Tax Credits for Teslas Will Drop Almost $4,000 in January — Should You Buy a Model 3 Now?
Written by
Yaël Bizouati-Kennedy
Edited by
Nicholas Morine
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Tax credits for certain electric vehicles (EVs) will be slashed soon. Tesla recently noted on its website that, while customers who take delivery of a qualified new Tesla and meet all federal requirements are eligible for a tax credit up to $7,500, “reductions are likely for certain vehicles in 2024. Take delivery by 12/31 to qualify for full $7,500,” as GOBankingRates previously reported. So are these soon-to-be-reduced savings worth making the jump?
Tesla’s announcement follows the Treasury Department’s Dec. 1 update on the Inflation Reduction Act credit rules involving “foreign entity of concern” requirements. Said foreign entities of concern (FEOCs) include China, Russia, North Korea and Iran.
“An eligible clean vehicle may not contain any battery components that are manufactured or assembled by a FEOC,” according to the Treasury Department. And Tesla’s banner on its website would suggest that the automaker doesn’t believe it will meet the new requirements.
Expert: More of a Sales Pitch Than News
While Tesla certainly seems to believe that now is the time to buy, some experts argue that there are several factors to consider.
“This has more to do with squeezing every last sale into the final quarter than a genuine concern for the wallets of those who purchase a new Model 3,” said Steve Birkett, senior EV editor for FindTheBestCarPrice.com.
As Birkett noted, Tesla missed earning targets in the third quarter and the company is eager to get back to exceeding expectations as the year comes to a close.
“The automaker’s website has also acknowledged since July that certain model trims would lose some or all of the tax credit in 2024, so the news is not a surprise to most buyers in the market for a new Tesla,” he said.
Reason To Wait: Prices Could Drop Further in 2024
According to Birkett, another aspect of the purchasing decision lies in Tesla’s penchant for frequent price adjustments.
“The Model 3 RWD started 2023 priced at $46,990, but following price cuts throughout the year this model is now available for as low as $36,440 on Tesla’s website in December 2023,” he said.
In turn, Birkett argued that it would not be unusual to see Tesla compensate for the loss of half the federal tax credit on its Model 3 LR and RWD versions by announcing further price cuts to that amount in January 2024.
“The Model 3 is also set to receive a refreshed look with the updated ‘Highland’ version of the vehicle expected to arrive in the U.S. at some point in 2024, which will put downward pressure on the price of older Model 3s in its inventory,” he added.
But there’s a reason to buy it now, too — at least for some consumers.
A more compelling reason to pick up a Tesla Model 3 in 2023 rather than waiting comes in the form of free charging, per Birkett.
“Tesla has offered six months of free Supercharger use to buyers who take delivery of a new Model 3 or Model Y before the year is out,” he said. “If one of the reasons to buy your EV is to travel the country, this represents an attractive offer that won’t be on the table for buyers in 2024.”
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