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<p class="has-black-color has-text-color has-large-font-size">It’s a confusing time to buy an electric car. New regulations have made many EVs and buyers ineligible for a $7,500 tax credit. But there’s a way to get those savings no matter how much a car is worth, where it’s made, or how much you earn: leasing.</p>
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<p class="has-black-color has-text-color has-large-font-size">Leasing could save you money upfront and keep you from getting stuck with an outdated car with yesterday’s technology. If you’re interested in driving a new electric car, here’s what you need to know about leasing before you make your choice.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">What Is Leasing?</h2>
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<p class="has-black-color has-text-color has-large-font-size">Leasing a car is kind of like renting a house rather than paying a mortgage. You make a monthly payment to a leasing company in order to drive a new car for a set number of months—usually 18 to 36—and for a set number of miles.</p>
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<p class="has-black-color has-text-color has-large-font-size">You’ll usually make a down payment as well. The monthly payments are often less than what you would pay to finance a new vehicle for a similar time period. (You’re essentially paying the amount the car depreciates during the lease period.) At the end of the lease, you return the car to the leasing company.&nbsp;</p>
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<p class="has-black-color has-text-color has-large-font-size">A CR survey of 2,121 Americans conducted in April 2023 found that 30 percent of respondents would consider buying or leasing an EV, but 55 percent saw the purchase price as an impediment. A lower monthly payment may help those who are interested in an EV afford to drive one.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Can I Get Tax Credits by Leasing an EV?</h2>
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<p class="has-black-color has-text-color has-large-font-size">Yes. To qualify for a federal tax credit of up to $7,500 on the purchase of a new EV, both the car and the buyer are subject to numerous conditions. The vehicle has to be made in North America, its battery components and minerals must meet specific sourcing requirements, it must be priced under a certain threshold, and the buyer’s income must not exceed a certain amount.</p>
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<p class="has-black-color has-text-color has-large-font-size">But those conditions all get thrown out the window if you lease. “A lease is considered a commercial sale to the leasing company and is eligible for a separate commercial vehicle tax credit that has fewer restrictions than the consumer tax credit,” says Chris Harto, CR’s senior energy policy analyst. That means the leasing company can get a full $7,500 tax credit for an EV, and in turn pass some or all of those savings on to you in the form of lower lease payments. (Leasing also lets you enjoy those savings even if you don’t owe a tax burden at the end of the year.)</p>
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<p class="has-black-color has-text-color has-large-font-size">Some leased EVs may also be eligible for state and local savings, or even rebates from electric companies.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Which Automakers Offer the Best Lease Deals on EVs?</h2>
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<p class="has-black-color has-text-color has-large-font-size">Hyundai, Lucid, and Polestar are among the automakers announcing in advertisements on TV and online that they’re including the tax credit in lease deals. Hyundai calls it an “EV Lease Bonus,” Polestar calls it a “Polestar Clean Vehicle Noncash Credit,” and Lucid calls it “Plug-In Electric Vehicle Savings.” These deals can reduce the cost of a vehicle and lower the monthly payment or down payment you have to make.</p>
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<p class="has-black-color has-text-color has-large-font-size">But dealerships don’t necessarily have to honor advertised lease deals, says Gabe Shenhar, associate director of CR’s auto test center. “Leases are negotiable because dealers compete among themselves,” he says.&nbsp;</p>
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<p class="has-black-color has-text-color has-large-font-size">The decision to include the tax credit in your lease (and to sell you the car without first inflating the MSRP with dealer fees or other markups) is ultimately up to the dealership. For example, the Chevrolet Bolt is eligible for a $7,500 tax credit, but dealerships are marking up the MSRP by 16 percent, on average, as of May 2023 according to data from TrueCar—eliminating much of the savings.</p>
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<p class="has-black-color has-text-color has-large-font-size">To avoid confusion and to be certain you’re getting the full savings, ask to see where the credit is factored in on your paperwork, and check to make sure the original sale price isn’t marked up to compensate for it. Ask about every line item on the paperwork. “Buyers can be too focused on the monthly payment and not realize they’re leaving money on the table if the dealer starts off with a markup or eliminates discounts the vehicle may be eligible for,” Shenhar says.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">What Are the Advantages of Leasing an EV?</h2>
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<p class="has-black-color has-text-color has-large-font-size">In addition to cost savings, leasing might offer other advantages over purchasing an EV, especially because technology is advancing so rapidly that battery range can increase and purchase prices may drop over a relatively short period of time. “A three-year lease is an eternity with how fast technology is improving,” Harto says.</p>
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<p class="has-black-color has-text-color has-large-font-size">Leasing can also offer peace of mind because it’s difficult to predict now how much an EV purchased today will be worth in two, three, or five years, says Jake Fisher, senior director of CR’s auto test center.&nbsp;“Prices and rebates have been fluctuating quite widely, making resale values impossible to predict,” he says. If the EV you’re leasing depreciates a lot over the next few years, it’s not your problem.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">What Are the Downsides to Leasing?</h2>
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<p class="has-black-color has-text-color has-large-font-size">They’re the same as the disadvantages of leasing a gas-powered car:</p>
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<p class="has-black-color has-text-color has-large-font-size">• At the end of the lease, you have no equity in the car—nothing to show for the payments you’ve made. If you choose to lease another car, the payments start up again. If you don’t, you may have to pay a disposition fee that’s typically a few hundred dollars.</p>
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<p class="has-black-color has-text-color has-large-font-size">•&nbsp;If you go over your lease’s mileage limit—typically between 10,000 and 12,000 miles per year—you’ll have to pay an excess mileage penalty. That can range from 10 cents to as much as 50 cents for every additional mile. You don’t get a credit for unused miles.</p>
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<p class="has-black-color has-text-color has-large-font-size">• If you don’t maintain the vehicle in good condition, you’ll have to pay excess wear-and-tear charges to repair the dings and scrapes or remove any aftermarket accessories when you turn it in.</p>
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<p class="has-black-color has-text-color has-large-font-size">• It’s difficult to terminate a lease if you decide that you don’t like the car, or if your lifestyle changes and an EV no longer meets your needs. You’ll probably get stuck with thousands of dollars in early termination fees and penalties if you get out of a lease early—and they’ll all be due at once. Those charges could equal the amount of the lease for its entire term.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Should I Buy My EV at the End of a Lease?</h2>
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<p class="has-black-color has-text-color has-large-font-size">That depends. Almost all lease contracts have what’s called a buyout amount or payoff amount, a dollar value that you can pay the leasing company to purchase the car outright. This number is only negotiable before a lease is signed. Leasing companies hope that it will accurately reflect what a car is worth at the end of a lease, but they could get it wrong.</p>
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<p class="has-black-color has-text-color has-large-font-size">If demand for used EVs is high at the end of your lease, resale values may be higher than expected and it may make sense to purchase the car for the buyout value that’s written into the lease contract. “If the automaker underestimates the resale value, you can buy the car and have equity, or sell it for a profit,” Fisher says. That’s what many lessees were able to do when used-car values soared early during the pandemic. But if similar cars are selling for less than the buyout amount written into your lease—or if the new crop of EVs are better than the leased one you’re turning in—it’s smart to walk away.</p>
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<p class="has-black-color has-text-color has-large-font-size">Product reviews are everywhere, but are they truly unbiased? Based on data? Even real? At Consumer Reports, our reviews are backed by scientists, engineers, journalists, and researchers who work tirelessly to test and rate the products and services you use every day. Not just so that you can buy an appliance or car with confidence, but also to help raise standards for all consumers. As a nonprofit organization, we rely on the support of our members. So become a member today because when you join CR, you do so much more than just gain access to our independent ratings and reviews. You help us fight for fair deals and safe products for all consumers.</p>
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<p>To read the full article, <a href="https://www.consumerreports.org/cars/buying-a-car/how-leasing-an-ev-can-save-you-money-a6013438463/">click here.</a></p>
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