Expert Says New Law Takes Effect Soon. Here’s What It Means About Buying EVs and Hybrids From Mercedes, Tesla, Chevy, and More
'Your monthly payment is going to go up...'
The $7,500 EV tax credit is going away. So what does that mean for buying or leasing electric vehicles?
That’s the question posed to TikTok user and finance educator Ravi Wadan (@raviwadan) in a video posted to his account recently.
"After Sept. 30, you're no longer going to get the $7,500 EV tax credit on electric vehicles or plug-in hybrid videos,” Wadan says. “So what does that mean? That means that these crazy lease deals that we've been seeing … these 1% and under lease deals on Mercedes EQEs, EQSs; Honda Prologues; Chevy Blazers; the Hummer lease deals; the Tesla lease deals—these are probably going to go away.”
What Is the EV Tax Credit?
Also called the Clean Vehicle Credit, it's a government incentive for American consumers to buy EVs and plug-in hybrids. It applies to new and used cars, depending on whether they meet government requirements. It can also be handed-off to your dealership for a bigger discount off the sticker price; otherwise, you have to add a form in order to receive the credit when you do your taxes next year.
The EV tax credit is tied to your income, so you'll want to check the IRS website before you shop.
The credit began in 2023 and will go away Sept. 30.
Does the End Of the EV Tax Credit Affect My Current Lease?
No. The credit itself goes to the dealership when it comes to leased EVs. If you have a lease in place before Sept. 30, the monthly payments shouldn't change.
When it comes to leasing, specifically, EVs are considered commercial vehicles under federal law. This loophole means that for a lease, there are more eligible EV options for shoppers; for buying, the tax credit is more strict about which models qualify.
Moreover, there are no income considerations required for the EV tax credit when it comes to a lease.
What Does That Mean for EV Shoppers?
Wadan continues, “Just to give you some context, if that $7,500 EV tax credit is no longer included on a 36-month lease, your monthly payment is going to go up about $200 a month. On a car like the Honda Prologue, for example, where a lot of people are getting these for 0% down, $350 a month, that payment is going to go up to $550 a month—if all other things remain stagnant.”
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If that sounds like a lot, you’re not alone. “That's a substantial increase,” Wadan says. “So my recommendation for people who are considering; who are shopping for electric vehicles or plug-in hybrids is to take advantage of the $7,500 EV tax credit while it's here. Because after Sept. 30, you're no longer going to get that tax credit and the deals just aren't going to be as good.”
Wadan isn’t the only one who thinks this approach is best. Since news broke that new laws would eliminate the credit, car buyers started snatching up EVs at near-record rates to take advantage of the credit while it is still in place. The most sought after models include the Chevy Equinox EV, the Honda Prologue, and the Hyundai Ioniq 5. An analyst told CNBC those sales could plummet as soon as next quarter as consumers encounter EV prices without the tax credit buffer.
Catch Up With the Latest As the EV Tax Credit's End Draws Near
Viewers React To the EV Shopping Advice
In the comments, several viewers speculated that it might be better to wait until after Sep. 30 instead. "Don't you think these companies will drop the car prices after Sep. 30 to get sales?" wrote one.
Man others complained about the D.C. politics that led to this new legislation.
Another person said they disagreed with the entire premise of the discussion. "EVs are second car toys until they improve that battery technology 10 years from now," they wrote.
InsideEVs reached out to Wadan via TikTok comment and email for comment.
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