The federal tax credit given to consumers for the purchase of electric vehicles (EVs) is outstanding. Consumers can receive a tax credit of up to $7,500 when they file their taxes.
Half of the tax credit is available if the vehicle and battery are primarily assembled in North America. The other half is available if the minerals used in the battery originate in the United States or partner countries.
Tax credits are used as a down payment
Previously, this federal tax credit could only be claimed on a consumer’s tax return, but Congress just recently announced changes to this that could be transformative for EV sales. Starting January 1, 2024, this credit will be transferred directly to your dealer and can effectively be used as a down payment on a new car.
This means consumers do not have to wait until they file their annual taxes to benefit from this tax credit. Available immediately when purchasing a new car.
What’s the catch?
While consumers may be excited about the change, retailers are concerned. There are concerns about the timing of these transfers and the financial risks associated with waiting for government payments.
Michelle Primm, an Ohio dealer, is concerned about her car dealership’s cash flow. she said: She says, “Car dealers are rich in assets but poor in cash. Car dealers check their cash flow every day.”
Naturally, the National Automobile Dealers Association Cooperation with the IRS To ensure that the payment system for this program is as streamlined as possible.
How is the math calculated?
For example, if you are considering purchasing 2024 Volvo EX30, the starting price is just under $35,000. The list of cars eligible for this tax credit changes regularly, but if this car were to qualify for the full tax credit, $7,500 would be available as a down payment, leaving him with $27,500.
If you finance this at the average interest rate plus regular taxes and fees, your monthly car payment will be $520.And the average car payment is $725 in 2023you will be in good shape.