Ford and GM Implement Lease Workaround to Temporarily Extend EV Tax Credit Eligibility Post-September 30 Deadline
Key Insights
Ford and General Motors have devised a strategy using their captive finance companies to extend the federal $7,500 electric vehicle tax credit for retail leases beyond the September 30 deadline.
This workaround involves the automakers' finance arms making initial payments on specific vehicles before customer acquisition, leveraging IRS guidance on the commercial clean vehicle tax credit.
The program applies exclusively to retail leases, not direct purchases or fleet sales, and is designed to maintain competitive lease payments for consumers while inventory lasts.
Both manufacturers are offering dealers a $1,000 incentive per vehicle to participate, aiming to bridge the gap until December 31 for Ford, with GM anticipating coverage well into Q4.
Detroit automakers Ford Motor Co. and General Motors have successfully implemented a strategic workaround to temporarily extend the federal $7,500 electric vehicle tax credit for eligible retail leases, mitigating the immediate impact of stricter eligibility requirements that took effect after September 30. This initiative, confirmed by spokespeople from both companies, leverages specific IRS guidance related to the Inflation Reduction Act (IRA) to maintain market momentum for their EV offerings.
The core of the program involves the automakers' captive finance companies, Ford Credit and GM Financial, making an initial payment on specific electric vehicles identified by their Vehicle Identification Numbers (VINs) before a customer formally leases the vehicle. This pre-payment, made prior to the September 30 deadline, allows these vehicles to qualify under the IRS's interpretation of the commercial clean vehicle tax credit, which permits the transfer of the incentive to the lessor, who can then pass the benefit to the lessee through reduced monthly payments.
Ford CEO Jim Farley underscored the importance of this move, stating that the automaker aims to prevent a "hole in our owner base" as consumers transition away from direct government support. The program is structured to ensure that customers leasing an EV through participating dealers experience "business as usual," with the tax credit value reflected directly in their lease calculations. Ford's program is slated to run until December 31, while GM anticipates meeting customer demand well into the fourth quarter, contingent on inventory availability.
To incentivize dealer participation, both Ford and GM are offering a $1,000 dealer cash incentive per vehicle. The eligibility for this extended credit is strictly limited to retail leases; direct purchases and fleet vehicle acquisitions do not qualify. This targeted approach highlights the automakers' efforts to sustain consumer interest and adoption rates in a rapidly evolving regulatory landscape for EV incentives.
The IRS guidance, issued last month, clarified that a vehicle could still qualify for the credit if a written binding contract and a payment were made on or before September 30, 2023, even if the vehicle was placed in service (i.e., taken possession of by the customer) after that date. This interpretation, which includes nominal down payments or vehicle trade-ins, provided the regulatory window for Ford and GM to implement their programs. Stellantis, another major Detroit automaker, has not publicly announced a similar program, stating it will continue to be aggressive in the marketplace to support electrified options.
This temporary measure underscores the industry's agility in navigating complex incentive structures and its commitment to fostering EV adoption, even as federal support mechanisms undergo significant changes. The "while supplies last" caveat emphasizes the finite nature of this workaround, setting the stage for renewed focus on cost reduction and market-driven demand beyond the current year.