation. You don’t have to worry about the car’s market value dropping over time, which adds a layer of financial security and peace of mind. This aspect makes leasing an attractive option for those who want to enjoy the benefits of an EV without the risks associated with owning one.

Beyond depreciation, leasing an EV means continuous access to the latest models. This flexibility allows you to upgrade regularly, ensuring you always have a vehicle with the latest features and technology. Newer EV models often have better energy efficiency, leading to reduced environmental impact and savings on fuel costs. By leasing, you’re not just keeping up with the latest in automotive technology; you’re also contributing to the adoption of cleaner, greener transportation solutions.

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