Lease including Fed Tax Credit

Discussion in 'Clarity' started by Patrick Noonan, Dec 20, 2019.

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  1. Patrick Noonan

    Patrick Noonan New Member

    Has anyone had success in weaving the fed tax credit into a lease? Is Honda cooperative in doing this and are their leases competitive? I know that ownership is retained by Honda and just want to know if that is front-loaded to the lease. If I do this, can I pay it off within a year without a big hit?

    Thanks all for help.

    Papanoon
    Port Angeles, WA
     
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  3. KentuckyKen

    KentuckyKen Well-Known Member

    IMHO, if you did not negotiate this as part of the leasing agreements (price, payments, residual, etc.) then it’s too late to do anything about it, since as you noted, Honda retains ownership and its the owner that gets the tax credit for the year put into service.
    But I’m not the most knowledgeable person when it comes to leases.
     
  4. The Gadgeteer

    The Gadgeteer Active Member

    Lease deals often already include the government incentives baked in. For instance if you add up the payments and buyout of my 2018 Clarity Touring lease the total cost to own the vehicle is about $27K for a $37K MSRP vehicle. Obviously Honda passed the incentives and more to make the deal. Also lease deals are negotiable just like purchase deals.
     
    Last edited: Dec 21, 2019
  5. 4sallypat

    4sallypat Active Member

    Yes, I got the $7500 credit immediately when I leased my 2018 Clarity.

    Honda Financial Services (leasor & owner) returned back the $7500 Fed tax credit at the time of signing.

    This meant, the net cap cost went down by $7500, $100 HFS lease credit, $2500 dealer discount, $500 State CA employee.

    My net cap cost was $24,100 and the MF was 0.00020.

    For 2019/2020 model year - ask a couple of Honda dealers - aim for large volume dealers because I noticed when I went shopping, the small dealers tended to keep all or part of the $7500 on the table...
    Be very careful as some dealers are greedy and will not offer you the full credit!

    Luckily, my So Cal Honda dealer I had bought 5 previous Hondas was upfront, transparent and honest so he gave me the whole $7500 up front.

    OTOH if you are looking to purchase using HFS financing, my dealer pinged me last week and said, they are giving $6000 off MSRP ($4000 HFS + $2000 dealer) and 3.9% for 60 months on any remaining 2019 Clarity - and then you are eligible for $7500 tax credit claimed in 2020 if you buy before the end of the year. Message me if you want that dealer's info.....
     
  6. DucRider

    DucRider Well-Known Member

    You actually have to have it "placed in service" which requires physical possession. Signing the purchase docs and having it shipped to another state (to avoid paying CA Sales Tax) means it must arrive before year end to qualify in 2019. Form 8936 does not even have anywhere to enter the purchase date.
     
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  8. 4sallypat

    4sallypat Active Member

    Good point!
    If you are buying out of state, remember to ask for the shipping manifest showing date of arrival for your tax credit!
     
  9. neal adkins

    neal adkins Active Member

    It depends on the state you are in. In california the federal tax credit can be written into the lease. And paying the car off early does not effect it. I would call a dealership in the state the car will be registered in and ask if they can do it.
     
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  10. interestedinEV

    interestedinEV Well-Known Member

    Buyer beware. When you are negotiating the lease, you need to have the capitalized cost reduced by the amount of the credit before you sign the lease. If you have signed the lease already and this was not discussed up front, you have to assume that the lessor is not going to give you the credit.

    When negotiating a lease, it is very important you understand the capitalized cost which is the MSRP less all discounts less the federal tax credit. So here is the catch, some lessors will agree to return the money later when they get it. Let us say the MSRP is $33,000, you negotiate to $30,000. Now some dealers want to base on the Lease on $30,000 even if they agree to send the money back later. The best way to do it is to negotiate the capitalized cost to be $22,500 ($30,000-$7,500) and tell the lessor to keep the money.

    Whatever you do, do not try and claim the tax credit on your IRS form. The IRS was not checking but has started cracking down on it after the Inspector General wrote a nasty note. It is very easy to check if you are the owner

    People Have Falsely Claimed Up To $74 Million Of EV Tax Credits
    https://jalopnik.com/people-have-falsely-claimed-up-to-74-million-of-ev-tax-1838995238


    The credit, as it was written, only applies to the owner of the vehicle. So if you lease an electric car, it’s still owned by the leasing company or the automaker’s financial arm. Because of that, the lessor is eligible for the credit and the lessee isn’t. Even still, over a thousand people have claimed the credit on a leased vehicle and received it when they shouldn’t have. It’s possible that the people double claiming genuinely didn’t know that they weren’t eligible in this case.
     
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  11. DucRider

    DucRider Well-Known Member

    There is a big misconception about dealers getting the tax credit - they essentially never do. The exception would be if they held the lease themselves and didn't use a finance company, and I've never heard of this being done. Some used car dealers will hold the note on overpriced junk cars sold to people with poor credit, but a new car dealer will not be in the business of investing their money in leased vehicles.
    As a rule, any factory/dealer incentives require using the manufacturers finance arm (Honda Financial in the case of the Clarity).
     
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  13. interestedinEV

    interestedinEV Well-Known Member

    Absolutely, that is why I use the word lessor (which could be the captive finance arm or a bank/financial institution). The dealer merely acts as an agent, and gets a cut for that. But the dealer is your conduit to the lessor, hence it is important that you are upfront with the terms with the dealer. If they will not give you credit for the incentives, it means the lessor is keeping it and possibly sharing a cut with the dealer.

    Remember the lessor (Honda Financial for example) is the only one who can claim the credit. The lessee (which is the one who will operate the car as it were his/her own) but has no title to it.

    For EVs leasing may be fine as technology is changing so rapidly, in almost every other case I would not recommend leasing. As they say if you cannot afford to buy you cannot afford to lease.
     
  14. 4sallypat

    4sallypat Active Member

    ^^^ This is 100% correct on a lease!

    I got the $7500 cap cost reduction when I leased the Clarity last year.

    That's how I got $285/month lease !
     

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