How to save thousands on EVs that don’t qualify for $7,500 tax credit
PHOENIX (3TV/CBS 5) -- You want to buy a new electric vehicle. You’ve heard about a $7,500 dollar tax credit that is available because of the Inflation Reduction Act. The savings sounds good, but the credit doesn’t apply to every new EV at the dealership, and it doesn’t apply to every car buyer. “The car needs to qualify. It needs to be manufactured in the States. Your household income needs to be taken into account. And the actual MSRP of the vehicle needs to qualify,” said Jason Church, the Chief Operating Officer of Courtesy Automotive Group. "
According to Church, if you find an EV you love that doesn’t qualify for the tax credit, you still may be able to get those $7,500 savings, thanks to a loophole for a lease. According to the IRS, businesses can claim an unlimited number of commercial clean vehicle credits, which means leasing companies that get the tax credits can pass on the savings to their customers.
“You’re going to get a lower lease payment because the $7,500 will be applied. There’s no restriction on where the vehicle is manufactured, no restriction on MSRP, and no restriction on qualification needed on your household income,” Church said. “The Polestar, for instance, the $7,500 vanished, poof! But then come January, with the IRS clarification, we were able to apply that, so now we have lower lease payments on the Polestar 2. Same with the Volvos, the C40, XC40, as well as plugin hybrids as well. Several car makers, including Honda, Toyota, and Kia have entered written agreements to become a qualified manufacturers but have not yet submitted a list of makes and models that will be eligible for the tax credits, according to the IRS.
If a used vehicle fits better into your budget, there is a federal tax credit of up to $4,000 for used EVs. “It’s a credit that exists on paper but probably doesn’t exist in reality. The reason I can say this is there’s a $25,000 max on that, and unfortunately with used car supply and demand being what it is, to find an electric vehicle under $25,000 is very hard,” Church said. “Maybe in a year or two when we have more EVs coming back at a lower book value, then we’ll be able to actually access that.”
According to AAA, EVs account for less than one percent of vehicles on the road. but as interest grows so do car buyers’ questions. “One of the biggest things that people need to look out for is the battery life on an EV. It’s a lot like your phone. It degrades over time,” said Julian Paredes, a spokesperson for AAA Arizona. “Ask the dealership to fully charge that EV and see what its maximum range is and also look at the maximum range of a brand new car. You can see the difference there and you can find out how much that battery has degraded if it’s a lot or very little.”
It’s also important to check the EV’s warranties. Manufacturers are required to offer an 8-year / 100-thousand-mile warranty on traction batteries, but according to AAA’s used EV buyers’ guide, not all warranties are passed on to future owners.
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