Car Buying Hack: Starting in 2024, You Can Use the EV Tax Credit as a Down Payment
Written by
David Nadelle
Edited by
Nicholas Morine
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Up until five days ago, car buyers had to wait until they filed their federal income taxes to receive the benefits of the federal electric vehicle (EV) tax credit. However, changes to EV tax breaks starting in 2024 have provided EV owners with handy buying options, both intended and unexpected.
As of January 1, EV tax credits up to $7,500 for new clean vehicles and up to $4,000 for used EVs can now be applied at the point of sale. Eligible purchasers can receive full credits from dealers even if they owe federal taxes, according to The Associated Press.
Part of the Inflation Reduction Act, the change was announced by the Biden administration at the beginning of October 2023. Under guidance from the Treasury Department and the Internal Revenue Service, the goal is to nudge American drivers into buying electric vehicles by lowering purchasing costs and help U.S. car dealers grow their business through increased EV sales.
Dealers Concerned About Reimbursement
But as Kelley Blue Book (KBB) noted, by allowing a point of sale EV tax credit, buyers can use the benefit as a down payment. It’s a great hack for those buying a new or used car, but is also a potential worry for dealers as they wait to be reimbursed by the federal government.
“Car dealers are asset-rich and cash-poor,” said Ohio dealer Michelle Primm, per KBB. “Cash flow is something we look at every single day in a car dealership.”
While U.S. sales of EVs were slow out of the gate compared to countries like China, Germany and Norway, there has been a healthy improvement in the electric vehicle business stateside in 2023. EVs are expected to account for 9% of all passenger vehicles sold in the U.S. in 2023, according to Atlas Public Policy.
Current incentives of up to $7,500 in tax credits for select electric cars, plug-in hybrids and hydrogen-powered vehicles that meet government qualifications continue to be updated by the Inflation Reduction Act. The U.S. Department of Energy’s Office of Energy Efficiency & Renewable Energy has an up-to-date list of qualifying vehicles.
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