For those who don't qualify for the Fed rebate, better to lease?

[eye.surgeon]

I don't qualify for for $7,500 federal rebate based on income. My understanding is Tesla includes the rebate basically as a cap cost reduction in their lease rate. Is this the case, and if so would I be better off leasing? I understand the money factor is terrible in the lease, but $7,500 cap cost reduction would go a long way to cover that.

 

[ATPMSD]

My understanding is Tesla includes the rebate basically as a cap cost reduction in their lease rate.

Sorry but no, this is incorrect.

 

[coupedncal]

If the $7500 is not a cap cost reduction then where does it go? Tesla is not going to just pocket that money, correct?

 

[Lance From Jax]

If the $7500 is not a cap cost reduction then where does it go? Tesla is not going to just pocket that money, correct?

The "tax credit up to $7500" is just that. A credit. It is not Tesla's money to play with.

 

[tangible1]

I don't qualify for for $7,500 federal rebate based on income. My understanding is Tesla includes the rebate basically as a cap cost reduction in their lease rate. Is this the case, and if so would I be better off leasing? I understand the money factor is terrible in the lease, but $7,500 cap cost reduction would go a long way to cover that.

Even if available via a 3rd party lease, you may not be able to take advantage of the rebate.
But you should check just the same.

 

[coupedncal]

The "tax credit up to $7500" is just that. A credit. It is not Tesla's money to play with.

With much due respect, this does not make any sense. The finance company is always able to get that $7500 from the federal govt. Under what scenario will they pass this amount to the lessee?

 

[cbdream99]

Unfortunately Tesla didn't say ....

Everything You Need to Know About Leasing an EV or PHEV With a Tax Credit - Consumer Reports

Our experts show you how to qualify for a federal tax credit of up to $7,500 by leasing an electric vehicle or plug-in hybrid.

www.consumerreports.org

 

[jcanoe]

Tesla slashes lease pricing on Model 3/Y​

Tesla slashes lease pricing on Model 3/Y, expects to lose half tax credit on 3

How to bypass nearly every restriction of the EV tax credit by leasing​

How to bypass nearly every restriction of the EV tax credit by leasing

 

[ATPMSD]

Even if available via a 3rd party lease, you may not be able to take advantage of the rebate.

It is not a rebate, it is a Federal Tax Credit and there is simply no way to get the Federal Tax Credit if you do not purchase the car.

To qualify, you must:

• Buy it for your own use, not for resalE

Credits for new clean vehicles purchased in 2023 or after | Internal Revenue Service

You may qualify for a clean vehicle tax credit up to $7,500 if you buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle.

www.irs.gov

The finance company is always able to get that $7500 from the federal govt.

Again, incorrect.

 

[jjrandorin]

If the $7500 is not a cap cost reduction then where does it go? Tesla is not going to just pocket that money, correct?

They (Tesla) can choose to pass none, some, or all of it on.

They dont HAVE to do anything other than pocket the money. its up to them if they do anything else and one would need to check the residuals to calculate what is happening.

 

[jjrandorin]

It is not a rebate, it is a Federal Tax Credit and there is simply no way to get the Federal Tax Credit if you do not purchase the car.

To qualify, you must:

• Buy it for your own use, not for resalE

Credits for new clean vehicles purchased in 2023 or after | Internal Revenue Service

You may qualify for a clean vehicle tax credit up to $7,500 if you buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle.

www.irs.gov

Again, incorrect.

Tesla gets the credit, since they are the owners of the vehicle. Thats how leasing works. Whether they pass it on or not is another question, but they get it. The articles you will find about leasing and tax credits are normally from the aspect of "hey can I get the tax credit if I lease?" and the answer is "no you dont get it, the owner (the company leasing it to you) does.

They can choose to apply it to the residual value or not (make the car cheaper) but they dont have to.

 

[Lance From Jax]

With much due respect, this does not make any sense. The finance company is always able to get that $7500 from the federal govt. Under what scenario will they pass this amount to the lessee?

I had a misunderstanding of what this was before I bought. Take a little time to read up and see how it may effect you. Unless you have no tax liability, I cant see how you will get zero credit if you buy new.

 

[ATPMSD]

Tesla gets the credit, since they are the owners of the vehicle. Thats how leasing works. Whether they pass it on or not is another question, but they get it.

Disagree. The requirement is

• Buy it for your own use, not for resale

Also, they do not meet any of the income rules. Having said that, I think they can buy it as a commercial entity.

Commercial Clean Vehicle Credit | Internal Revenue Service

Businesses and tax-exempt organizations that buy electric vehicles and mobile machinery may qualify for clean vehicle tax credits up to $40,000.

www.irs.gov

But it must:

• Be for use in your business, not for resale

I don’t think leasing out a car is using it in your business. But this is where I will bow out as I am not a Tax Accountant.

 

[Mike728]

This is what they're claiming:

 

[jjrandorin]

Disagree. The requirement is

• Buy it for your own use, not for resale

Also, they do not meet any of the income rules. Having said that, I think they can buy it as a commercial entity.

Commercial Clean Vehicle Credit | Internal Revenue Service

Businesses and tax-exempt organizations that buy electric vehicles and mobile machinery may qualify for clean vehicle tax credits up to $40,000.

www.irs.gov

But it must:

• Be for use in your business, not for resale

I don’t think leasing out a car is using it in your business. But this is where I will bow out as I am not a Tax Accountant.

I am not either, but have 20 years of experience leasing BMWs and about 15 of those years helping other people get good lease deals on BMWs, specifically focused on leasing them. Whenever there were tax credits for X or Y, BMW would choose to pass them on (or not) in the form of front end or back end credits.

Even right now, other manufacturers who make EVs that meet the tax credit criteria are offering very attractive lease deals, in part because they get that tax credit and can apply it toward the car (or not, as they choose to).

Whatever we are reading about tax credits or not does not apply to the finance companies that do this.

 

[ATPMSD]

This is what they're claiming:
View attachment 991013

Well that is very intersting!

So if this is a 2023 delivery, then Tesla is opting to offer a discount, but this is NOT the Federal Tax Credit. Note that in 2024 the rules of the game change where the credit can be taken at the time of delivery. My GUESS is that Tesla decided to offer this incentive knowing that without it people would just defer delivery until 2024, which would negatively impact their year-end delivery quotas.

So if you can grab this, good for you!

 

[cbdream99]

Disagree. The requirement is

• Buy it for your own use, not for resale

Also, they do not meet any of the income rules. Having said that, I think they can buy it as a commercial entity.

Commercial Clean Vehicle Credit | Internal Revenue Service

Businesses and tax-exempt organizations that buy electric vehicles and mobile machinery may qualify for clean vehicle tax credits up to $40,000.

www.irs.gov

But it must:

• Be for use in your business, not for resale

I don’t think leasing out a car is using it in your business. But this is where I will bow out as I am not a Tax Accountant.

The credit is going to the manufacturer (business) not the customer, whether the customer will get anything is up to the company. For example,

Current Mazda Incentives & Special Offers | Mazda USA

Find great deals and special offers in your local area, like Cash Back, Low APR financing, and Lease Deals on select Mazda cars, SUVs, and Crossovers.

www.mazdausa.com

$7,500 LEASE CUSTOMER CASH ON 2024 Mazda CX-90 PHEV - whether it is the result of the federal credit or the company just want to sweeten the deal is a different question.

Also, some states like Texas required to pay tax on the full price of the leased vehicle, so one has to do the math and check how long you are going to keep the vehicle vs when Elon is going to lower the price of the car..

 

[coupedncal]

I just ran the numbers on Tesla site for an M3 SR lease.
MSRP of $40K.
Payments are $366 for 36 months.
$4500 down.
Plus license and registration
$1111 tax upfront

It is very difficult to understand if they are rolling in the $7500 tax credit into the lease price. They claim they are but since you don't know what the residual is, it is anyone's guess how the numbers are working out. And you also don't know what money factor they are using for this lease calculation.

Without knowing all the facts, it seems Tesla leases are not a good deal for the consumer. Aren't they leaving a lot of money on the table by not going after the lease crowd? They could be moving a lot more cars by (1) applying full cap cost reduction at the time of lease signing, (2) Allowing the cars to be purchased at the end of the lease at residual value. Some of us who do not qualify for $7500 tax credit via a purchase will jump at the lease option if they make these changes.

 

[tangible1]

It is not a rebate, it is a Federal Tax Credit and there is simply no way to get the Federal Tax Credit if you do not purchase the car.

To qualify, you must:

• Buy it for your own use, not for resalE

Credits for new clean vehicles purchased in 2023 or after | Internal Revenue Service

You may qualify for a clean vehicle tax credit up to $7,500 if you buy a new, qualified plug-in electric vehicle or fuel cell electric vehicle.

www.irs.gov

Again, incorrect.

Well, yes and no. see Instructions for Form 8936 (01/2023) | Internal Revenue Service
The Tax Credit is subject to recompense if you do not qualify, but it becomes more .... obscure .... if the vehicle is LEASED.
The Tax Credit IS CLEARLY AVAILABLE to the Owner/Lessor (see instructions above), and whether said entity chooses to pass it as discount to the Lessee is at their discretion.

Further clarification may be needed since in 2024 it becomes a Point of Sale Credit.
ie, you may get a full Credit upon purchase, but then Form 8936 wants it back if you don't fully qualify.
And, again, a Lease may pass some or all of it along to the Lessee.

So again, I would seek guidance from a Leasing company that does Tesla, and your Tax expert of choice.

 

[jjrandorin]

Without knowing all the facts, it seems Tesla leases are not a good deal for the consumer. Aren't they leaving a lot of money on the table by not going after the lease crowd?

They never have been (a good deal for the customer) and Teslas business model is not like BMWs where BMW essentially prices cars to sell them twice (once on lease, and then as a lease return vehicle).

TL ; DR = they lowered pricing recently but they dont really care about leasing, and the cars have never really been good lease targets for the savvy leasee who knows how leases work, unless one is actually writing it off as a business expense, or, just simply is using it to "get into" the car like a lot of people do with luxury vehicle leases.

They can also work if one is not sure they want to live the EV lifestyle, or if someone is really concerned that technology is going to scale so rapidly that they are going to be "stuck with the old stuff", and they care about that. Unlike a lot of over cars though, they definitely are not for the "leasehakr" crowd or make a ton of sense financially.