How to Get a Car Rental Loan—Before It’s Too Late

America is flocking to electric cars, increasing sales up 127% in the last two years. To sweeten the deal, the federal government is offering a tax credit of up to $7,500 for EVs and other “clean vehicles,” including plug-in vehicles.

But buckle up if you want to qualify. You have to manage a complex of resource rules. Sellers will not sell for anything below reserve price. And you may need to buy before expected additional rules from the Internal Revenue Service in March – cut or eliminate debt for some examples.

“If you want an EV, now is the time to go for it,” said Ingrid Malmgren, policy director for Plug In America, an EV advocacy group.

The credit rules, reformed under the Anti-Inflation Act, are a mix of good and bad news for consumers. One good change is the example from


General Motors

(ticker: GM) and


Tesla

(TSLA) is now eligible. The government no longer has a qualifying cap of 200,000 EV sales—a provision that restructured debt for GM and Tesla.

Tax breaks are also available for compact cars such as the Audi Q5 PHEV and the BMW 330e. And, for the first time, you can get a loan on used cars.

But a big problem is a new requirement for a car that has the last assembly in North America. While the list may be a way to solve that, the law changes the disqualification of the sale of many EVs and plug-ins, including cars made by Toyota, Hyundai, Kia , and Subaru.

Ultraluxury cars are unlimited. Sports cars, pickup trucks, and vans are priced just under $80,000. For cars, the limit is $55,000.

Tesla, for one, has already responded, cutting prices on some models to revive sales and come under the door. The Model Y was adjusted to $52,990 from $65,990, and the Model 3 Performance was $53,990, down from $62,990.

To check if a vehicle meets the requirements for assembly, you can contact its vehicle identification number at the Department of Energy. location. The IRS too list drive to meet its criteria.

Anyone who buys or leases must meet income thresholds. For new vehicles, it cannot exceed $300,000 for a couple filing jointly. The limit is $225,000 for heads of households, and $150,000 for singles and all other filers. For used cars, the revenue is half the amount of new cars in each category.

Consumers face a tough time. The government is planning to impose battery requirements on EVs to qualify for tax credits. By 2023, 40% of the precious stone’s minerals and 50% of its parts must come from North America or countries with which the US has a trade agreement. The demand for minerals and components is growing by 10 percent every year. If a vehicle meets only one limit, for minerals or parts, the buyer is eligible for half the credit, or $3,750.

The battery rules will go into effect after the IRS issues guidelines, expected in March. Once effective, many EVs could be derailed from full credit, said Chris Harto, a senior policy analyst at Consumer Reports. . “Most vehicles will qualify for the credit battery category, but most—and perhaps all—will not qualify for the mineral category,” he said.

Tesla,


Ford motor vehicle

(F), and GM said that their models will probably meet the mark for parts but not precious minerals, which means that the debt can be cut to $3,750 for their models.

One big winner, for now, is Tesla. The leading EV maker has eight comparable models—more than any other manufacturer—qualifying for the $7,500 credit, including its Model Y All-Wheel-Drive and Model 3 Long Range. But come spring, the debt on those cars will probably be cut in half.

Another point: You have to own the car before the IRS issues the rules about batteries. A down payment and a signed purchase agreement are not enough to determine the tax value.

Bidders may face stiff resistance from buyers. The list of EVs has been in short supply due to the shortage of supplies left over from the pandemic. Retailers are likely to see increased demand as consumers try to take full advantage of the tax break before March, and giving them the pressure to make concessions. Many EVs are sold for the installed price, or more. This can be added to the initial and total cost of ownership.

“The cars that come out ahead economically are those that have not been raised by the dealer and are still eligible for credit, like the Nissan Leaf and the Chevy Bolt,” said Harto. “The Bolt is a screamer,” he said, referring to GM’s best-selling EV, which starts at $26,500.

Another way to get a tax credit is using cars. The amount of credit can be equal to 30% of the purchase price and is limited to $4,000. However, used models must be purchased from a dealer for more than $25,000.

One way to deal with some of the eligibility rules is to list. Car dealers, like dealers, are not subject to many sales rules. When dealer financing companies buy EVs to lease to customers, they can get a full $7,500 credit and pass on the savings. “Sellers may be able to get credit when they negotiate a lease,” Malmgren said. “It has the potential to be a significant opportunity.”

But retailers cannot provide full savings, given the strong demand for EVs. The terms and prices of the lease also include interest and other costs that can make a purchase cheaper over the years of ownership.

Either one of these cars will save you money based on the price of gas and the competitive price of electricity. Considering the high prices of EVs, plus the costs of repairs and upgrades, usually six years of ownership is cheaper than the standard model, say from Harto. While credit cards can help, the window to capture the full benefit may be closing quickly.

email: editors@barrons.com

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