A popular workaround in the electric vehicle market allows many buyers to access the full $7,500 clean vehicle tax credit, even if they don’t meet the stringent income or manufacturing requirements. By leasing an EV instead of purchasing it, consumers can take advantage of a provision in the Inflation Reduction Act that classifies leased vehicles as “commercial vehicles”. This classification exempts them from the usual restrictions, enabling dealers to claim the credit and pass the savings on to their customers. This “leasing loophole” has led to a dramatic surge in EV leasing, which skyrocketed from approximately 15% of the market in 2022 to 67% by March 2025.
Time is Running Out to Claim the Credit
This opportunity is short-lived. Under President Donald Trump’s new tax and spending package, the EV tax credit, including the leasing workaround, is scheduled to end after September 30, 2025. This impending deadline applies to both new and used electric vehicles, whether they are purchased or leased, creating a sense of urgency for potential buyers looking to capitalize on the savings.
The Pros and Cons of Leasing an EV
Leasing an electric vehicle often comes with lower monthly payments and a smaller down payment compared to financing a purchase, making it an attractive option, especially with the added $7,500 credit. Other benefits include continuous warranty coverage and the flexibility to upgrade to a newer model every few years. However, there are trade-offs to consider. Lessees do not build equity in the vehicle, face mileage limitations (typically 10,000 to 15,000 miles per year), and may incur fees for excessive wear and tear or for terminating the lease early.
Is Leasing the Right Choice for You?
The decision to lease versus buy depends on individual circumstances. For those who prefer lower payments, enjoy driving the latest models, or are not yet fully committed to long-term EV ownership, leasing can be a financially savvy choice, especially while the tax credit is still available. However, for drivers who cover long distances or want the freedom to customize and eventually resell their vehicle, purchasing might be the better option. As the September 30 deadline approaches, potential EV buyers should carefully weigh these factors to make the best decision for their budget and lifestyle.
