For most of 2024 and 2025, leasing was the smart move on an EV, and it had nothing to do with monthly payments or depreciation. It was a tax trick: leasing companies claimed a $7,500 commercial credit that private buyers couldn’t touch, and quietly passed some of it through as a lower lease payment. Financial writers called it the “lease loophole,” and for two years it was genuinely the best deal in EV finance.
It ended on 30 September 2025, and the market reaction was immediate. Kelley Blue Book reported that Tesla raised Model Y lease payments by up to $70 a month and Model 3 payments by up to $80 a month right after the credit expired — rebuilding roughly a third of the old credit’s value straight back into the sticker lease price within weeks. The loophole isn’t a grey area anymore. It’s just gone, and lease pricing has already adjusted to reflect that.
So the lease-versus-buy decision on an EV in 2026 has returned to fundamentals: money factor, residual value, mileage allowance, and what you actually plan to do with the car. Here’s how that plays out now that the artificial thumb has come off the scale.
The key numbers
- 30 September 2025 — when the $7,500 purchase credit (30D) and the commercial/lease credit (45W) both expired
- $70–$80/month — how much Tesla raised lease payments immediately after, on the Model Y and Model 3
- $2,520–$2,880 — that hike totalled over a 36-month lease
- $208/month — what the old $7,500 credit was worth spread across a 3-year lease; the hike rebuilt roughly a third of it
- 0% — federal tax benefit now attached to either leasing or buying an EV
- 3–4 years old — where a used EV sits at the strongest value point in the current market, per our used EV buying guide
What actually expired, and when
Three separate federal EV incentives ran out within nine months of each other, and it’s worth being precise about which is which because coverage often blurs them together.
| Credit | What it covered | Expired |
|---|---|---|
| Section 30D (New Clean Vehicle Credit) | Up to $7,500 for eligible private new-EV purchases, subject to income and price caps | 30 Sep 2025 |
| Section 25E (Used Clean Vehicle Credit) | Up to $4,000 for eligible used-EV purchases | 30 Sep 2025 |
| Section 45W (Commercial Clean Vehicle Credit) | Up to $7,500, claimed by the leasing company and often passed through as a lower payment — the “lease loophole” | 30 Sep 2025 |
| Section 30C (home charger credit) | 30% of charger hardware and install cost, up to $1,000 | 30 Jun 2026 |
The narrow exception: if you signed a binding written purchase contract and made a payment on or before 30 September 2025, you can still claim the credit on delivery even if the car arrives in 2026 — but you need documentation proving both dates. For everyone starting the decision fresh in late 2026, none of this applies. The credit is not phasing down; it is off.
Why leasing specifically got hit harder than buying
Section 45W didn’t have the income limits, price caps, or North American assembly and battery-sourcing rules that governed the private purchase credit (30D). A leasing company buying the car for commercial purposes could claim the full $7,500 on almost any EV, then pass some of that through to the lessee as a lower monthly payment — which is why plenty of buyers who didn’t qualify for 30D at all, or wanted a car built outside North America, ended up leasing purely for the money.
That workaround is what died on 30 September 2025, and it’s why lease payments moved so much faster than purchase prices did. A buyer’s price was never propped up by 45W in the first place; a lessee’s payment often was, directly and by design.
The honest lease-versus-buy comparison, credit-free
With the incentive gone from both sides, the decision comes down to the same variables that governed any car lease before EVs existed — plus a few EV-specific wrinkles worth naming.
| Leasing | Buying | |
|---|---|---|
| Upfront cost | Lower — typically first month plus a smaller down payment | Higher — full price or a larger deposit |
| Monthly cost | Now reflects full sticker price, no hidden credit discount | Loan payment, or none if paid cash |
| Mileage | Capped, typically 10,000–12,000/yr, overage fees $0.15–$0.30/mile | Unlimited |
| Battery degradation risk | Not your problem — hand it back | Yours, though warranty typically covers 8yrs/100,000mi to a capacity floor |
| Depreciation risk | Not your problem — baked into the residual set by the lessor | Yours, and it’s steep on EVs (see below) |
| Access to newest tech | Easy — hand back and re-lease every 2–3 years | You keep the car as software and range improve elsewhere |
| State/local incentives | Some survive and may still apply to a lease | Some survive and may still apply to a purchase |
Why depreciation now tips the scale toward buying, specifically used
This is where the EV-specific case gets stronger for buying than it would be for a petrol car, and it comes from a fact covered in depth in our EV depreciation guide: EVs lose value fast in the first three to four years, then the curve flattens sharply.
That is bad news if you buy new and eat the depreciation yourself. It is good news read the other way: a three-to-four-year-old EV has already absorbed the steepest part of the loss, and current data shows the used market has actually firmed up in 2026 rather than continuing to fall — see our used EV buying guide for the specifics. Buying a lightly used EV captures the exact discount that leasing used to manufacture artificially through the tax code, except now it’s a real market discount rather than a subsidy that can vanish overnight.
Put simply: the credit used to make new-lease EVs artificially cheap. With it gone, a used EV is the closest thing left to that old value proposition — except it’s backed by an actual asset losing actual value, not a government incentive that can and did disappear in a single legislative session.
When leasing still makes sense in 2026
The credit disappearing doesn’t make leasing wrong for everyone — it just removes the one reason that used to override every other consideration. Leasing remains the better fit if:
- You want a new EV every 2–3 years and value staying current on range, charging speed and software over minimizing total cost.
- You drive a predictable, moderate annual mileage that fits comfortably under the lease’s cap, so overage fees never become a factor.
- You want zero exposure to depreciation and battery degradation risk, and are willing to pay for that certainty through the lease’s built-in margin.
- You’re testing whether EV ownership actually suits your routine before committing to a purchase — a lease is a lower-stakes way to find out than a five-year loan.
- State or manufacturer incentives still apply to your specific lease. Several states run their own EV rebates independent of the federal credit, and some are structured to apply at lease signing — worth checking before assuming there’s nothing left on the table.
When buying wins, and it usually does now
- You plan to keep the car five years or more. Ownership costs compound in your favour the longer you hold, while a lease resets the clock — and often the payment — every 2–3 years.
- You drive above the typical lease mileage cap. High-mileage drivers get hit hardest by lease overage fees, and this is also exactly the group for whom EV running-cost savings compound fastest — see our EV versus hybrid cost comparison for how mileage changes the underlying economics.
- You’re buying used rather than new. The depreciation argument above is strongest here, and lease deals are rarely available on used inventory in the first place.
- You want to avoid interest-rate uncertainty on a future lease renewal. Money factors (the lease equivalent of an interest rate) have been elevated through 2025 and into 2026, with only gradual easing expected — buying with cash or a fixed loan sidesteps that entirely.
State and local incentives are the one thing still worth checking
The federal credit is gone, but it was never the only incentive in play. A number of states, utilities and municipalities run their own EV rebates, tax exemptions, or reduced registration fees, and some remain active in 2026 regardless of what happened federally. These vary enormously by location and change without much notice, so verify current availability at the Department of Energy’s laws and incentives database rather than assuming a rebate you read about is still funded. A meaningful state incentive can shift the lease-versus-buy maths back in favour of leasing in specific places, even with the federal piece gone entirely.
What hasn’t changed
It’s worth remembering that the tax credit was never the whole financial picture, and everything else about EV ownership economics is unaffected by its expiration. Running costs, covered in our home charging cost breakdown, are the same whether the car was leased or bought. Maintenance savings are the same. The choice between an EV and a hybrid, which now leans harder toward the hybrid on new-car economics specifically, is a separate question from lease-versus-buy and applies regardless of which financing route you choose.
Frequently asked questions
Is the EV lease tax credit loophole still available in 2026?
No. The Section 45W commercial credit that funded it expired for vehicles acquired after 30 September 2025. Lease payments have already adjusted upward to reflect its absence — Tesla raised Model Y and Model 3 lease payments by up to $70–$80 a month within weeks of the credit ending.
Should I lease or buy an EV now that the credit is gone?
Buying, and specifically buying used, now has the stronger financial case for most people. Leasing still suits drivers who want a new EV every 2–3 years, drive moderate and predictable mileage, and want zero depreciation risk — but that’s a lifestyle choice now rather than a tax-driven one.
What federal EV incentives are still available in 2026?
None of the major ones. The $7,500 new-vehicle credit (30D), the $4,000 used-vehicle credit (25E), and the $7,500 commercial/lease credit (45W) all expired 30 September 2025. The home charger installation credit (30C) followed on 30 June 2026. State, utility and municipal incentives are separate and some remain active.
Are there any exceptions to the credit expiration?
Yes, a narrow one. If you signed a binding written purchase contract and made a payment on or before 30 September 2025, you can still claim the applicable credit when the vehicle is delivered, even into 2026 — with documentation proving both dates.
Why did EV lease payments go up so much after the credit expired?
Because the credit had been flowing through the lease as a hidden discount rather than being visible on the sticker. Once it disappeared, lessors rebuilt roughly that value back into the advertised payment — Kelley Blue Book documented Tesla doing exactly this within weeks of the September 2025 deadline.
Is buying a used EV a better deal than leasing a new one now?
Often, yes. Used EV prices have firmed in 2026 rather than continuing to fall, and a 3–4-year-old EV has already absorbed the steepest part of its depreciation, which is roughly what the old lease credit used to manufacture artificially through the tax code — except now it’s a real market discount on a real asset.
Do state EV incentives still exist?
In many places, yes, independent of the federal credit’s expiration. Availability and amounts vary by state and change without much warning, so check a current source like the Department of Energy’s incentives database rather than relying on older articles.
The short version
The EV lease loophole that made leasing the obviously smart move through 2024 and 2025 is dead — the commercial credit funding it expired on 30 September 2025, and lease payments adjusted upward almost immediately to absorb the loss. With the incentive gone from both sides, the decision has returned to ordinary lease-versus-buy fundamentals: leasing still suits someone who wants a new EV every few years and predictable, capped mileage; buying, particularly buying used, now has the stronger financial case for most people, because a 3–4-year-old EV captures roughly the same discount the old credit used to manufacture, except it’s backed by a real depreciated asset rather than a subsidy that can vanish in a single tax bill. Check state and local incentives before assuming there’s nothing left on the table — the federal piece is gone, but it was never the only piece.
