Suggested Citation:
Hoogland, Kelly, Scott Hardman, Debapriya Chakraborty, David S. Bunch (2025)

The US Federal Tax Incentive Encourages Buyers to Lease and Purchase Electric Vehicles

Using a survey of approximately 6200 California plug-in electric vehicle (PEV) adopters, including both battery electric vehicle (BEV) and plug-in hybrid electric vehicle (PHEV) adopters, we investigate lessees’ and purchasers’ hypothetical adoption decisions in the absence of the federal tax credit. The findings indicate that many PEV adopters would not choose a PEV without the tax credit, with more PEV lessees reporting they would not adopt a PEV without the incentive. We find through logistic regression models that as the value of the federal tax credit increases, the more likely it is that if that tax credit were unavailable, PEV purchasers and lessees would choose a conventional vehicle or forego getting a new vehicle. The models also identify socio-demographic and vehicle characteristics associated with increased reliance on the federal tax credit. Purchasers and lessees without access to at-home charging are more dependent on the tax credit, suggesting the credit may be useful in encouraging PEV adoption for those without home charging, perhaps compensating for the higher costs and lower convenience of using public charging. Buyers of less expensive PEVs are also more reliant on the federal tax credit. While the mechanism established by the IRA allows all leased PEVs to receive the full tax credit as an upfront discount and bypass all vehicle and buyer eligibility requirements, Manufacturer Suggested Retail Price (MSRP) caps could ensure the credit is administered to those most reliant on it. The lack of sustainable long-term funding for financial incentives may have negative implications for PEV market growth, especially for those with increased barriers to adoption.