A wave of affordable used electric vehicles (EVs) is flooding the market as leases signed under a 2022 tax loophole begin to mature, offering budget-conscious buyers unprecedented access to EVs. According to Cox Automotive, nearly 1 million EVs were leased from early 2022 through March 2025, driven by incentives that made leasing more attractive than buying, reports Axios.

Leasing Loophole Fuels EV Surge

The 2022 Inflation Reduction Act (IRA) introduced a $7,500 tax credit for EV purchases, but strict sourcing rules limited eligible vehicles. A workaround emerged: leasing qualified as a commercial sale, allowing banks to claim the credit and pass savings to consumers via lower monthly payments.

This “leasing loophole” caused EV lease rates to skyrocket from 15% in 2022 to 67% by March 2025, per Cox Automotive.

“Leasing became a game-changer for EV adoption,” said Stephanie Valdez, an analyst at Cox Automotive.

Wave of Lease Returns Begins

With most leases lasting two to three years, the first wave of these vehicles is now hitting dealerships. Recurrent Auto reports that 123,000 leased EVs and plug-in hybrids will return to the used market in 2025, surging to 329,000 in 2026 and 650,000 by 2027.

That’s over 1 million used EVs in three years, equivalent to a tidal wave of inventory. For comparison, used EV sales are expected to exceed 100,000 units in Q2 2025, bolstered by a $4,000 federal tax credit for used EVs.

Flood Of Affordable Used Evs Hits Market As Lease Returns Surge

Benefits for Buyers and Industry

This influx means more choices for cost-conscious buyers. Used EVs, often priced 20-30% below their original MSRP (approximately $10,000-$15,000 less for a $50,000 vehicle), make electric driving accessible to a broader audience. For example, a 2022 Tesla Model 3 leased for 36 months (about 36,000 miles driven) could return at roughly $25,000-$30,000, compared to its original $40,000 price.

This affordability could accelerate EV adoption, especially for families seeking efficient vehicles amid fluctuating gas prices (currently averaging $3.50/gallon nationwide).

Dealerships also benefit from steady inventory, unlike the unpredictable trade-ins from purchased vehicles.

“Lease returns give us a clear pipeline to stock reliable, low-mileage EVs,” noted Valdez in the Cox report.

However, the industry faces challenges as EV battery range and charging infrastructure remain concerns for buyers. Most returned EVs offer 200-300 miles of range, sufficient for urban commuting but less ideal for long-distance travel without fast-charging access.

Policy Shifts Loom

The future of EV incentives is uncertain. President Trump and congressional Republicans plan to dismantle Biden-era policies, including the $4,000 used-EV tax credit and the leasing loophole. This could slow EV sales momentum, as leasing accounted for two-thirds of EV transactions by early 2025. Without incentives, monthly lease payments could rise by $100-$200 (based on a $7,500 credit spread over 36 months), potentially deterring new lessees.

What’s Next for EV Buyers

The flood of used EVs offers a golden opportunity for buyers. Models like the Nissan Leaf (150-200 miles range), Chevy Bolt (259 miles), and Tesla Model Y (330 miles) are expected to dominate returns. Buyers should act quickly, as policy changes could reduce affordability. Checking battery health (typically 80-90% capacity after 36,000 miles) and verifying charging compatibility with local stations (Level 2 or DC fast chargers) is crucial.

This surge of used EVs marks a pivotal moment for the industry, balancing opportunity with uncertainty as policy shifts loom. For now, the market is primed for price-conscious drivers to go electric.

Photos courtesy of EXVL / Tesla / Kia