Some shoppers for electric vehicles and plug-in hybrids are encountering severe sticker shock this weekend in monthly lease numbers.
That’s because versus just a few days ago, a vast swath of EV and PHEV models are no longer eligible for the federal EV tax credit—now known as the Clean Vehicle Credit.
On Thursday, Toyota pulled its incentives on EVs, with some of the estimated monthly lease payments on its BZ4X electric car increasing by over $100 a month, our companion site CarsDirect noted.
2021 Toyota RAV4 Prime XSE
The hike may be most pronounced though for Toyota’s in-demand RAV4 Prime and Prius Prime. As we see at the time of writing, Toyota’s lease “deal” pricing on the RAV4 Prime, which up to Tuesday qualified for the full $7,500 EV tax credit amount, has risen to $643 a month with $4,293 due at signing ($2,000 down). Until recently, the same lease terms had been running $490/month, with $3,140 due at signing—so nearly $7,000 more for the customer to pay over the course of the lease.
In Los Angeles, there lease deals on EVs tend to be on the lower side, the going official Toyota lease price of the BZ4X is now at $745 a month with $3,395 due at signing.
2022 Tesla lineup (Courtesy of Tesla, Inc.)
A Tesla Model Y Long Range, which stickers far above the BZ4X, starts at $789 a month to lease, with $4,500 down. Tesla hasn’t worked around the tax credit in several years, and this currently looks to be to its advantage; you have to really want the BZ4X to pay the same money.
Likewise, lease deals on the Chevy Bolt EV, which started at $219 a month earlier this month, aren’t likely to have changed after
2023 Chevrolet Bolt EV
Tesla and GM vehicles will be able to once again be eligible for the revised tax credit starting in 2023, if they meet the cut on a number of other stipulations in the bill, including an $80,000 price cap for SUVs, pickups, and vans and a $55,000 cap for cars.
As CarsDirect notes, Toyota’s lease deals are regional, but it appears that special lease programs for both EVs and plug-in hybrids were removed “pretty much everywhere overnight.”
The reason comes down to simple math: Automakers’ captive finance companies were able to claim the EV tax credit and write it into the cost of the lease—effectively lowering the amount of the entire lease amount from the start. So now it appears they’re merely passing the vast majority of that amount over to shoppers.
With so many vehicles now ineligible, anyone who’s shopped around for EV leases in recent weeks or months will encounter some sticker shock that extends far and wide, to most EVs and plug-in hybrids.
2022 Ford Mustang Mach-E
There are exceptions. Late Tuesday, after the bill had been signed and the Internal Revenue Service and the Department of Energy provided some quick-turnaround guidance, we looked at the shortlist of American-built eligible vehicles. That has a very elite list of vehicles that will continue for the rest of 2022 with the tax credit—including the Ford F-150 Lightning, Escape PHEV, and Mustang Mach-E, the Nissan Leaf, and the Jeep Wrangler 4xe and Chrysler Pacifica Hybrid, without pushing too far into the luxury pricing zone.
2023 Volkswagen ID.4
In the meantime, there will be some challenging nuances in the market to navigate. Volkswagen had followed similar guidance earlier in the week on the tax credit—stating that “Any ID.4 funded with a VCI lease contract date after (the) Inflation Reduction Act is signed into law will no longer qualify for the $7,500 Zero Emission Bonus.”
But VW is in an especially odd situation with the ID.4 because American-built 2023-model-year versions of the ID.4 will likely qualify for the tax credit at least for the remainder of 2022, while German-built 2022-model-year versions will not.
Although VW and Toyota are certainly not alone, leave that to dealerships—and some very puzzled shoppers—to figure that out.