EV Tax Credit Lives On Through Lease Loophole

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The deadline to claim the now-expired $7,500 federal tax credit for electric vehicles passed on Tuesday. However, major automakers like General Motors and Ford have found a loophole that allows EV shoppers to still benefit from the credit on certain leases for a few more months.

Both GM and Ford worked diligently before the credit’s expiration to ensure that some of their EVs already in dealerships or in transit would still be eligible for the tax credit. GM Financial and Ford Credit, the financing arms of the automakers, made down payments on these EV models before the deadline, meeting the requirements for the tax credit.

The IRS confirmed in August that possession of the EV by the deadline was not necessary. Instead, entering into a binding contract and making a payment on the vehicle on or before September 30 sufficed. This paved the way for GM and Ford to make the initial down payment themselves on EV leases, allowing dealers to pass on the tax credit savings to consumers.

Ford has announced that it will offer competitive lease payments on EVs through Ford Credit until December 31, while GM is confident in its inventory to extend the tax credit availability well into the fourth quarter.

How to still get the EV tax credit

Reports suggest that Ford and GM engaged in discussions with the IRS to devise programs that would enable customers to benefit from the tax credit on leases. These announcements come on the heels of both automakers achieving record EV sales in the third quarter.

Despite Ford’s CEO Jim Farley predicting a decline in EV sales following the tax credit elimination, he expressed confidence that the extended access to the tax credit on select leases would help keep Ford’s EVs affordable for consumers in the short term.

It remains unclear how much Ford and GM spent on the down payments and the exact number of vehicles involved in these programs.

Additionally, EV-only automakers like Tesla and Rivian have adjusted their lease prices following the expiration of the tax credit. Tesla, for instance, increased its Model Y lease prices but still reported impressive global vehicle deliveries in the third quarter.