Lease buyout loophole to get $7500 credit for EV if income is too high - anyone done this?
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Anonymous
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Our income is too high (>$300k) to qualify for the $7500 EV credit. I've read online that to work around the limit you can lease the car, receive a discount for the credit, then buy out the lease soon after. The fees for leasing and the buyout eat up some of the benefit buy you still come out way ahead (saving $6k for a Tesla by my calculations).
Has anyone done this successfully? I am considering going through this process before the EV credit expires on 9/30. (Not sure if it works for all EVs but it seems to work for Tesla and Hyundai) |
Anonymous
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Yes, our income is similar to yours and last year my spouse leased a USA-built Volvo PHEV for 3 months then purchased the car in full immediately after the third monthly lease payment. If the credit/discount had not existed, we would have bought the same car in cash.
We ended up saving half or less of the $7500 credit. The resale value of the car is also probably lower due to being the “second owner” vs. a one-owner vehicle even though the car never left our possession, but we plan to keep it for 10 years, so that’s not a big concern for us. We had done very well negotiating the lease ($10K+ off MSRP) due to qualifying for multiple discounts (loyalty, Costco, etc) in addition to the $7500 credit, but the lease buyout was much higher than projected. They would not commit to a buyout amount at the time my spouse signed the lease. Red flag #1. I would only go through this process if it was for the exact vehicle that you would purchase even without the discount due to the credit/discount and if you’re not concerned with resale value. It didn’t save us as much as we thought that it would. It might work for someone who planned to lease anyway, just by reducing the cost of the lease due to lowering the initial “price” of the vehicle. Red flag #2: At the time of lease signing, the dealership said that they would help us with the paperwork to buy out the lease, but they didn’t; we ended up having to do everything online and by mail directly with Volvo Cars Financial Services. We also had to go to the DMV ourselves for a new title and registration unlike when I purchased my new ICE (gas) Volvo in cash. We love the car and would buy it again, but we were disappointed in the loophole process and it would not have been worth it to us if it had not been for a car we planned to purchase anyway. |
Anonymous
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Thanks for sharing your experience. My biggest fear is that it will be a hassle to complete all the paperwork.
For Tesla, it sounds straightforward and transparent from what I've read online especially if the leasing is done through Tesla itself rather than one of their partner banks. The "second owner" factor is something I hadn't considered although like you I plan on keeping the can for a long time. |
Anonymous
I don't think Tesla lets you buy at the end of lease. |
Anonymous
| Most of these leases are cheap because the manufacturers are setting very high residual values for the leases — if you're interested in getting the $7,500 off via lease, you're probably better off just turning the car in when the lease ends. |
jsteele
Site Admin Online
Site Admin Online
This. You can take advantage of the lease loophole. However, if you are going to get a lease anyway, just keep the car for the lease period and decide later whether or not you want to buy it. As this poster says, the residuals are frequently very high. Also, EV technology is changing so quickly that you might want something better in two or three years. |
Anonymous
Yes, they do. We just leased one and were given the cost of buyout at the end of the lease. |