Will the $7,500 lease credit still be available when the new Model Y becomes available in March?
[UPDATE] Tesla and General Motors stand to bear the brunt of the elimination of the federal EV tax credit.
The EV tax credit plays a critical role for buyers when considering an EV since it amounts to an instant $7,500 discount at time of purchase, while the lease tax credit brings down monthly payments. Both help to drive sales and leases of popular EVs like the Tesla Model Y — especially with the new model coming to the U.S. in March — and Chevy Equinox EV.
Trump didn’t waste any time
The “EV Mandate” was top of mind for Trump on Monday during his acceptance speech in the U.S. Capitol Rotunda. “We will revoke the electric vehicle mandate,” he said. (A mantra he repeated when speaking to Davos attendees on Thursday.) This was followed by an executive order that set the stage for “elimination of unfair subsidies and other ill-conceived government-imposed market distortions that favor EVs.”
$7,500 EV lease credit — ‘we expect to be eliminated’
Tesla and General Motors have the most EV models that qualify for the full $7,500 federal tax credit, according to Fueleconomy.gov. In 2025, GM has five — the Cadillac Lyriq, Cadillac Optiq, Chevrolet Silverado EV, Chevrolet Blazer EV, and Chevrolet Equinox. Tesla has four models and nine variants of the Model Y, Model 3, Cybertruck, and Model X that qualify.
The Trump administration is looking to eliminate or alter credits that can be applied directly at the time of the transaction. While the widely-known $7,500 federal tax credit for EV purchases is safe at the moment, the lesser-known lease credit may be the first to go, according to Stephanie Brinley, an analyst at S&P Global Mobility. “We expect the leasing portion will be eliminated; the purchase tax credit may or may not be,” Brinley said in an email. “The purchase credit requires North American assembly, increasing levels of regionally or locally-sourced components and raw materials, and has vehicle pricing and buyer income limits,” she said. “The leasing tax credit has none of those limits; the credit goes to the lending agency, which has so far passed the effect on to the consumer, though the regulation does not specifically say that they must,” Brinley said.
EV leasing explodes
The leasing credit has become increasingly important to consumers as EV leasing explodes. Nearly half (46%) of new EVs are leased, according to Experian. “That makes leasing the most popular option for EV drivers,” Experian said in November.
Here’s how Experian defines the lease credit: “Although regular federal clean vehicle credits don't apply when you lease, commercial clean vehicle tax credits of up to $7,500 are available to leasing companies, who can pass along savings to their customers in the form of incentives. Consumers who benefit from leasing incentives don't have to meet the IRS vehicle eligibility or income requirements for regular EV tax credits.”
Leases have become the cheapest way to get into an EV like a Tesla Model Y, a Chevy Equinox EV, or a Ford Mustang Mach-E. And leases can be applied to EVs that are not eligible for the purchase credit. For example, some Ford dealers offer a $7,500 incentive when leasing a Mach-E. While dealers don’t always explicitly state that this is a credit, Ford does say on its website that “you may qualify for a credit up to $7,500 if you lease a new, qualified battery electric vehicle (BEV), plug-in hybrid electric vehicle (PHEV) or fuel cell electric vehicle (FCEV).”
GM, Tesla ready for elimination of federal credits?
“Our incentive loads are higher than ICE but they are considerably lower than the industry,” said Paul Jacobson, Executive VP & CFO, General Motors, responding to a question about the possible elimination of the credit, at the Barclays Global Automotive and Mobility Tech Conference in November. ICE refers to internal combustion engine, i.e., gas engine. “We have a lot of flexibility embedded into our operation. We’re going to continue to work with the incoming administration,” Jacobson said.
Tesla CEO Elon Musk stated in July, with his usual bravado, that removal of the federal EV tax credit would "only help Tesla” and be devastating to competitors.
Update: updates status of new Tesla Model Y.
