EV Tax Credit Loophole Means Leasing Can Save You $7,500

Alistair Weaver is in a quandary over replacing his Tesla Model 3 with another electric vehicle when his lease expires in a few months. Weaver, who lives with his wife and two children in a Los Angeles suburb, likes driving an emission-free vehicle to help reduce pollution. But he can’t buy the next EV he wants—a $50,000 Hyundai Ioniq 5—and qualify for a $7,500 tax credit under the new Inflation Reduction Act (IRA), because it’s manufactured in South Korea and Indonesia.

To save money, Weaver is contemplating returning to a gas guzzler. Or, depending on the monthly payment, he’s considering leasing a Hyundai Ioniq 5 instead of buying. The latter option would allow him to benefit from the tax credit, because the new ­federal rules exempt leased vehicles from restrictions on where the car is made, where its battery materials come from and how much money the consumer makes. Those stipulations on purchased EVs are designed to promote North American production of battery-powered vehicles.