Confused on $7500 Rebate

[nojope]

Hello all, I just joined the forum and am considering leasing a Focus electric here in Phoenix, AZ, if a dealer can get one. I'm just confused about the $7500 federal rebate because I know Nissan gives lessees credit for it at the dealership, but I thought Ford didn't unless you buy it, that's why they compensated with a (currently) $9,000 discount. But then I read in a different thread someone mentioning the $7500 rebate in a lease deal. So I just want to make sure I understand what to expect before I go to the dealership.

Should I expect the $9000 Ford discount PLUS the $7500 discount if I'm leasing?

 

[jmueller065]

No, the $7500 is included in the $9000 (or whatever the current lease deal is) discount.

Its just Ford Credit passing on the $7500 to the customer.

 

[michael]

And incidentally this is a pretty good deal. BMW, for example, pockets part of the $7500 on leases. Chevrolet uses it to artificially increase the residual to an unrealistic value, thus making it unthinkable to buy the car out at the end of the lease.

The drawback is that (at least here in Taxifornia) the $7500 is treated like a down payment and subject to sales tax. Chevy's arrangement avoids this.

 

[NightHawk]

Yep as far as I understand it Ford's large lease cash incentive is mostly the $7500 federal tax credit.
Currently for the 2014 FFE for the next couple months or so the Ford lease cash is $10,000, though it can vary at times - it was $11,750 back in Sept and was $500 higher during Labor Day week.
If you purchase a new FFE outright (cash or via loan) instead of the lease cash incentive, Ford has a current bonus cash incentive of $4000, but you have to apply for the up to $7500 federal tax credit yourself, but that only works if you actually owe that much or more in federal taxes for that year.
If you don't owe much or any in federal taxes the only way to take advantage of the $7500 federal tax credit is thru the big lease cash incentive on a 3 year lease.

State electric vehicle rebates are separate, in the case of California you can apply for the current $2500 state tax rebate online yourself whether you bought a new FFE or lease one for at least 3 years. Once approved, they eventually (up to 60days or so) mail a check directly to you, so thats not a tax credit.

 

[WattsUp]

If you purchase a new FFE outright (cash or via loan) instead of the lease cash incentive, Ford has a current bonus cash incentive of $4000, but you have to apply for the up to $7500 federal tax credit yourself, but that only works if you actually owe that much or more in federal taxes for that year.

And by "owe" (because people get confused by this) we mean your entire tax liability for the year, or "total tax", not just what you might happen to "still owe the IRS" at the end of the year (for example, because your withholding didn't cover your total tax).

If you usually pay $7500 or more in taxes each year, you will most likely be able to claim the full tax credit. For example, if your tax liability was exactly $7500 for the tax year in which you purchased the FFE, then you could apply the full credit and pay $0 in taxes. If some money had already been withheld, you would get all that back as a refund.

But, if you usually pay less than $7500 in taxes, then you will only be able to claim a portion of the tax credit, and the rest of the credit will be lost. For example, if your tax liability was just $5000 for the tax year in which you purchased the FFE, you could apply $5000 of the credit (and again pay $0 in taxes) but the remaining $2500 would not be useful to you.

 

[Williamffe]

So, if you file jointly with spouse would I be more likely in getting all $7500?

 

[twscrap]

If your combined income is over $56k, then yes.

 

[Williamffe]

done and done cool thanks :mrgreen:

 

[Washingtonian]

The refund isn't quite that simple. Please don't assume that if you make a combined $56K that you have enough tax liability for the full $7500. That assumption could cost you thousands of dollars and does not take into account itemized deductions, credits for children, etc.

Assuming your financial circumstances are similar to last year, the easiest way is to review your 2013 tax return 1040 form. Line 61 shows your total tax liability. If that is over $7500 you should get the full amount in 2014 - again assuming your income is similar to 2013.

 

[jazclrint]

Hello, new guy here.

What a great thread. I was thinking about leasing new or maybe buying a used FFE in the late spring/early summer of next year. But all the talk about incentives brings things into perspective. Buying used might still be an option, but only if it is for less than $20,000. And I am a bit nervous owning an FFE as I am not completely certain Ford knows what it is doing building an all electric vehicle. I feel like leasing protects me from this. Also, as I don't make enough to owe $7500 in taxes leasing allows me to take full advantage of the tax credit. And at the end of the lease, if the car has proven itself then I can buy it. The lease is looking like a good thing from where I'm standing. Also, Ford allows you to pay the lease off early with out penalties, unlike Chevy. Assuming I understand all of this correctly.

 

[jmueller065]

And I am a bit nervous owning an FFE as I am not completely certain Ford knows what it is doing building an all electric vehicle.

No need to be nervous. Ford did an excellent job with the FFE. You'll find many of us here very happy with our FFE.

 

[michael]

I'm not aware of any reason you can't pay off a Volt lease early, but you definitely don't want to buy the Volt out of the lease.

And to be clear...Ford leases are from Ford itself, so they have some interest in keeping customers happy so they will get another Ford. Volt leases are from US Bank or Ally Bank who don't care if you ever get another Chevy, and they make things harder.

They reason you never ever would buy a Volt out of a lease is that the $7500 is used to artificially inflate the residual. If you buy, you would have to pay this artificially inflated residual price.

Ford and most others use the amount like a cash contribution, a capital reduction. The problem with this approach (at least in California) is that this amount is subject to sales tax at 9 to 10%.

That being said, I believe leases make a lot of sense in EV's since they are getting cheaper and better all the time.

 

[jazclrint]

I'm not aware of any reason you can't pay off a Volt lease early, but you definitely don't want to buy the Volt out of the lease. . . .

Ford and most others use the amount like a cash contribution, a capital reduction. The problem with this approach (at least in California) is that this amount is subject to sales tax at 9 to 10%.

I actually wasn't looking at the Volt, but their all electric econo box. Don't remember the name at the moment. First, the dealership had no information and knew nothing about it. Second, when I pressed for information about the lease they said there were "early payment penalty fees". Their words, not mine. And I had gone to them first. I was very surprised to when I went to the Ford dealership and found that not only were they aware of the car, but one of the new salesmen was actually leasing one.
And, I could pay the lease off early, no problems or fees attached.

Also, I live in TN so Cali's weird tax laws don't seem to apply. Thankfully.

Thank you for the replies!

 

[WattsUp]

I actually wasn't looking at the Volt, but their all electric econo box. Don't remember the name at the moment.

Spark.