BEWARE misinformation re: RAV4 EV lease ($7,500 tax credit)

I'm in the market for a 2013 Toyota RAV4 EV, but I can't seem to find a reputable dealer in Southern California who will give honest answers about leasing that vehicle.

Two separate dealers have told me that I can lease the RAV4 EV and still claim the $7,500 tax credit when I file my Federal taxes for 2012. That is complete nonsense! What a great way to trigger an audit - try to steal $7,500 from the IRS!

Check out the relevant IRS form: http://www.irs.gov/pub/irs-pdf/f8936.pdf - it clearly states in the instructions that "[the person claiming the tax credit must be the owner of] the vehicle. If the vehicle is leased, only the lessor and not the lessee is entitled to the credit." [emphasis added]

If you find a dealership that is giving this erroneous information (i.e., LYING to you), please post that dealer's name in this thread so that others can be warned. If your dealership is lying to you about this, what else are they lying about?

I'm waiting to hear back from both of the dealerships I visited before I out them to give them a chance to change their tunes. (There's always the possibility that it's just ignorance and not deception.)

NOTE: You can get the California $2,500 tax rebate if you lease, but the lease has to be at least 3 years. (If you purchase, you have to own the RAV4 EV for 3 years or the state may come after you for fraud.)

The sales people at car dealerships are NOT tax attorneys! Did you talk to the Finance Manager? That guy should know something about federal tax credit eligibility. But in all fairness, the dealer has nothing to do with applying for either the tax credit or the CA rebate. The leasing company should would (or should) know more, but that entity is not generally onsite at the dealership.

Furthermore, quite frankly, because the RAV4 EV is such a "new" car, there is a lot of misinformation about it out there amongst the dealerships. However, you have come to the right place, because the collective members of this forum have a wealth of information, AND have mostly already "been there, done that", so they know all about the buying or leasing "experience", and good deal of technical information about the car itself.

Why not just buy it at 1.9% APR if that financing deal is still available, and spread the payments over at least 5 years? Then you will get the whole enchilada! :mrgreen:

Blastphemy said:

NOTE: You can get the California $2,500 tax rebate if you lease, but the lease has to be at least 3 years. (If you purchase, you have to own the RAV4 EV for 3 years or the state may come after you for fraud.)

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That's not fraud. You either pay back a pro rata amount (used car for 18 months of 36 required would likely be 50% returned), or you transfer the vehicle to another owner who will use the car in California.

The $7500 Federal credit was a difficulty at the Toyota dealer that I bought my Rav4 from. Here is a post I made on the http://www.MyNissanLEAF.com forum. I specifically purchased the car over a lease because of this single issue.

http://www.mynissanleaf.com/viewtopic.php?p=240964#p240964

WARNING WARNING WARNING

Toyota has an interesting handling of the IRS $7500 tax credit. Those of us who bought a LEAF know all too well that when you buy the car, you file tax form 8936 for the $7500 credit.

But if we lease, Nissan will rightly take the credit, and pass it on to in your lease as a $7500 tax credit.

TOYOTA DOES NOT DO THIS !!! Toyota keeps the credit, according to the Toyota regional dude who explained it away with the dealer I was trying to lease the Rav4 from. The $7500 is just magic that Toyota seems to think that the end consumer is better off not knowing.

So, when Toyota says their lease has $3200 cash for you, the leasee, they really mean they are going to give you $3200 of the $7500 they get as a credit, for themselves. Instant $4300 profit for them (not the dealer... the legal owner, Toyota Financial (or whatever it's called)).

Caveat Emptor

Dsinned said:

The sales people at car dealerships are NOT tax attorneys! Did you talk to the Finance Manager? That guys should know the most about the tax credit eligibility, generally speaking. But in all fairness, the dealer has nothing to do with applying for either the tax credit or the CA rebate. The leasing company should know more, but that is not somebody who works at the dealership.

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It's not that difficult being a car salesperson. Once one learns the 5-10 models sold by their dealership, researches the most relevant competition, sees the dealership culture to know how to sell as a member of the team, and understands how the cars are bought/leased, there's nothing to it. Yet I see salespersons sitting on their butts all day long who don't know their product and don't know how it's sold who should be reading an owner's manual, taking a car for a drive to get familiar with it, or talking to the finance guys to learn the incentives and deals they offer. But those stellar salespersons subscribe to your assertion that broadening their knowledge beyond how the shift in the Pruis differs from the Corolla isn't necessary nor expected, so a customer with even a rudimentary knowledge of all this will know more and get frustrated quickly at the incompetent sales experience.

When I walk into a dealership, I should NEVER know more than the salesperson...but I always do, and it's annoying. When was the last time you walked into your accountant's office and knew more than he did? Or knew more than the plumber fixing your gas line, or knew more than the electrician installing your Leviton charger and TOU meter?

Perhaps a salesperson would have to be a bit savvy to know specifically that one must file form 8936 to apply for the $7,500 credit if a qualifying vehicle is bought, but knowing that a customer who chooses to lease can't apply for the tax credit at all should be fundamental knowledge - especially if that same salesperson is lying to his customers by saying they can get the credit when leasing! And they sure as heck shouldn't be telling customers that it's a $7,500 tax rebate (like the CA $2,500 state incentive is) to make them think a check will be in the mail. (Yes, I was told that one too.)

In my case, it was the senior Finance people and the General Manager who were "confirming" this to my salesperson. Even when I pulled out IRS Form 8936 and showed them the instructions, their cognitive dissonance made it impossible for them to accept the reality of their misinformation. They've probably leased so many cars with this promise that their brains refused to let them accept the truth, and also probably because they just didn't want to. They know most people are gullible and frequently won't fact-check their salesperson, so the dealership keeps lying to make the car appear $7,500 less expensive to its unsuspecting prey.

Dsinned said:

Why not just buy at 1.9% APR if that deal is still available, and spread the payments out over at least 5 years? Then you will get the whole enchilada,

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For five reasons: (1) The lease is less expensive even without the $7,500 credit included; (2) I don't have to worry about how the battery performs after three years; (3) I won't have to deal with trading in the car when the time comes and getting screwed because it'll be obsolete technology by then; (4) I still don't trust the technology 100%, so leasing is a good hedge; and (5) In three years, there are going to be electric cars available that put the RAV4 EV to shame, and I want to be free to get one without strings attached (see #3).

TonyWilliams said:

That's not fraud. You either pay back a pro rata amount (used car for 18 months of 36 required would likely be 50% returned), or you transfer the vehicle to another owner who will use the car in California.

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It's fraud if you don't pay back the pro rata amount! Even if it's in ignorance, it'll cause the CA Franchise Tax Board to come knockin' at your door (as one of my neighbors found out when he bought a Leaf and then transferred it to his son in Arizona after just 3 months).

Blastphemy said:

The lease is less expensive even without the $7,500 credit included;

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How did you determine this? I don't agree a lease is cheaper with it, and $7500 is 15% of the cost of the car.

The lease money factor is almost 0%. The finance deal is 1.9%. The total interest on a zero down, "full pop" sale of $51,000, plus 10% for tax, title, and license is $56,000:

60 months - $979.11 @ 1.9% interest
Interest paid - $2,746.40
State / Fed hand outs - $10,000

Yes, the lease would save you about $2500 in interest, but lose up to $7500 in Fed tax credit, for $5000 more expensive on a lease.

It's fraud if you don't pay back the pro rata amount! Even if it's in ignorance, it'll cause the CA Franchise Tax Board to come knockin' at your door (as one of my neighbors found out when he bought a Leaf and then transferred it to his son in Arizona after just 3 months).

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Yes, going out of state will cost you!

TonyWilliams said:

How did you determine this? I don't agree a lease is cheaper with it, and $7500 is 15% of the cost of the car.

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Frankly, it's apples to oranges since the lease would be 3 years and the purchase 5 years. But it's easy enough to compare both at 36 months using the exact numbers given to me by the dealership:

On a purchase, it's $50,870 price + $4,451.13 sales tax + $3,103.59 DMV/fees/etc. - $2,500 incentive - $10,000 down payment = $802.95/mo. Therefore, after 36 months, assuming that I got my $10,000 deposit back from the IRS and CA ($7,500 credit + $2,500 rebate), I will have paid $28,906.20 in total ($802.95 x 36).

On a lease, it's $50,870 price + $2,550 DMV/fees/etc. + $737.35 first payment - $3,200 incentive - $3,500 down payment; with money factor of 0.00001, residual of $23,400, 15,000 miles/yr, and sales tax of 8.75% = $737.35/mo. Therefore, after 36 months, assuming that I got $2,500 back from CA, I will have paid $26,807.25 in total ($737.35 x 35 + 1,000).

Therefore, purchasing is more expensive by $2,098.95.

The one thing I don't know is whether Toyota's leases have a Disposition Fee at the end; I forgot to ask about that. If there is one, that would add to the cost of the lease making the gap a little smaller between lease and purchase.

Regardless, in both cases I'll have a car with a theoretical residual value of $23,400 (according to Toyota). In the case of the lease, I just turn in the car, thank Toyota, and go buy/lease my next vehicle. But in the case of the purchase, if I want to replace my RAV4 EV, I'll have to either sell it or trade it in...and there's no way I'll get $23,400 for a used car with 3-year-old obsolete technology. So I have to take an additional loss if I purchase and then want to trade up after 36 months.

The only reason to purchase the RAV4 EV is if one intends to keep it for 6 years or more. If one is of the opinion that three years from now we'll be seeing Tesla Model Xs, Chevrolet Volt SUVs, Cadillac ELR SUVs, etc. available with better range and technology, then the lease is the best option, and also the least expensive.

But the point of this thread is to warn potential RAV4 EV consumers about dealerships who lie about the $7,500 Federal tax credit, so perhaps we should get back on topic? If Toyota passed on the entire $7,500 to the consumer instead of just $3,200, the lease would be $607/mo instead of $737/mo - a savings of $4,680 over the 36-month lease term.

So when Toyota chooses to pocket their instant $4,300 profit, they're screwing each customer out of $4,680!

Blastphemy said:

On a purchase, ... $10,000 down payment.... Therefore, after 36 months, assuming that I got my $10,000 deposit back from the IRS and CA ($7,500 credit + $2,500 rebate), I will have paid $28,906.20 in total ($802.95 x 36).

On a lease, ... - $3,500 down payment... Therefore, after 36 months, assuming that I got $2,500 back from CA, I will have paid $26,807.25 in total ($737.35 x 35 + 1,000).

Therefore, purchasing is more expensive by $2,098.95

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I guess with only 36 months and 12,000 mils per year being the only factors, you seem to be ahead. Somebody who drives more than 12,000 miles, or will keep it more than 36 months, may or may not come out ahead.

Ownership means I can do just about anything to the car. Plus, I rarely "invest" in a depreciating asset, and that means no down payment, particularly with near free borrowed money. Naturally, any new car acquired is a depreciating asset, but it has tangible value that can be measured.

My purchase was zero down, so when I get my $2500 state check, I can hopefully put that to work somewhere (except offsetting low cost borrowed money).

Also, I won't physically "see" $7500 except as a line credit on my taxes, so again, I'm reluctant to spend that money either as a down payment (that had to come from somewhere).

Anyway, thanks for pencilling it out.

Blastphemy said:

On a purchase, it's $50,870 price + $4,451.13 sales tax + $3,103.59 DMV/fees/etc. - $2,500 incentive - $10,000 down payment = $802.95/mo. Therefore, after 36 months, assuming that I got my $10,000 deposit back from the IRS and CA ($7,500 credit + $2,500 rebate), I will have paid $28,906.20 in total ($802.95 x 36).

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Another factor, but I am not sure if still in effect for the 2012 tax year, you can claim an IRS tax credt on an itemized return for the sales tax paid to purchase a new motor vehicle. The sale tax where I live is currently 9.375% (going up to 9.625% in January), so that's another big chunk of change you'll save for the "privilege" of living in CA. I'm not sure you can do the same thing on a lease.

Dsinned said:

Another factor, but I am not sure if still in effect for the 2012 tax year, you can claim an IRS tax credt on an itemized return for the sales tax paid to purchase a new motor vehicle. The sale tax where I live is currently 9.375% (going up to 9.625% in January), so that's another big chunk of change you'll save for the "privilege" of living in CA. I'm not sure you can do the same thing on a lease.

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Didn't that go away in 1986?

A lease in California also has a sales tax, but it's called a "use" tax since you don't own it, and it's paid monthly.

I don't know if the calculations above calculated use tax.

Blastphemy said:

TonyWilliams said:

...and there's no way I'll get $23,400 for a used car with 3-year-old obsolete technology. So I have to take an additional loss if I purchase and then want to trade up after 36 months.

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I'm pretty certain that a 3 year old rav4 ev is going to go for more than that. The 10+ year old 1st gen rav4 ev's go for close to that today!

qwk said:

I'm pretty certain that a 3 year old rav4 ev is going to go for more than that. The 10+ year old 1st gen rav4 ev's go for close to that today!

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The 10+ year old 1st gen didn't have any real competition until recently. In three years, the 2013 RAV4 EV is going to be up against the Tesla Model X, the Chevrolet MPV5, Via Motors' large EREV SUVs and vans, the Nissan TeRRA, a Cadillac SUV variant on the ELR, an Infiniti SUV variant on the LE/Emerg-E, not to mention possible electric SUVs from Mitsubishi, Ford, and Lexus. Hopefully, it will also have competition from a 2016 RAV4 EV and electric Highlander! And don't forget: by then the 2013 RAV4 EV will have 45,000 miles on it and a three-year-old battery that's starting to lose it's full capacity - not great for the sales pitch...

TonyWilliams said:

I'm pretty certain that a 3 year old rav4 ev is going to go for more than that. The 10+ year old 1st gen rav4 ev's go for close to that today!

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Agreed. The 1st generation RAV4 EV (1997 to 2003) is a good benchmark for what we might expect in future years with respect to the new RAV4 EV. If anything, with only 2600 planned for production, and a little over half as many of the first version, we might even see these cars become somewhat "collectible", and conceivably, although unlikely, start INCREASING in value over the next several decades. A lot of factors must come together for that to happen, but right now the RAV4 EV has a uniquely place in automotive history being the modern day continuation of the first of its kind. And if like the last generation, it continues to uphold a proven track record, it may be even more desirable to own as a "used car", because of the undeniable prestige of its relationship to the AMERICAN car company, Tesla Motors. One can only hope anyways . . . :mrgreen:

Blastphemy said:

qwk said:

I'm pretty certain that a 3 year old rav4 ev is going to go for more than that. The 10+ year old 1st gen rav4 ev's go for close to that today!

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The 10+ year old 1st gen didn't have any real competition until recently. In three years, the 2013 RAV4 EV is going to be up against the Tesla Model X, the Chevrolet MPV5, Via Motors' large EREV SUVs and vans, the Nissan TeRRA, a Cadillac SUV variant on the ELR, an Infiniti SUV variant on the LE/Emerg-E, not to mention possible electric SUVs from Mitsubishi, Ford, and Lexus. Hopefully, it will also have competition from a 2016 RAV4 EV and electric Highlander! And don't forget: by then the 2013 RAV4 EV will have 45,000 miles on it and a three-year-old battery that's starting to lose it's full capacity - not great for the sales pitch...

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Three years from now, there isn't going to be any EV with the specs of the Tesla drivetrain--unless it's a Tesla powered vehicle which costs $$$. You know how I know? Three years ago I heard the same BS prediction.

100 miles of real world range, good luck...
Comparable in performance, nope..(remember the original rav ev went from 0-60 in 19 seconds)
10kwh charging, try again

The other vehicles you mentioned are hybrids. Totally different market.

Blastphemy said:

Hopefully, it will also have competition from a 2016 RAV4 EV and electric Highlander!

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Perhaps you didn't see the announcements from Toyota that cancelled their mass production EV projects. They only make the Rav4 EV for one reason.

There won't be a new 2016 Rav4 EV based on the quite obvious... none of these EV's sell very well, and Toyota already knows that today. The only things that will change that are if more states adopt California's rules.

qwk said:

Three years from now, there isn't going to be any EV with the specs of the Tesla drivetrain--unless it's a Tesla powered vehicle which costs $$$. You know how I know? Three years ago I heard the same BS prediction.

100 miles of real world range, good luck...
Comparable in performance, nope..(remember the original rav ev went from 0-60 in 19 seconds)
10kwh charging, try again

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I don't think I understand your post. If three years ago prognosticators were predicting 100 miles of real-world range on a single charge, 0-60 in less than 7 seconds with amazing intermediate acceration, and fast charging, they all exist now - the first two in the RAV4 EV and the third in the Tesla Model S and Leaf. I'm probably just missing your point - sorry. Perhaps you're saying only the Model X and Tesla-powered RAV4 EV will have this and none of the competitors? That's possible, but three years is a long time, and if consumers begin voting with their wallets for EV or EREV vehicles in significant numbers, the R&D will catch up at other car manufacturers. I'd rather be hopeful than cynical about the future of EVs.

qwk said:

The other vehicles you mentioned are hybrids. Totally different market.

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I have many friends who have both a Volt and a Leaf, and they consider those vehicles interchangeable (except for long trips, in which case the fully-electric vehicle stays home). I own a Volt and my wife will probably buy the RAV4 EV next year. Aside from one being a sedan and the other an SUV, we don't see them as any different for our respective daily commutes and we'll probably switch off from time to time. Leaf owners buy Volts and Volt owners buy Leafs, and without a doubt RAV4 EV owners will buy Chevy's MPV5 and vice versa, along with other low-gas or no-gas alternatives.

TonyWilliams said:

Perhaps you didn't see the announcements from Toyota that cancelled their mass production EV projects. They only make the Rav4 EV for one reason.

There won't be a new 2016 Rav4 EV based on the quite obvious... none of these EV's sell very well, and Toyota already knows that today. The only things that will change that are if more states adopt California's rules.

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As I mentioned to qwk above, I prefer to be more optimistic than cynical. If there's a market for a 2016 RAV4 EV and Toyota can make money on it (instead of just building it for CA compliance), it'll be built. Sales of the 2013 RAV4 EV have slipped after the initial enthusiasm, but it's such a great vehicle that I strongly believe word will get out, just like it did for the poorly-marketed Volt. My wife had absolutely zero interest in the RAV4 EV; she was quite content to replace her current car with the 2013 Infiniti FX50 V8...until I took the initiative and rented the RAV4 EV for a day. The first words out of my wife's mouth when she merged onto the highway for the first time? "Holy crap! This is awesome!" Bye bye, FX50.

OK - I know I'm contributing to the drift, but let's remember the topic of this thread and try to stay with it. I'm surprised no moderator has stepped in to excise the tangents and move them to their own thread...

Three years ago there were supposed to be all these EV offerings from the big manufacturers. Where are they? My point is that since the only vehicles that fit the criteria above are/will be Tesla powered for at least the next 5-10 years minimum, they will keep their value well.

BTW, the leaf's real world range is a mere 40-50 miles. No way can one drive it like a normal car, and get 100 miles like the new rav4.

qwk said:

BTW, the leaf's real world range is a mere 40-50 miles. No way can one drive it like a normal car, and get 100 miles like the new rav4.

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No, a LEAF won't ordinarily drive 100 miles, but then the EPA rating on a full charge is 73 miles. The LEAF has 21kWh available when new (and warm), so at 65mph it gets 4 miles/kWh (without heater, on level road, no wind, etc) for a total of 84 miles of range.

The Rav4 is EPA rated at 113 miles with a full charge, and can drive 146 miles at 65mph with a new, non-degraded battery.

-------EPA- 65mph @ Economy - Usable battery

LEAF - 73 -- 84 @ 4.0 miles/kWh - 21.0kWh
Rav4 -113 - 146 @ 3.5 miles/kWh - 41.8kWh

I thought the EPA's range rating of the RAV4 EV is only 102 miles, because of Toyota's dual charging modes, i.e. 92 miles for a standard charge and 113 miles for an extended charge. Or, was 92 and 113 what the EPA got for city vs. highway driving? Regardless, it sort of "looks" like the EPA simply averaged the two ranges to get 102. In reality, these numbers seem much lower than the actual ranges most RAV4 EVs will get in the real world, but then again, "hypermiling" has no relationship to the EPA's test cycle. :mrgreen:

Dsinned said:

I thought the EPA's range rating of the RAV4 EV is only 102 miles, because of Toyota's dual charging modes, i.e. 92 miles for a standard charge and 113 miles for an extended charge. Or, was 92 and 113 what the EPA got for city vs. highway driving? Regardless, it sort of "looks" like the EPA simply averaged the two ranges to get 102.

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http://www.toyota.com/rav4ev/

It only says 102 miles on the Toyota website:



http://www.greencarcongress.com/2012/08/rav4ev-20120803.html



...Toyota expected the electric SUV to achieve an EPA driving range rating of 92 mi (148 km) for this [Normal] charging mode. Extended mode allows the battery to charge to its full usable capacity of 41.8 kWh, providing an expected EPA driving range of 113 mi (182 km) according to Toyota estimates.[14] The EPA rated just one range of 103 mi (166 km)


Charge modes and range. The determination of EPA-rated range for the RAV4 EV is a bit convoluted, noted Sheldon Brown, Executive Program Manager for the RAV4 EV at the Toyota Technical Center in Michigan. Basically, EPA calculates EV range based on the J1634 test procedure, reduces it by 30% and harmonically averages the results them for city and highway usage. However, the RAV4 EV has two defined charge modes.

In our recent discussions with EPA, the certification side decided that they should apply the user-selectable interpretation of the drive mode policy—a policy we felt was meant to govern modes that impacted efficiency. And now they are applying that to how we calculate range.

Since we have the two different modes, we have to test both the city and highway in both the normal and extended mode. We average those, take the 30% reduction, and then once again harmonically average the city and highway cycles. So, in a standard mode of 92 miles, in an extended miles we might see a label range of 113 miles.
—Sheldon Brown

What will appear on the label is likely, however, to be around 103 miles, with a label fuel efficiency of 76 mpge.

My point is not that the EPA is incorrect. It's a matter of interpretation. We feel that their interpretation is misguided in this particular application. But it really is confusing to the customer and to the general public when we talk about range calculation. Averaging two different modes and coming up with a number is very difficult to completely understand.
—Sheldon Brown

In developing the RAV4 EV, the engineering team shot for a range of about 170 miles on the LA-4 cycle—which simulates an urban cycle with frequent stops. Real-world data gathered during the testing of six Phase 0 prototypes found a distribution of ranges that reached 145 miles, with a concentration being in the 80–100 mile bins (partly due to the routes designed for the eFAST methodology, Brown noted).

The 80-105 mile or so range corresponds to about 28-34 kWh of energy use. This suggests, Brown said, that the RAV4 EV Normal mode capacity has a real-world range of approximately 100 miles.