Electric cars are becoming increasingly popular, especially given current gas prices, but that doesn’t change the fact that they are usually more expensive to buy. This is where the federal EV tax credit comes in, which allows buyers to reimburse up to $ 7,500 from the price of an ad for a vehicle that includes electric vehicles.
Unfortunately, some car manufacturers may fall victim to their own success. The EV tax credit only applies to the first 200,000 cars sold by the carmaker, after which buyers are left to pay the full price of the ad. Currently, this only applies to Tesla and General Motors, but there are reports that Toyota, Nissan and Ford may be close to this threshold.
And with the combination of supply chain problems and inflation affecting new car production, it’s no surprise that some carmakers want change. And they seem to have the right idea.
Carmakers want to expand the federal EV tax credit
According to Reuters (opens in a new tab) The CEOs of Ford, General Motors, Stellantis and Toyota wrote to congressional leaders urging them to lift the 200,000 sales cap. transfer to customers, making the switch to electric even more expensive than it already is.
Now is the perfect time to encourage people to buy electric cars instead of punishing them because they want to avoid extreme petrol prices.
This is something that future Tesla owners will know about, as the carmaker has applied multiple price increases over the past few years.
This does not mean that carmakers want tax credits to last forever. Instead, they are proposing to remove the sales-based threshold in favor of a “sunset date” that would end the credit once the EV market becomes “more mature”.
This is something that just happened in the UK (opens in a new tab), as the British government puts the last nails in the coffin of the car grant. The grant has reduced the cost of new electric cars at the point of sale and has been slowly declining over the last few years.
In March 2021, the government reduced the rebate from £ 3,000 to £ 2,500, while reducing the value of eligible cars from £ 50,000 to £ 35,000. In December, it went down again, offering a £ 1,500 discount on cars under £ 32,000. Today (June 14th) the grant was completely abolished, with immediate effect.
But I think the UK’s decision is a mistake. Now is the perfect time to encourage people to buy electric cars instead of punishing them because they want to avoid extreme petrol prices.
Electric cars cost less over time – but have a higher entry fee
Electric cars cost a lot, but what has been obvious for some time is that they cost less to operate over time. In fact, Consumer reports (opens in a new tab) said back in 2020, with a study finding that drivers could save $ 4,700 (or more) in fuel costs in the first seven years.
Throughout the life of the car, owners will save anything from $ 6,000 to $ 10,000. Consumer Reports estimates that the owner of an electric car that recharges at home can save $ 800 to $ 1,000 in fuel costs each year and about $ 4,600 in car maintenance. EVs have fewer moving parts, which means that components fail less often and do not need as much regular maintenance.
It has also been found that long-range electric cars maintain their value “better or better than their traditional petrol-powered counterparts.” So the fact that electric cars cost 10% to 40% more at the time of purchase, still pays off in the long run.
These days you should also keep in mind the astronomical rise in fuel prices. While energy prices have also risen, gasoline prices are, frankly, crazy at the moment. The US average is over $ 5 a gallon (opens in a new tab)and in the United Kingdom, people have started to report that petrol prices have been exceeded £ 2 per liter (opens in a new tab) – This is equivalent to just over $ 9.50 per gallon.
Speaking of CNN (opens in a new tab), a senior political analyst at Consumer Reports, emphasized the fact that EV drivers can save money on these types of prices. If you are still buying a new car and it is possible to incorporate EV into your current life situation, then now is a good time to invest in EV. Assuming you can get one and you have the money to pay for it.
Here, too, financial incentives and tax credits come into play. You may still have to wait a few years for savings to increase, but the financial barriers associated with electric cars are significantly lower.
For example, the Ford-F-150 Lightning starts at $ 39,974, while the petrol F-150 starts at $ 30,870. That’s a difference of $ 9,104, but with the full $ 7,500 EV tax credit, that number drops to $ 1,604. This implies that you are not eligible for any state or local incentives, such as $ 750 in California. Clean Fuel Award (opens in a new tab) or $ 2500 Texas EV Discount Program (opens in a new tab).
Although you still have to pay the full price for the truck, the fact that the incentives reduce the total cost makes the transfer of the extra money much more enjoyable. Hell, at this level you’re going to start counting your savings pretty quickly.
We are getting cheaper electric cars, but we still have to finish
Despite problems with the supply chain and production, we are seeing cheaper EVs coming to market. Last year, Nissan reduced the base price of the Nissan Leaf to $ 27,400, making it the cheapest electric car on sale in the United States. Then, in the last few weeks, Chevrolet has taken a step forward by lowering the price of the Bolt and Bolt EUV to $ 25,600 and $ 27,200, respectively.
Although all three cars are still relatively expensive, these price reductions are quite significant. $ 6,300 for the Bolt EUV, $ 6,000 for the regular Bolt and $ 4,170 for the Leaf. And these cars are for sale now, not some distant dream like the $ 25,000 Tesla hatchback. As much as we want this car to take to the streets, Elon Musk admitted that the development of the cheap Tesla is currently delayed.
The inclusion of extended financial incentives in the mix makes cheaper EVs more affordable and therefore more attractive to people who can’t afford to pay for cars that cost more than $ 40,000. Nissan Leaf is still eligible for the full EV tax credit, which means the final price could be up to $ 19,900 – probably more depending on where you live.
Now imagine if Chevrolet, a General Motors brand, suddenly qualifies for the full tax credit again. You’re looking for $ 18,100 for the base model – which isn’t much more than the $ 14,595 you have to pay for the Chevy Spark. It’s not full parity, but it’s getting pretty close.
Eventually
The adoption of EV is growing, but there are still challenges – especially in terms of the cost of entry. And at a time when he knows how to find cheap gas is a basic skill for many people, anything that can push them to a more cost-effective option can only be good.
However, how likely this is to happen is not entirely clear, and as usual, politics can stop you. Democrat Sen. Joe Manchin, in particular, questioned the need for extended tax credits if the supply of electric cars could not match demand. Republicans, meanwhile, looked fully on board when former President Trump tried to reject the loan in its entirety (opens in a new tab) in the proposed budget for 2020
The car industry may be under pressure, of course, but that will be the point. The Biden administration has been pushing for increases in the federal tax credit for electric vehicles since last year. One such proposal includes offering an additional $ 4,500 tax credit for union-built cars assembled in the United States and setting a limit of $ 12,500. So far no real progress has been made here.
One thing is for sure: the more people switch to an electric car, the better. Not only in terms of supporting their own finances, but also for all the environmental reasons that people have been talking about over the last decade. The best way to do this is to make them more affordable.
Meanwhile, there are many electric cars that still qualify for a federal tax credit, and it is worth being aware of other available financial incentives for EVs.