Car buyers have had a tough go looking for their next road warrior. Inventories are low due to supply-chain troubles, which means prices for new and used cars have skyrocketed thanks to increased demand.
If you add in the gas price hikes that dominated summer news headlines and passage of the EV-friendly Inflation Reduction Act, you now have a cacophony of issues to consider when searching for a new vehicle. And that includes whether an electric vehicle is in your near future.
The Inflation Reduction Act extends the tax credit on new electric vehicles, including plug-in hybrids, until December 2032. The credit is worth up to $7,500, providing a hefty incentive for consumers to spring for an EV. And now used EVs that are at least two years old are eligible for a credit too—up to $4,000 or 30 percent of the price of the vehicle, whichever is less.
The new rules are a sweeping change. They eliminate the eligible-vehicle cap placed on automakers on one hand while adding North American assembly-material sourcing requirements on the other. Previously, a vehicle that qualified for the tax credit would no longer be eligible if the manufacturer had hit the model’s 200,000-car limit.
That is no longer the case for vehicles bought in 2023. To qualify for the credit, though, the law sets income limits and a price cap on eligible vehicle prices.
If you’re considering purchasing an electric vehicle and you want the widest pool of available options, your safest bet is to buy in 2023.
The 2023 list hasn’t been released yet, but you’ll see which vehicles to avoid until the New Year because the current list includes the car models that have reached the manufacturing cap to qualify for a tax credit.
After you’ve narrowed your choices, go to the dealership to test-drive the vehicles and to make note of the vehicle identification numbers (VIN) of the ones you’re interested in. From there, go back to the Department of Energy website listed above and scroll down to the VIN decoder to see if the car qualifies for the EV credit.
Compare an EV with its gas-powered equivalent and you’ll find that the EV runs roughly $10,000 more. Ten grand can buy quite a bit of gasoline, and it would take many years to offset the added cost, says Ronald Montoya, senior consumer advice editor at car shopping site Edmunds.com. That’s where a tax credit can come in handy.
With regard to the new price caps for tax-credit eligibility, you’ll find more leeway in terms of price and selection on trucks and SUVs than on cars. Take the 2022 Volvo S60 sedan, for instance, which is on the Department of Energy’s current list. The gas-mild hybrid version of the vehicle has a starting manufacturer’s suggested retail price of $41,300, whereas the plug-in hybrid starts at $51,250. And these prices are before you decide to add options.
The ultimate feature package on the plug-in hybrid, complete with a Harman Kardon premium sound system and head-up display, costs an additional $5,450, bringing the sales price to $56,700, or $1,700 above the $55,000 price cap on EV cars imposed by legislation. Meanwhile, the Chevrolet Blazer EV, which will become available next summer, has a starting MSRP of roughly $45,000. That’s way below the $80,000 SUV price cap.
(Rivan Stinson is a staff writer at Kiplinger’s Personal Finance magazine. For more on this and similar money topics, visit Kiplinger.com.)
