Author Topic: Post FIRE Electric vehicle purchase  (Read 1137 times)

superd

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Post FIRE Electric vehicle purchase
« on: March 05, 2021, 03:10:44 PM »
Hi all.. Iíve been looking at a few different options for an electric car: Prius prime or crosstrek phev which have a 4500 federal tax rebate. Given my income is dividends at 0% and side gig / other taxable income is less than the $12,000 standard deduction I have no taxes to take advantage of the non-refundable doesnít rollover credit. If I take IRA distribution to get $4500 in taxes Iíd lose the ACA premium reduction of around the same value.

Has anyone encountered this dilemma and had a dealer offer a solution to get the credit via a lease or other fancy paperwork ? Or another way to find taxable income without losing aca credit ?

innkeeper77

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Re: Post FIRE Electric vehicle purchase
« Reply #1 on: March 05, 2021, 03:25:51 PM »
Sometimes you can buy essentially new cars for slightly more than MSRP minus incentives. We did that for a PHEV (Honda Clarity- a PHEV with a large enough range and battery to qualify for the $7500 rebate) for environmental reasons (Not at all financial..), It also made the whole paperwork process a lot easier, and we were able to finance it at close to mortgage level interest rates. Ours had only 17 miles on it as a used car.

superd

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Re: Post FIRE Electric vehicle purchase
« Reply #2 on: March 05, 2021, 05:39:12 PM »
Sometimes you can buy essentially new cars for slightly more than MSRP minus incentives. We did that for a PHEV (Honda Clarity- a PHEV with a large enough range and battery to qualify for the $7500 rebate) for environmental reasons (Not at all financial..), It also made the whole paperwork process a lot easier, and we were able to finance it at close to mortgage level interest rates. Ours had only 17 miles on it as a used car.

Hi yes, Iíve seen that on loaner and test drive cars near the end of the model year. Sounds like you got a great deal on the clarity!

Iíve talked with a couple Toyota dealers and confirmed Toyota wonít roll the tax credit into a lease and pass it on to the lessee. Subaru does, but the interest rate in their lease contract is 6% so that eats up most of the credit combined with the extra lease document fees when compared to normal finance rate or cash.

Biden did talk about changing the ev credit during the campaign, hopefully itís turned into a refundable or rollover eligible credit then Iíll offset some Roth conversions while staying in same ACA subsidy level over a few years.

ExExpress

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Re: Post FIRE Electric vehicle purchase
« Reply #3 on: May 15, 2021, 06:24:02 PM »
In a lease, the finance company takes the tax credit as the purchaser of the (PH)EV. The lease cost is generally reduced by a similar amount. I think what may work in your case is to acquire the car via lease, negotiate a "one pay lease" where all payments are made at signing which nearly zeroes out the financing cost of the lease and then exercise the purchase option at residual value at a time of your choosing. The tax credit never appears on your returns but you should be more or less equal in terms of total acquisition cost of the car.


skiersailor

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Re: Post FIRE Electric vehicle purchase
« Reply #4 on: May 20, 2021, 04:15:55 PM »
Volvo didn't apply the Federal tax credit to the XC40 Recharge leases when the model was first launched a few months ago, but they are now.  Unfortunately their remaining lease terms aren't very attractive and I don't think dealers are negotiating much on price yet.  BMW, which has a history of subsidizing leases, isn't applying the tax credit to the capitalized cost for leases of the X5 45e PHEV.  It appears that manufacturers are using the tax credit like any other incentive, so deals aren't very good for newly introduced vehicles but may improve over time.

If you can negotiate an attractive discount on the capitalized cost and get the dealer to apply the tax credit against it, then leasing an EV may be a good option but I wouldn't prepay anything and instead just accept the finance charges as the cost of capturing the tax credit in a lease when you otherwise wouldn't qualify for it.  Perhaps you can save money by opting for the shortest lease possible and buying the vehicle at the end. Pre-paying a lease involves financial risk if the vehicle is totaled, since insurance will pay market value which would have dropped significantly at the front end of the lease and effectively your prepayments could be forfeit.  One of the benefits of a lease is being able to walk away from a loss like that, but prepaying the lease negates the benefit.  I assume you wouldnít need to pay for Gap insurance if you prepay a lease, and if so perhaps that would make up for the increased risk of loss.

It would be nice if the Federal tax credit was replaced by a point-of-sale rebate which would also benefit lower income buyers, but Congress isn't making much progress on anything these days so that will probably be a long wait.

The Mustachean answer would be to purchase a used EV because its market value should already be discounted by the original owner's tax credit and a steep depreciation curve due to rapidly evolving EV technology.
« Last Edit: May 20, 2021, 05:13:58 PM by skiersailor »