Fed up with excessive fuel costs and enticed by federal tax credit, Dave Walters determined he wished an all-electric Hyundai Ioniq 5 for his subsequent car.

The Orange County, California, resident initially thought of buying a used mannequin, till he discovered he might lease the car and make the most of a key loophole below the Inflation Discount Act.

Shopping for a used Ioniq, which is produced in South Korea and Indonesia, would not earn him $7,500 off via a federal tax credit score. Leasing the car would.

“I ran the numbers — what it will be with out the leasing credit score and with the leasing credit score — and that type of put me excessive and that was the principle factor of why I went in that course,” he stated. “It was a couple of hundred {dollars} much less a month.”

Walters is strictly the type of client Hyundai Motor and different automakers have began to focus on for EV leases to capitalize on a loophole within the IRA that permits automobiles produced exterior North America to qualify for the credit. It is one thing lawmakers similar to U.S. Sen. Joe Manchin, D-W.V., supposed the principles to dam.

Beneath the IRA, leasing is categorized as industrial enterprise and due to this fact exempt from laws that require the car and battery elements to be made in North America. Most EVs on the market right this moment don’t qualify for the complete tax credit score due to the place the automobiles or elements are constructed.

However leasing might save drivers 1000’s, so long as the businesses receiving the credit move the financial savings on to shoppers.

“I am not shocked that the producers are saying that they will do extra leasing,” stated Charlie Chesbrough, Cox Automotive senior economist. “The IRA rolling on EVs and permitting them to qualify for that $7,500 actually is a game-changer, and that makes a big impact on our month-to-month fee.”

For a $50,000 EV and a 36-month lease, Chesbrough estimates the complete $7,500 tax credit score equates to $222 in month-to-month financial savings for a client.

Auto analysis agency Edmunds reviews about 37% of EVs purchased in April had been leased, up from 25% throughout the first quarter and 13% final yr.

“It type of creates a loophole for automakers to focus on extra prosperous prospects who’re most likely extra probably to have the ability to afford and really get permitted to purchase an EV,” stated Jessica Caldwell, Edmunds govt director of insights. “It additionally permits them to degree the enjoying area towards rivals who get the complete tax credit score when buying.”

The proportion of Hyundai Ioniq 5 automobiles which might be leased spiked from about 2% to start this yr to greater than 30% in April, in keeping with Hyundai Motor America CEO Randy Parker. Beginning this month, the corporate is providing a $499-a-month leasing deal for the car — decrease than the trade’s common lease fee of $577, in keeping with Edmunds.

“We wish to proceed to push and spotlight leasing as a lot as we will so we will proceed to make the most of the tax credit score and shoppers can make the most of the tax credit score,” Parker informed CNBC. “Proper now, that is how the playing cards have been dealt.”

Kia and Ford additionally say they may look to extend leasing on their EVs to decrease the pricing and enhance gross sales.

Kia expects to extend its EV leasing from under 15% now to as excessive as 40% within the coming months, Watson stated. Like Hyundai, Kia is providing a $499 leasing deal for its EV6 with a $4,999 preliminary down fee.

“For the subsequent a number of years, Kia goes to must lean closely into leasing to have the ability to move alongside that $7,500 credit score to prospects. And so that is what we intend to do,” stated Eric Watson, vice chairman of gross sales operations at Kia America.

Previous to the IRA passing, Hyundai and Kia, that are owned by the identical South Korean dad or mum firm, had been second within the U.S. in EV gross sales behind Tesla. However their gross sales have since fallen behind these of Basic Motors and Ford, each of which have automobiles which might be absolutely or partially eligible for federal tax credit.

Hyundai and different automakers that grew to become ineligible for the credit below the IRA opposed the laws, looking for an extended ease-in interval for the brand new guidelines or broad exemptions primarily based on their U.S. EV plans.

“It offers us a lifeline. I would not name it leveling the enjoying area,” Watson stated of leasing qualifying for the $7,500 tax credit score.

A Ford spokesman stated the corporate’s credit score arm is engaged on a leasing technique for electrical automobiles such because the Mustang Mach-E, which is produced in Mexico and at present qualifies for half the federal tax credit if bought. The corporate’s electrical Ford F-150 Lightning is eligible for the complete $7,500.

“We’ll lease electrical automobiles and you will be listening to extra about that from us fairly quickly,” Ford CFO John Lawler stated final month.

A spokesman for GM stated the corporate is just not altering its leasing technique for EVs, as all of its automobiles qualify for the complete tax credit. Solely about 3% of GM’s EVs are leased, he stated.

Whereas the lease phrases are sometimes only some years, automakers have touted EVs as drawing new prospects to their manufacturers.

“The sooner you get these prospects inside your model, particularly with the brand new expertise, I believe the higher likelihood it’s a must to preserve them,” Edmunds’ Caldwell stated.

And momentary leasing could also be a gorgeous possibility for a lot of shoppers similar to Walters, who traded in a 2009 Nissan Murano, as EVs stay an rising trade with altering applied sciences and a major variety of new entries.

“I wished to type of dip my toe into it and see if I actually prefer it. It is solely been six weeks nevertheless it’s been actually good to date,” Walters stated. “I actually get pleasure from driving it and I actually get pleasure from not having to pay for fuel.”