Whoever Created The EV Leasing Loophole Subsidy Is A Clever Genius
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When Democrats in the U.S. House of Representatives, Democrats in the U.S. Senate, and the Joe Biden administrations worked together to extend and even revive electric vehicle subsidies for consumers, several rules were added. However, one loophole broke all of those rules, and it’s leading to a lot more electric cars on the road.
The loophole is the leasing loophole. Initially created for commercial EV fleets, it was applied to automakers’ captive finance partners as well, which basically meant it was available for anyone leasing an electric car. Rules the loophole got around include:
- household income rules limiting access to EV subsidies
- non-China battery content requirements
- vehicle price limit rules.
In other words, with leasing, it’s a free for all! You can get the $7,500 federal tax credit applied to any EV you can lease.
You may be shocked to find out that a lot more EV drivers are now leasing their new EVs rather than buying them. In fact, from Q2 2021 to Q2 2024, the percentage of EVs being leased went from 20.9% to 48.7%!
The policy loophole combines quite well with another factor that may be shifting people toward leasing. Prices for all cars, but especially for EVs, jumped through the roof when the COVID-19 pandemic created bottlenecks in the supply chain. EV owners who decided to sell their cars as the economy got going again were thrilled because all of that led to very little depreciation and high resale values for a period of time. Some EV owners even sold their EVs for more than they bought them. However, all of that halted when supplies caught up to demand and automakers could start selling in high volumes again, and as they worked through long waitlists for new EVs with longer range. Prices of EVs went down, a lot, which led to rapid depreciation on EVs that were “bought high” and later “sold low.” That’s where leasing comes into play. With leasing, consumers don’t have worry about the potentially steep decline in EV values if that happens again (it shouldn’t). In short, some buyers may be more prone to leasing now to avoid the risk of high depreciation. With the leasing loophole, that just pushes more buyers to go that route.
From my perspective, anything that gets more people to switch from gas-powered vehicles to electric ones is a good thing, so this EV subsidy change making EV leasing much more attractive to people was a brilliant idea. I don’t know if the people who snuck it in were expecting all of this, or if it was just a happy side effect, but I assume the former. My guess is there’s a clever genius or two who got this in under everyone’s noses in order to juice the EV transition. And I love it.
The leasing option also offers another benefit. You benefit from the subsidy immediately, rather than having to wait until tax season. That may actually be the #1 benefit for many EV lessees.
At the moment, there’s no sign any of this is going to change.
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