All about EV

How did leasing become a better deal?

You say you want a revolution? Well, you know, we all want to change the world. And no matter all the outrageous “news” you might see on the cable shout shows, Homo sapiens seem to be doing it.

Even the EPA’s own website shows U.S. emissions of carbon dioxide, methane, nitrous oxide and other harmful gases have been dropping in the United States since the early 2000s. Folks are recycling plastic bottles more. Folks are eating more locally produced veggies. Some of us think humankind is getting better at this.

We’re driving more electric vehicles these days. And when our power stations begin using more sun-, waterand wind-generated electricity, things will be even brighter. (Not as much smog.)

One day, EVs will be the dominant type of car/ truck on the street/ road. Bank on it. All drivers will be thinking more about distance ranges than miles per gallon. Every day, more and more families are buying their first EVs, and celebrating.

Buying an EV is a big deal. But it appears that leasing one is even bigger.

Last year’s improperly named Inflation Reduction Act provides tax credits up to $7,500 towards the purchase or lease of an electric vehicle. As with most tax law, stipulations apply. The applicability of the credit depends on how much of the vehicle and/or batteries are manufactured in North America. This immediately reduces options.

Additionally, income thresholds apply to the buyer. The Associated Press reports, “To qualify for the tax credit, a car cannot cost more than $55,000. SUVs, pickups and vans can’t exceed $80,000. And a buyer’s gross income must be no more than $150,000 if single, $300,000 if filing jointly and $225,000 as head of a household.”

Despite the massive increase in EV deployment, the fine print has left some EVs on dealer lots because consumers aren’t certain they qualify.

However, if leasing cars is your thing, throw all of those requirements out the window on your way off the dealer lot.

When a vehicle is leased it falls into the category of “commercial” vehicle. A lease is a business transaction between two parties with the lessor retaining ownership, but allowing for possession and certain use before returned.

Because it’s a business transaction, no personal income threshold applies and, for whatever reason, the requirements related to the vehicle’s origin don’t apply. Therefore, anyone at any income level can enjoy the full $7,500 tax credit if they lease the vehicle, but not necessarily if they buy the vehicle.

Because of these requirements, only 10 of the 49 EV models available in the United States receive the full credit if purchased. All 49 receive the full credit if leased.

Predictably, this has led to a sharp increase in leases. Elizabeth Krear, vice president of the EV practice at J.D. Power, says, “… lease affordability has surpassed purchase affordability.”

After $4,000 due at signing, Hyundai is offering a lease of $499 per month on a three-year deal for an Ioniq 5 SE electric vehicle. By contrast, the same EV would cost $865 per month if financed for five years at a 7% interest rate.

As such, leases now account for 41% of all U.S. EV deliveries, according to the AP. This is four times what it was as recently as December.

Some call this an unfair loophole, and one of the architects of the act, Sen. Joe Manchin (D-W.Va.), believes they “ignore the purpose of the law,” which was to kick-start EV manufacturing in the United States. It’s hard to argue with him.

But on the positive side of leasing, the sale of EVs, like other alternatively fueled vehicles, has been hampered through the years by uncertain tradein or resale values of a vehicle that not everyone wants. Leasing removes that issue from the table and allows further market penetration.

On the negative side in American support for renewable energy, the reality is most rare-Earth minerals come from China and Russia. Volatility of commodities markets, potential supply-chain issues and their impact on the balance of geopolitics all come into play. It almost sounds like we’re talking about the oil industry.

Clearly, part of the push for EVs is to reduce greenhouse gases. That’s a good thing, but other considerations should not be ignored.