Here’s a clever suggestion for driving an electric vehicle (EV) without any troubles. You don’t have to think about tax credits related to the battery’s origin or the vehicle itself since you’ll receive the full $7,500 credit on any EV you select. Even better, when your lease period ends, you can walk away from what will likely be outdated technology and lease the latest state-of-the-art EV.
Step 1: Select an EV, any model
Due to a ruling from the U.S. Treasury Department that came into effect on January 1, 2023, individuals who lease any EV can qualify for commercial clean vehicle tax credits amounting to $7,500. This is significantly different from the incentives and stipulations imposed by the Inflation Reduction Act (IRA) regarding EV purchases.
To provide some context, the IRA requires that battery components come from specific sources and that the vehicle be produced in North America. Additionally, there are price caps on qualifying EVs and income thresholds for individuals aiming to receive these purchase-linked tax credits. None of these criteria apply when leasing an EV.
The explanation is straightforward. “A lease is considered a commercial sale to the leasing company and is eligible for a separate commercial vehicle tax credit that has fewer restrictions than the consumer tax credit,” explains Chris Harto, senior energy policy analyst at Consumer Reports. This implies that the $7,500 tax credit is subtracted from the vehicle’s MSRP, allowing the leasing company to provide you with lower monthly payments.
Step 2: Obtain the full tax credit
If you opt to buy an EV, you might receive either a $7,500 tax credit, a $3,750 tax credit, or potentially no credit at all, depending on the origin of its battery materials and its place of assembly. However, when leasing, these factors are irrelevant, and you’re guaranteed the full $7,500 without any conditions. Just ensure the dealer informs you on the documentation that it has been applied.
This means that a broad range of currently available EVs eligible for only a partial or no IRA tax credit can be leased while still qualifying for the full $7,500 tax credit, including those priced over the IRA’s $80,000 MSRP limit. Keep in mind that due to IRA stipulations, some models (like Hyundai’s Ioniq 5 and Kia’s EV6) will be manufactured in the U.S. starting in 2025, becoming eligible for either partial or full purchase tax credits.
Step 3: Leave outdated technology behind at the end of your lease
The primary benefit, as previously noted, is that leasing an EV helps you avoid being tied down to a vehicle with technology that’s likely to become obsolete by the conclusion of your lease. It is anticipated that by the end of the decade, EVs will be powered by lighter and faster-charging solid-state batteries, rendering the lithium-ion batteries that fuel most current EVs as outdated.
Advancing technology may also significantly lessen the resale value of older EVs, which you can sidestep when you lease. When you lease, your residual value is locked in, while the resale value of a purchased EV can fluctuate due to multiple factors, including any price reductions introduced by the manufacturer during your ownership (which has occurred to Tesla owners!).
As is widely acknowledged, the Trump administration will assume office in January. The incoming president has pledged to implement considerable changes to the existing IRA and its favorable EV incentives. This raises concerns for EV buyers, as the IRA purchase tax credits may be partially or entirely removed in the next Congressional session.
Furthermore, although the current leasing credit is primarily directed at commercial buyers (with individuals also benefiting), it’s conceivable that this too might face restrictions or be eliminated. Thus, if you’re thinking about acquiring an EV, now is the time to make a decision.
However, ensuring a seamless electric vehicle experience, particularly if you are renting for a vacation, necessitates careful planning, as fast-charging stations, while more plentiful than they were four years ago, are still not as ubiquitous as gas stations.
At this time, an EV may be best suited for a long weekend or a trip where you intend to remain in one location and enjoy day trips, rather than for an extensive cross-country journey.
“A cross-country road trip?” remarked Damon Bell, senior research editor at Cars.com, an online vehicle marketplace. “It’s feasible, but it does make things a bit more complicated.”
Most EV owners set up dedicated electric outlets at home, enabling them to charge their cars overnight without too much concern about finding public charging stations. However, if you plan to rent an EV for a trip, it’s advisable to chart the locations of charging stations along the routes you expect to travel.
Currently, the federal government reports approximately 70,000 public charging stations offering 186,000 ports or stalls—the EV equivalent of gas pumps—across the nation. However, their distribution is not uniform. Fast chargers, which can quickly charge a battery in a matter of minutes instead of hours, are usually concentrated on the East and West Coasts and certain regions in Texas.
Greg Brannon, who is the director of automotive engineering and industry relations at AAA, stated that taking an electric vehicle (E.V.) on a long road trip might extend your time in the car by 20 to 30 percent. This is due to the need to locate charging stations and wait for the battery to recharge. In areas with high demand, you might even have to queue for a fast-charging port to become available.
“E.V.s are not particularly suitable for extended road journeys,” he noted, especially if you are renting a vehicle other than a Tesla, which boasts the largest network of fast chargers. (Some non-Tesla models, like Fords and Rivians, can access certain Tesla Supercharger stations, but only with a specialized charging adapter that isn’t broadly available. However, major E.V. manufacturers are introducing vehicles that are compatible with Tesla stations, starting with the 2025 model year, according to Consumer Reports.)
The average range for E.V.s now stands at approximately 270 miles per charge, although this can vary based on battery type, road conditions, temperature, and driving habits. Extremely hot or cold weather can influence the range. Unlike gasoline vehicles, which typically deliver better mileage on highways, E.V.s may experience decreased range on freeways, according to Mr. Brannon, due to their operational characteristics.
Preparing your route and locating charging stations prior to your journey can help alleviate “range anxiety,” the fear of running out of battery. Numerous apps, such as PlugShare, can assist you in finding public charging stations.
If these challenges don’t discourage you, now might be an ideal time to explore an E.V., as several companies are offering promotions to promote rentals. The major rental companies have encountered various successes and setbacks with E.V.s. For instance, Hertz announced this year that it would reduce its fleet of electric vehicles since they depreciated faster than anticipated and demand was lower than expected. Hertz stated in an email that it has provided resources to educate new E.V. drivers and offered multiple models at rates similar to conventional gasoline vehicles.
I rented an E.V. with my husband over the three-day Memorial Day weekend in the Boston area. At the airport in the city, one rental company (Budget) was advertising a 50 percent discount for customers who switched their reservation from a standard vehicle to an E.V. In a statement, Budget mentioned, “We find that E.V. rentals are most appealing to customers who can plan for charging throughout their journey.”
I had already booked an E.V. online and was therefore not eligible for the half-price offer, according to the customer representative. Regardless, my rate was reasonable for an airport rental during a busy holiday weekend—around $89 per day, inclusive of various fees and cash back on an Amazon gift card, thanks to a deal with Budget.
The initial vehicle offered to us, a Kia, did not come with a basic charging cable. Thus, we requested a different car and were provided with a Chevrolet Bolt, which did include one. We intended to do some charging by connecting it to a standard outlet at the residence where we were staying. However, we quickly realized that this “Level 1” charging method is extremely gradual—you only gain a few miles of range for each hour of charging.
We discovered an Electrify America charging station in close proximity to a local mall that had four ports available. Two of these were fast chargers (the remaining ones were slower but still functional ports, which would take over an hour to charge the vehicle). One fast charger was open when we arrived on a Friday afternoon. The car’s charge increased from about 66 percent to 83 percent in roughly 30 minutes at a total cost of $6.72, including tax. (This was a refreshing change from the usual $50 expense to refuel my gas vehicle.) We paid using a credit card. Some charging networks provide discounts if you register using their apps, and certain locations charge more during peak hours. The experience went smoothly. Even so, half an hour doesn’t equate to the five minutes it typically takes to refill a gas tank.
Driving the vehicle was enjoyable. E.V.s are quiet and responsive due to their design, which allows for quick acceleration. One notable adjustment was getting used to the car’s “regenerative” braking—a feature common in E.V.s and hybrid vehicles that recycles energy back to the battery when the vehicle slows down, slightly enhancing its range.
In practice, this means the vehicle rapidly decreases speed when you lift your foot off the accelerator, so you seldom need to engage the brake pedal. (This is also why E.V.s have less range during highway driving; there is generally less braking.)
We liked the vehicle so much that we decided to reserve another one for a longer duration later in the summer at an off-airport Budget location. Renting at that location—and prepaying—totaled around $31 per day for a late June/early July rental.
Here are some questions and answers regarding the rental of an electric vehicle (E.V.):
Is it necessary to return the E.V. with a full charge?
Generally, rental agencies provide the vehicle charged to at least 70 percent and expect it to be returned at that same level. If you return it with a lower charge, you may incur a fee (Budget charges $35).
Do hotels and Airbnb rentals provide charging stations for E.V.s?
More hotels are offering complimentary charging as an added benefit, but it’s advisable to call ahead to ensure the chargers are operational. Airbnb has reported a more than 80 percent increase in searches for properties with charging options from 2022 to 2023. The company has recently partnered with ChargePoint, a charging network, to provide hosts with discounts to install charging stations.
Must I remain with the E.V. while it is charging?
Most mobile apps associated with charging networks will notify you when the car is nearing a full charge, allowing you to leave briefly for a coffee or meal and return when it’s ready. Planning your stops at charging stations near restaurants or amenities can be beneficial.
However, don’t take too long. If you do not move the vehicle once it’s charged, you could be charged “idle time” fees designed to discourage users from occupying the charging spots while others are waiting.
If you’re interested in trying out an electric vehicle, renting one can be a cost-effective choice. However, finding E.V.s for rent may become increasingly challenging.
Electric vehicles have been a financial setback for rental agencies, particularly Hertz, which in January reduced its plans to acquire 100,000 Teslas after the resale values of these cars plummeted far more rapidly than anticipated.
Hertz’s situation has created a chilling effect across the industry, causing many rental companies to sell electric vehicles at significant discounts. It might be a while before they resume purchasing these cars.
Last year, over 4 percent of the vehicles purchased by manufacturers for rental firms were electric, according to S&P Global Mobility. This year, that figure has dropped to just 1.4 percent.
In theory, renting an electric vehicle is an excellent way for people to experience and become accustomed to new vehicle types, such as battery-powered cars that generate no tailpipe emissions. “The potential for rental companies to influence consumer behavior and foster adoption is crucial,” stated Stephanie Valdez-Streaty, director of industry insights at Cox Automotive. “However, there’s a significant journey ahead.”
Ms. Valdez-Streaty mentioned that rental companies had recently provided attractive deals on electric vehicles, but these are unlikely to persist as they streamline their fleets of such cars.
Hertz and other rental agencies found that providing electric vehicles to customers profitably was more challenging than they initially believed. Most rental car facilities at airports lack charging stations. Many renters were unprepared for the rapid acceleration of electric cars, which led to an increase in accidents and higher insurance costs. Additionally, some companies discovered that they couldn’t obtain spare parts for electric cars as quickly as they could for gasoline vehicles.
“They assumed that E.V.s would be simpler, more straightforward, and cheaper to maintain,” noted Karl Brauer, an executive analyst at iSeeCars.com, an online vehicle search platform. “They’re realizing that’s not the case.”
In a statement, Hertz assured it would “continue to offer our customers the broadest range of vehicle makes and models, including electric ones.”
The primary issue for rental companies was the swift depreciation of Tesla vehicles, the leading producer of electric cars. Under the leadership of Elon Musk, the company significantly reduced prices on new models last year to boost sales. This action decreased the prices of used Teslas. A recent study from iSeeCars.com indicated that used electric vehicles have depreciated more rapidly than average used gasoline cars this year and, in May, cost less on average than used gasoline vehicles for the first time.
Resale values play a vital role in the financial calculations of rental companies since they typically sell cars before they accumulate excessive mileage. Rental car agencies incur losses when they sell vehicles for less than anticipated. In the first quarter of the year, the decreased value of Hertz’s electric fleet resulted in a $195 million reduction in profits.
Rental companies “are entirely reliant on residual values,” expressed Shay Natarajan, a partner at Mobility Impact Partners, a private equity firm investing in sustainable transportation. “It’s simply a very challenging business model.”
James Iovino, a resident of Baldwin, N.Y., had around nine electric vehicles listed on the car-sharing platform Turo. However, he exited the business about a month ago after the prices of electric vehicles fell.
“I experienced losses for the same reason Hertz did — when Elon Musk speaks, the industry often suffers,” he remarked.
Some rental car companies, however, assert they are not discarding electric vehicles due to the recent price drops.
Enterprise Mobility has several thousand electric vehicles available across the United States, Canada, and Europe, and will continue to add more based on market demand, according to Mike Wilmering, a spokesperson for the company.
“We’re looking beyond just the number of available chargers and focusing on understanding power requirements and accessibility — both at our locations and within the communities we serve,” stated Mr. Wilmering. “Our goal is to ensure customers have an excellent experience with electric vehicles, and we’re prioritizing them in our long-term planning.”
For individuals who have never driven an electric vehicle, there can be a significant learning curve when they get behind the wheel of a battery-operated car. Rental agencies often lack the personnel to provide customers with a tutorial. Hertz, for instance, shares information online for those renting electric vehicles and sends instructions via email.
Last year, Tom Moore and his spouse rented a Tesla from a Hertz outlet in Portland, Oregon, as a trial for purchasing an electric vehicle.
His wife, who handled most of the driving, sought lessons from a neighbor with a Tesla back in Mountain View, California, before their trip. It was a smart move — the Hertz staff did not offer any guidance before handing over the key fob.
“They simply stated, ‘This is your parking spot,’” recalled Mr. Moore.
Hertz mentioned that it “has gained significant insights as an early leader in the electric vehicle rental sector, and as we adjust our fleet to meet consumer preferences, we are dedicated to continually improving the rental experience, which includes making it accessible and gratifying for all customers.”
Refueling has posed another challenge. Many rental agencies expect customers to charge electric vehicles to about 70 percent capacity prior to returning them. This means that customers need to plan for a stop at a charging station towards the end of their trips, which can be difficult when racing to catch flights and with a scarcity of fast chargers near the rental facility.
Rental companies prefer not to handle recharging because they aim to quickly return cars to circulation. Moreover, it can be challenging for rental agencies to set up chargers at airports.
“Airports are notoriously unaccommodating for the development of electric infrastructure,” stated Raghu Iyengar, an executive at Volkswagen of America who deals with sales to rental firms. He mentioned that demand for Volkswagen’s ID.4 electric SUV from rental agencies has been nearly nonexistent.
Customers who rent Teslas are granted access to Tesla’s Supercharger network, which is the largest fast-charging infrastructure in the United States. However, most Superchargers are compatible solely with Tesla vehicles. People renting cars from brands such as Kia, General Motors, or Polestar must utilize charging stations operated by different providers, each requiring its own mobile application for payment. Renters should also be cautious, as there are limited or no fast chargers in several regions, particularly in rural areas.
Even in a hub of technology, renting an electric vehicle can prove challenging.
Kerry Dietz, a retired architect from Springfield, Massachusetts, booked the “manager’s special” at Thrifty Car Rental, part of Hertz, during her visit to Berkeley, California, last year. Despite being an experienced electric vehicle owner with a Tesla, Thrifty provided her with a Polestar, a vehicle designed in Sweden and manufactured in China, which was incompatible with Tesla’s charging network.
“I spent the entire duration of our visit searching for a working charging station,” said Ms. Dietz. “It was truly a frustrating ordeal.”
As the popularity of electric vehicles rises, rental companies will need to devise effective methods for offering them, according to Mr. Iyengar from Volkswagen. “An electric wave is going to elevate all entities,” he remarked, “and rentals will adapt to that.”
