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GM and Ford Just Found a MAJOR LOOPHOLE That BREAKS The Car Market | Episode 935
GM and Ford Just Found a MAJOR LOOPHOLE That BREAKS The Car Market | Episode 935
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About this episode
A significant loophole in the electric vehicle tax credit system is explored, revealing how GM and Ford are leveraging it to benefit consumers while potentially bending the rules. By placing deposits on vehicles before the tax credit deadline, these companies can still offer the $7,500 incentive to future lessees. The hosts debate the ethical implications of this strategy, questioning whether it constitutes fraud or a clever workaround. They also discuss broader trends in the auto market, including declining consumer sentiment and rising interest rates, indicating a challenging landscape for buyers.
Topics:
ev tax credits
loopholes
leasing strategies
consumer sentiment
auto market trends
interest rates
taxpayer implications
corporate ethics
Today on CarEdge Live, Ray and Zach discuss the latest news from Ford and General Motors. Tune in to learn more! Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com
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Too Afraid to Ask
Car
Lotus Elise
"...you read before was a legal and binding contract. Elise doesn't have a legal and binding contract until s..."
Car
Ford Mustang
"... $7,500 from them having to be spent on that Ford Mustang Machi. There is a benefit here. It's a lot of gro..."
Car
Hyundai Santacruz
"...tively large amount for help in purchasing a 2026 Hyundai Santacruz. But I knew from past history that dealing with a..."
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It's noon here in Vetner City, New Jersey and our nation's capital, Washington, DC. And this is courage live for the last day of September, September 30th. With your hosts me, Ray here in Vetner City, New Jersey. And well, Zach, um, Instance comfortably in his apartment in Washington, DC. How are you today? Handsome. I am doing fantastic. Happy end of September, everyone. Thanks so much for tuning in.
As you know, by now, if you've watched car edge live for a while, we've got an end of month promotion running right now back at car edge.com folks. If you're going to be in the market to buy a car in the fourth quarter of this year, take advantage of our 20% off promotion, 20% off car edge insights, which are the tools we use to secure the best deal on behalf of our customers right there, all the data you need to level the playing field or 20% off our car buying services. And again, if you're going to buy a car.
In Q4, take advantage of this discount right now or concierge service as well as negotiation expert go for dad. No, it's just going to say, um, sounds sounds good. It's almost as if there's a loophole in our in our discount program, where well, you can, you can sign up today. And as long as you take the library by the end of December, you're in good shape, folks.
Start speaking of loopholes. This is where we're going to kick things off. Nothing is as it seems to be ever. And then, you know, emphasis on the auto industry. We've got this loophole news from Ford and general motors that we're going to talk about. And then dad, you have to really interesting data from Cox Automotive. They do their weekly auto market report and holy cow. Does it seem like the tide is a changing in the auto industry. But first dad, let's talk about this.
Let's talk about this GM Ford work around EV tax credit expiration with Q4 lease programs. Now to be clear, folks, we don't always talk about EVs on this channel. But today is the last day to take advantage of a 7,500, 7,500 dollar federal tax credit, tax incentive to purchase a release and electric vehicle. And this breaking news from GM and Ford is absolutely absurd. What is going on here, dad? What is this loophole?
Well, apparently, apparently, ladies and gentlemen, you can, if you have placed some type of deposit on a vehicle that you intend to close on after September 30th, but you've placed the deposit on the vehicle by September 30th.
Well, then you would still get the 7,500 dollar tax credit if you qualify for it. If, if it's a lease, it automatically would get passed through. And so this was, I believe this was designed the interpretation from the IRS was designed to encourage customers to at least sign up, sign a formal contract for a vehicle.
It might not be able to be delivered by today, but sometime in the not to just in future.
Yeah, let me, let me read directly from the IRS guidance that's right here. Quote, if a taxpayer acquires a vehicle by having a written binding contract in place and a payment made on or before September 30th, 2025, then the taxpayer will be entitled to claim the credit when the plate, when they place the vehicle in service, namely when they take possession of the vehicle.
Even if the vehicle is placed in service after September 30th, 2025, so exactly that to your point, an incoming new electric vehicle, I as a consumer could sign a contract and put the first payment down on that vehicle, even though I might take delivery of it a couple weeks later, a couple months later in the following year.
And so what's happening here is that General Motors and Ford are essentially selling these vehicles to their leasing company before September 30th, before the end of day today, putting a first payment on them, getting the $7,500 tax credit and then leasing them to people in the future, total loophole to try and secure the $7,500 tax credit.
Is it a loophole or is it fraud? And I only asked that question because there is a difference between a customer entering into a contract, the legal and binding contract by signing it and putting money down on it.
And the lease entity being the placeholder and putting the deposit down when they have no idea who the ultimate customer or lessy will be.
So that, that to me almost border lines on fraud. Now, you know, in your, in my opinion, and, and let me say this, we are a consumer advocacy organization, however, that in my opinion doesn't include finding loopholes as a taxpayer.
It is almost as if I would like to sue and say, I don't want to spend any more of my money for these tax credit incentives that expire on September 30th, if a multi million billion dollar corporation has found this.
And I have no idea, nobody can sit here today and tell us what how many of these vehicles will be impacted and how much money this is going to cost the federal government in what I would consider to be not a good faith transaction, simply a placeholder transaction.
So, you know, I want people to be able to get a good deal. I want people to be able to save money.
I want it to be legitimate. I want it to be the way it was intended. Now, I understand having spent 40 some years in retail automotive that if every detail isn't spelled out.
Well, then major corporations or pain in the ass salespeople will go, well, this wasn't on the list. This is a little bit of a workaround.
You know, sometimes can we just go by what the intent of the regulation was as opposed to looking for the loophole in the regulate, but I digress.
Just to make sure everyone's crystal clear on what's happening here. And I pulled you up solo for when you're talking about wanting to sue multi-dillion dollar corporations that they could make it put us on to their thumb.
So that's in his opinion and his opinion only.
Let me read this out just explicitly so everyone understands the automakers, generators and Ford are using their financing arms to offer the incentive on September 30th by making down payments on the vehicles before finding customers to lease them.
The programs were confirmed and documents obtained by automotive news and by people with knowledge of their plans. GM dealers need to sign up by September 30th to participate while Ford gave dealers a September 26 deadline.
GM confirmed its program and a statement saying the automaker quote work with our GM dealers on an extended offer for customers to benefit from the tax credit for leases on select inventory of our broad portfolio of Cadillac Chevy and GM C.E.
So again, they're selling them to the leasing company, putting an initial down payment and then ultimately customers in October, November and December will be leasing vehicles that had already been sold to the leasing company.
Now, it is kind of interesting, Dad, because at the end of the day, if you lease a car right now, the car dealership owns it or most more likely the finance company owns it, you know, the bank where they get their four planned from.
No, the leasing company, yeah, the leasing company saying it's what I'm saying is before they sell to the leasing company, the dealership owns it more.
Yeah, nine times out of 10, the dealership actually doesn't own it, the dealership has financing on it from their bank, great.
Then the leasing company buys it and then the customer releases it essentially what we're doing here, but wait, let's stop there for one second.
The leasing company doesn't buy it until there is where there is a customer in place to lease it.
Of course, no, no, I think that's that's an important call out and to me, Chris, so clear and I think again, what makes this a loophole is essentially what these corporations are doing, what GM and Ford are doing is they are selling cars to leasing companies, which are essentially just holding companies or finance companies, they're selling them to those companies.
Without retail customers and they're doing it today because then they can get that $7,500 benefit to then try and lease it in November and October, November and December.
But here's the problem.
Let me hear the problem.
As I see it, okay, the paragraph you read before was a legal and binding contract.
Elise doesn't have a legal and binding contract until someone has agreed to a lease payment based on a selling price.
Now, make me wonder what's the definition of a taxpayer if a taxpayer acquires a vehicle by having a written binding contract because that I actually disagree with you.
If the leasing company is a taxpayer and the leasing company has a written and binding contract with the Ford dealer to buy the car, they're probably good to go.
And you got to imagine that GM and Ford spent tons of money with their in-house lawyers and outside counsel to try and make sure that this thing's legit.
It's just a pretty crazy loophole to try and extend the benefit of these tax credits beyond their intended date, which is obviously the end of date today, which I think that I hear your point on you don't like loopholes.
But this actually is a benefit to GM and Ford lessy customers who aren't in the market to buy an EV today but may become a customer to lease a Ford or GM electric vehicle before the end of the year because now they at least can continue to take advantage of this $7,500 discount.
Come on, you know, put yourself in the shoes. Put yourself in the shoes of John Doe or Jane Doe who have never watched car edge live who have no clue that the federal tax incentives end today.
And they go to buy a car at the end of the year because they know that they've heard from a buddy or from a friend to get the best deal on a new car you go at the end of the year.
It's a tremendous benefit to John and Jane Doe when they show up at that Ford dealership and they did this gimmick, they did this loophole and now it keeps $7,500 from them having to be spent on that Ford Mustang Machi.
There is a benefit here. It's a lot of gross how we got there, but there's a benefit.
I am not arguing that there isn't a loose right if they pass that discount forward.
I am just saying that take your time, take your time deep breath. I'll give you the full screen.
Well, at least is based on many things for the customer.
What the agreed upon selling prices, what the appreciation is, what the money factor is, what the payment is, the leasing company buying or not even buying.
I'm just saying we agreed to buy or putting down a nominal deposit to say, okay, we've agreed that we will buy this and we will deliver it in the future to whom?
Okay, I believe the idea behind this was to have a customer.
Now, yes, this will be great for customers in the future who did not take advantage of the expiring federal tax credit that expires today.
But when is the expiration date of something not really the expiration date of something?
Oh, the federal tax credit for leasing.
No, yeah, because what we'll just pretend we're selling it to our leasing company.
The leases require a customer and the leasing company only buys the vehicle once the customer is in place and they buy it on behalf of that customer.
It's actually a wait a second.
So how can the leasing company buy it when there is no customer in place?
I like spaces coming here, Dad, a loophole for another loophole.
And it is to be clear, it's actually a risk for the leasing company because if they know, if the dealership never finds a retail customer for this, the leasing company is the one who bought the vehicle on to be clear.
Probably someone else is financing.
It is just, it's a racket.
So he's very clear.
It's a racket, Dad.
Well, won't that be a really interesting thing when when the leasing companies have placed these nominal deposits on vehicles, taking them off the market so that someone else couldn't buy it if they wanted to.
Yeah, wait a second.
What if what if they never find somebody to buy that vehicle?
You know, what did they put down?
75 bucks, 50 bucks?
I mean, is it so in the title changes?
The title changes.
Well, is there.
The leasing, I mean, I don't know.
I don't know.
Are they used cars now?
If you say, like, it's very people because my good and I will assure you that you're not passing title on to the leasing company.
When there isn't anybody to lease the vehicle, that doesn't happen until the lease gets signed and there's a customer on the other end of it that's responsible for that payment.
So let's just say that they buy a thousand cars and let's just say they only end up leasing 900 of them.
What happens to the other hundred?
Do they just revert back to new car inventory as if nobody ever had a deposit on it?
This is just sure unadulterated BS, okay, that these companies have come up with to, in essence, rip off the federal government in my humble opinion.
It is a fascinating, fascinating development in all of this and kudos to automotive news for getting a documentation to be able to share it and corroborate it and validate it.
It's absolutely nuts.
Does it potentially have a benefit for uninformed consumers? Yes, let's be very clear it does.
Is it potentially seemingly, I'm not a lawyer, my dad's not a lawyer, these do not represent the values of carage fraud.
I don't know.
I don't know. Maybe we'll ask our general counsel to go look at it because it is fascinating to say the least.
And I love spaces, comment their debt at a minimum.
It's a loophole and another loophole and another loophole. It's all some convoluted BS.
And it's really in service of just trying to, just trying to save them some money, really.
Save who some money for it in general motors, because if they lose that $7,500, they know they can't sell those cars.
They can't lease those cars. They're trying to make sure the least payments won't be quite as good.
How much does the payment go up on a lease every thousand bucks, dad?
For every thousand. So that was 200 and that's what 200 and 80 bucks.
And 30 bucks or something.
80, 280. Yeah, I mean, yeah, do do that math for a second because the time seven is 210.
Yes.
And so it would be two, it would be 225 hours that the payment would be impacted.
If the government wasn't writing that check for them exactly.
So if, if that doesn't sound like cloud, damn it.
I don't know what does.
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Dad, I got a question here from Tone Talks.
Have you seen this type of pre-purchased by Elise Company before?
Oh my god, listen.
Manufacturers, BMW in particular, you know, oftentimes encourages their dealers at the end of a month
to move vehicles into service loan or fleet.
But the difference is they get titled.
They've actually sold them to...
Well, Dad, be clear.
Be and W's.
This isn't...
These aren't getting titled.
Yeah, BMW has been modern.
The vehicle work that's going to be done on these potential least vehicles
until the ultimate customer is found.
Yeah, hang tight, though.
Because BMW has been caught.
SEC charges BMW for discouraging inaccurate and misleading retail sales information upon investors.
So, I know you're saying there's a title and all that.
But actually, BMW's gotten caught up in this stuff.
This was passed since September of 2020.
No, absolutely.
I mean, this type of chicaneery has been going on for years.
You know, Fiat and Alfa Romeo encouraged their dealers for years
to report things as sold that weren't sold.
Let me read this data.
Wait a second.
The difference is they're not collecting $7,500 from the federal government every time they do it.
And that means they're not collecting $7,500 from you and me
and every other taxpayer out there every time they do it.
That's a huge difference.
This was, though, what BMW did back in 2015 to 2019,
inflated their reported retail sales in the U.S.,
which helped BMW close the gap between its actual retail sales volume
and internal targets, and publicly maintained leading retail sales position
relative to other premium automotive companies, Mercedes-Benz.
The order finds that BMW of North America, LLC,
maintained a reserve of unreported retail vehicle sales
referred to internally as the, quote, bank that it used to meet
internal monthly sales targets without regard to when the underlying sales occurred.
The order also finds that BMW paid dealers to in accurately designate vehicles
as demonstrators or loners so that BMW would count them as having been sold to customers
when they had not been additionally the order finds that BMW improperly adjusted, excuse me,
here, its retail sales reporting calendar in 2025 and 2027
to meet internal sales targets or bank excess retail sales for future use.
As a result, according to the order, the information that BMW provided to its investors
and their bond offering and to credit rating agencies contained material
and these statements and admissions regarding their U.S. retail vehicle sales.
Obviously, this is different than what we're seeing here with Ford and GM.
But they're kind of in the same sphere of, like, gamesmanship.
Loupal.
One doesn't cost the federal government $7,500 a pop.
One is not attaining a tax advantage by doing this, and one is, and just knowing how leasing
works, just knowing that there needs to be an ultimate customer.
The leasing company is not the ultimate customer, they're the ones that will pay for the vehicle
and then the ultimate customer is going to be making monthly payments to the leasing company
for having fronted the money for them. Okay, but that doesn't, you have to have the customer,
and so right now they're just saying, well, we'll find a customer eventually and when we do,
because of what we did on September 30th, we'll still be able to get that $7,500
federal tax credit pass through. And yet that to me is, I don't know why it's so hard
to say something's wrong when something's wrong. Okay, and this just happens to be one of those
situations where it's wrong. Okay, and I don't know why we can't just say, this is such BS and we
as the American taxpayer shouldn't have to be paying for it. For sure, I think you're on to
something dad and I think just to be clear, Mark, how does it expect the consumer? My dad just
said it. If you did not lease an electric vehicle before September 30th, and now it's October 30th,
November 30th, December 30th, that Ford dealer, that GM dealer, they have the option to pass along to
you for these vehicles that they previously sold to their leasing company. They have the option
to continue to pass along the $7,500 tax incentive. We'll see, Dad, well, I'd be very curious
if this stands. Like, if we make some noise about this over the next couple of weeks, if this,
if this, I don't know, if anything changes here, I would not be surprised because it is
definitely on the fringes of what is ethical, allowed, etc. Really, though, I want to say,
fascinating stuff, because we've seen for decades, you've experienced this in your career,
RDR and retail delivery reporting vehicles that aren't actually sold. I don't want to
incriminate you in any way, but like, you did that in your career, didn't you?
What? No. Have I seen it? Yes, okay. That's pretty common in the auto industry, this piece,
where you're essentially doing the same thing, but then getting a $7,500 tax benefit from taxpayers,
that's where it's a little bit different, not a little bit different, a lot different.
It's a lot different. Okay, and then I get it. I never think RDR to car then.
You never think RDR? Yeah, absolutely. Yeah, no, we get it. Yeah, absolutely.
It's been a commonplace, I think, like the service leaders.
In the 80s, yeah. Yeah, you know, but it never sucked a wild, wild west of auto sales back then,
but when you read that article, you begin to understand why lawyers are paid, what they are paid,
because they can look at words and find completely different meanings for them,
then what the rest of us thought they meant. They deal in semantics. Okay, where you can make
something sound like you're saying one thing, but you're really saying something else because you left
a little early on somewhere. And so I get it. It's just more than likely, legal, I don't know,
will the government spend any money to put a halt to it? Absolutely not. But is it the difference
between the right thing to do and the wrong thing to do? Yes, in my opinion, there's
the difference between the right thing to do and the wrong thing to do. And the wrong thing to do
in my opinion is to stick the American taxpayers with extra expense because you're trying to figure
out a way to move product that you couldn't move without the government's assistance.
Really well said, Dad. Let's switch gears before we do for those of you that have joined us now,
caredge.com. My dad and I are came of about 50 behind the scenes work every single day to help
thousands of people buy new and use cars. He also helped with researching vehicles, extended
warranties, tracking your vehicle values, insurance, things like that as well. But the thing I want
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of this promotion. Get your hands on car edge concierge or negotiation expert. Dad, the other
piece of information I wanted to pull up today is talks on about as these auto weekly auto market
reports. And I just want to flip through a few of these slides because it just starts to corroborate
the storyline that you and I have been talking about for a while here. So consumer sentiment down,
so far in September, we talked about that a little bit yesterday, so that's broad or consumer
sentiment being down. Retail sales have been declining in September, new sales, new vehicles sales
hold higher year over year, but have fallen for the last two weeks as used car sales have declined
more sharply. So again, a little bit of negativity, some pessimism here. We've got low APR financing
lower in September. In September, low interest rate offerings have declined, even as the Fed has
started to cut their rate policy. Auto loan rates are actually up in September. The average used
car APR is 14.2% in September and the average new car rate is 9.45%. New and used supply has actually
increased in recent weeks. New supply remains below last year's levels while used is now running
above last year. Used prices have inverted as wholesale markets week and the average model year
2022 price for retail was steady last week while wholesale prices actually declined 0.7%.
And then the leading indicators here, Dad, dealer leads are actually up year over year in September
on Auto Shader and KVB, but leads are down for the month compared to August on both sites.
Unique leads per dealer are down year over year in September for new vehicles but are up for use.
Unique credit applications are up 9% year over year so that's a little bit of good news.
It's like you read through most of these bullet points. It's bad growing inventories, weakening
demand. Like it seems like the auto industry, even on the retail side, a little bit of a wake-up
call going on right now. Well, it seems like I don't know, maybe we're actually being confronted
with reality. Okay. And the reality is and has been and will continue to be for the foreseeable
future that most items today, especially automobiles and auto loan rates are priced out of the
majority of the populations reach. It's just, it's not that difficult to see. Now, perhaps it's
difficult to do something about it, apparently, unless they can figure out another loophole.
But it just, it's it's plain as day that you can't continue to have prices go up,
car payments go up, insurance payments go up, maintenance costs go up, interest rates go up,
term loan terms go up and expect this to not be a recipe for economic disaster at some point
in the not too distant future. You know, you can people can only be leveraged financially or
credit wise so much before the damn house of cards collapses. And that's why we have the loophole
of bankruptcy in this country for those of us. And I was one who made that mistake who got in
way over his head when I when I had my golf USA store. And and I know, you know, so many of my
vendors said, well, we want a personal guarantee if we're going to sell you a product. And I said,
it's not a problem because if this thing goes south, guess what? There'll be two bankruptcy
filings that they won for the business and won for me personally. And and why did I do that? Because
that's the that's a government's way of encouraging people to take the risk and be become
job creators. And and sometimes the risk pays off and sometimes it doesn't. And and so you
were given that opportunity to wipe all that dead off the books because you took that risk to do
something. So yeah, I I've done it. It's you know, it's it's one of the most the moralizing things
you can ever go through. And I can tell you that from from a from a personal perspective.
You know, it hurts your ego. It hurts everything. But this is where we're headed.
Well, that was the comment I wanted to make that is I look at every single week
cox automotive puts out those weekly market updates. Great data. I greatly appreciate
that they share that information publicly. The tune is is a different tune that it's pessimistic.
It's negative. And that's different because it had actually been leaning more positive over the
past few months. But I think as we head into the fourth quarter here, it's actually quite negative
from the industry perspective, which again, fourth quarter is the best time to be in the market
to buy a new car. And I actually think we could see some opportunities on the use cars side too. It's
the fact that they saw used car sales have fallen off more of a cliff than new car sales. And
inventory levels are actually higher year over year for use car sales or for use cars.
Like there's a real sentiment shift going on right now. And some fundamentals are shifting
as well. And I think, you know, you and I will have to keep our eyes posted on next week's market
update. But as well, like the latest data we get on average incentives as a percentage of average
transaction price. Like I could start to see here a little bit of like a buyer's market opportunity
and some positivity for consumers where for a long time it had been really a seller's market,
lots of good momentum for the industry, not so much for the problem is even if it suddenly
becomes a buyer's market. Yeah, the prices are still ridiculous. And the people aren't in any
position to take on considerably more debt in order to help save that market. That's the real
issue if you if you look more deeply at it, it's, you know, the prices could go down. But
people are so leveraged today for everything that it just even if it turned into a buyer's
market, there might not be enough buyers to sustain the market. Pops, I want to thank two of our
community members who just left reviews back on the car edge Google page from Scott here. My
daughter just purchased a new 2025 Toyota Corolla using car edge strategies. You got the out-of-the-door
price step. They negotiated their trade in once the OTTD was completed. And I just want to pull this
up here. Congratulations to Scott and his daughter. Well done. Love seeing that. Thank you so much for
sharing your experience back on our Google page. We've got another one here, Dad, from Anthony.
This came in just 19 hours ago. We've got I was hesitant to pay a relatively large amount
for help in purchasing a 2026 Hyundai Santacruz. But I knew from past history that dealing with a car
salesman is one of the life's most uncomfortable and personal of personal interactions. I know
matter how many times I watch car edge videos, I would not farewell. So I signed up for the concierge
service. And I'm very happy I did. My concierge, Jerry, helped me pinpoint the exact vehicle I wanted
found it for me and negotiated a good outdoor price. Thanks, Jerry. And Drew, a car edge arranged for
delivery of my truck, which arrived quickly. Thanks Drew. I would definitely encourage others to use the
concierge service. It's a good looking truck here. Congratulations to our dear friend here, Dad,
Anthony. We appreciate everyone that shares their reviews, their positive and negative experiences.
We're human beings. We work our butts off, our team works their butt off to try and support everyone
that comes into our door that we're able to help. And yeah, just wanted to highlight those two.
Right there. Okay, Dad, let's call the show. Okay. We'll be back tomorrow with more car edge
live. Oh, and we just got while we were on here, Dad, we just got an offer to do an interview,
wait for it, I'll confirm, standby, CBS and Fox in West Virginia. So you know what? Thank you to
everyone who we did ABC and San Diego yesterday. Yes. Tomorrow we'll be doing an interview with CBS
and Fox and West Virginia. I mean, we are just everywhere. The moment, man, it's really cool. So
thank you to everyone who shares car edge. It's so cool seeing me and my dad on the news everywhere.
How cool that that is cool. And then you have me work in this coming Sunday. I'm doing a radio
interview at 11 o'clock in the morning for what is it like for a radio in I believe Massachusetts.
We're busy folks. But dad, Brian's going to make sure you're well fed. Thank you, Brian.
Really appreciate it. That's a lot. They for about a third of the sandwich. Yeah. Thank you, Brian.
I'll get I'll get Zach to call up the other 20 bucks.
Igor's right Bloomberg interview Justin on our team. That was an incredible article.
Which has now been like reproduced in a bunch of other places. And it's yeah,
I mean, they just wrote an entire article on car edge, dude. So thank you, Justin, for your
incredible efforts there. Okay, folks, we're back tomorrow with more car edge live. Dad,
enjoy the afternoon. I love you very much. I love you too. I believe we have a meeting at two.
We do. We have an all hands meeting at two. Yes. Well, you know what? I'll be there because
well, I'm all hands, ladies and gentlemen. Appreciate it. Love you dad. Love you too. See you soon.
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