How Much Can EV and Plug-in Hybrid Drivers Receive in Incentives?
Announced in August 2022, the U.S. Inflation Reduction Act includes, among its many provisions, incentives of up to $7,500 for purchasers of electric and plug-in hybrid vehicles. But the government’s guidance on which vehicles are eligible for those credits has been confusing.
In theory, $3,750 is available to purchasers of electric vehicles that are made in the north American free trade region – Mexico, Canada, or the U.S. The other $3,750 requires that the batteries contain minerals and parts from North America.
But according to a report by Reuters, on December 29, the U.S. Department of Treasury has confirmed that electric vehicles leased by consumers will be eligible for up to $7,500 in commercial clean vehicle tax credits – regardless of where they are made.
This news will be music to the ears of those considering EVs made outside of North America – which are currently numerous. While Hyundai, Volkswagen, BMW, and others have all committed to ramping up production and battery sourcing in the U.S., many popular EV models are still made overseas.
Why an Electric Car Lease Makes Sense
In addition to the extra financial benefit, leasing a new electric vehicle may be a better option for electric car shoppers for numerous reasons.
As EV and battery technology evolves, committing to a vehicle for a set number of years will help avoid the pain of having to sell or trade-in a piece of older technology when the time comes to purchase their next car. Leasing also generally offers lower monthly payments than financing – making EVs more affordable for more families on a budget. Being able to access the additional benefit of a government incentive makes leasing even more attractive.
The electric vehicle incentive landscape is rapidly changing. The government has delayed full implementation of the new purchase incentive until March, meaning some vehicles that would normally be eligible for just $3,750 in credits would get the full $7,500. The rules which govern where battery minerals and parts must be sourced are delayed until March.
Ultimately, the aim of the new incentives was to reduce American reliance on batteries which are currently made in China, with minerals sourced from all over the world. The requirement was to be that 50 percent of the battery’s parts must come from North America, and 40 percent of its minerals had to come from North America, or a country with a free-trade agreement with the U.S., with those percentages rising annually.
Many manufacturers are currently in the process of building North American battery factories and shifting their supply chains to source more minerals locally – but that’s a process that will take years to complete.
Is Now a Good Time to Jump Into an EV?
Once the new battery rules are in place in April, many domestically-made vehicles won’t qualify for the full $7,500 in incentives, as even electric cars made in the U.S. mostly use batteries sourced from foreign countries.
All of which means that – should you be able to find a new EV that you want in stock – now may be the best time to make the jump to electric. And that’s doubly true if you intend on leasing.