Updates to the Clean Vehicle Credit: Get Your Electric Car Discount at the Dealership
Electric cars are even more affordable and dealerships now offer the clean vehicle credit off the price of a car. Plus, discounts abound and prices are better. But there are rules.
Electric cars just got even more affordable.
There are new changes to the Clean Vehicle Credit rules that will result in more benefits for electric car buyers, and likely there will be more in the coming months. Among them, new incentives starting in 2024 will allow buyers to get their credits for new and used electric cars right at the dealership.
And as automakers ramp up battery production and vehicle assembly in the US, more vehicles will qualify for the credits based on both where the vehicle is built and the components that it’s built with.
Additionally, discounts on electric cars that don’t qualify for the credits seems to be increasing. The rules first changed in August, 2022 to give preferential treatment to cars and battery systems built in the US, with a sliding scale of eligibility for the full $7,500 credit based on various criteria.
New rules will further qualify vehicles based on the materials used to build battery systems, the size of the system and where the car is built. It’s confusing, so if you plan to factor a credit into your purchase plan, read the small print carefully.
Related: 13 of Our Absolute Favorite Electric Cars, Hybrids, and Plug-in Hybrid Electric Vehicles
New Clean Vehicle Credit Incentives to Make You Look Twice
Starting in January 2024 that federal tax credit can be ‘purchased’ by the car dealer who sells the car and immediately passed on to the buyer, effectively creating up to a $7,500 discount for new electric cars and up to $4,000 for used electric cars at the time of purchase.
There are stipulations: the dealer has to register with the IRS, the buyer needs to know they will qualify for the tax incentive at the end of the year (keep reading for income and pricing thresholds), the car can’t be flipped ore resold, the buyer must file a tax return and if at the end of the year the buyer doesn’t qualify for the credit, they’ll be hit with a tax bill.
Stipulations on used cars are similar to get the up to $4,000 credit: Cars must be sold for less than $25,000, be more than 2 years old and sold by a licensed car dealer. The credit is a sliding amount based on the sale price and caps at $4k. The good news is that any electric car qualifies. The bad news is, $25K can be a low threshold, for even used electric cars.
Related: Hyundai IONIQ 5 First Drive: A Pivotal Moment for Hyundai—and for Electric Cars
Income and Price Restrictions May Make Electric Cars Less Attractive
In addition to restrictions on the materials used in an electric car and where it’s manufactured, there are limits on the income of the buyer and the price of the car.
For buyers to be eligible, individuals must earn an adjusted gross income of $150,000 or less, a couple with a joint income must earn $300,000 per year or less, or a head of household must earn $225,000 or less.
Then, only electric cars with an MSRP of $55,000 and under and trucks and SUVs at $80,000 or less will qualify. This means that many base models qualify for the credit but the higher-level trims do not, though these prices were set in 2022 so they may be revised upward to reflect the aggressive increase in car prices the last couple of years.
You might remember that in the past, federal tax credits were only available to the first 200,000 vehicles sold by a manufacturer; purchases after that threshold didn’t qualify, but the new rules eliminated this cap.
If You Want an Electric Car, There’s an Affordable One Out There For You
If the tax incentive is important to you, check with an accountant to be sure you qualify and so does the car you intend to buy; don’t rely on dealerships or second hand information to make a decision.
And, there are many discounts in the electric car market and cars that are priced significantly below the market average, making the need for a federal incentive less important.
These include Tesla, which has discounted its Model 3, the Kia Niro, the Chevy Bolt and the Nissan Leaf. Coming to the US soon are the Volvo EX30, which will hit dealerships with about a $35,000 MSRP, MiniCooper SE, and the new Hyundai Kona, all of which are value-packed for an affordable price.
If the federal credit is important, double check the rules to make sure you understand what qualifies and what doesn’t.
Which Cars Should Qualify for the Clean Vehicle Credit
Not all qualify, and some that qualified under the old rules no longer do. Here are the electric cars that should qualify under the changing rules for all or part of the federal tax incentive:
- Cadillac Lyriq
- Chevrolet: Bolt, Blazer, Equinox, Silverado
- Chrysler Pacifica PHEV
- Ford Mustang Mach-E, Transit, F-150 Lightning
- Jeep Wrangler 4xe and Grand Cherokee 4xe
- Lincoln Aviator, Corsair
- Rivian R1S and R1T
- Tesla Model 3, X and Y long range
- VW ID.4
Many cars that qualified for tax incentives don’t any longer, due to changing rules for battery materials.
Those include: Nissan Leaf, BMW 330e, Audi Q5 PHEV, BMW X5 PHEV, Genesis Electrified GV70, Volvo S60 PHEV.
The rules keep changing. Discounts, in both tax incentives and pricing, continue to grow. More affordable electric cars are coming to the market. And lease deals are back, which might be the best way to get an electric car right now. However you slice it, there are more and more affordable ways to drive an electric car right now.
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Categorized:Car Buying Electric Cars
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