Thinking Of An Electric Vehicle?  Time Is Running Out

The clock is ticking for electric vehicle shoppers. A federal tax credit worth up to $7,500 on new EV purchases is going to expire on September 30, following legislative changes that phase out key clean-energy incentives. For consumers considering the switch to electric, the coming weeks represent a critical window to take advantage of the savings before they vanish.

The credit, part of the 2022 Inflation Reduction Act, has helped bring EV prices closer to parity with traditional gas-powered vehicles. Buyers of used electric cars can also benefit, with up to $4,000 available for qualified pre-owned models. However, after September 30, those incentives are going to end also.

For those in the market, acting now offers several advantages. First and foremost, the savings are significant. Many EVs qualify for the full $7,500 credit, which can be applied directly at the time of sale through participating dealers—effectively reducing the sticker price immediately rather than waiting until tax season. Used models under $25,000 with qualifying ownership history also remain eligible.

Second, a rush of demand is expected before the deadline, potentially tightening inventory and pushing prices higher. Automakers and dealers are responding with added incentives, including low financing rates, free home charging equipment, and lease specials tied to the tax credit’s expiration. Waiting too long could mean limited availability or missing out altogether.  We learned this week that GM is taking an EV plant and converting it to build more gasoline trucks and SUVs.

Dealers quit ordering EVs in big numbers well over a year ago.  The factory, of course, crammed as many down their throats as possible, but the huge numbers sitting on most dealers lots are just not there. If there is a rush, the inventory is not there to support it in most places.

Third, EV ownership still carries long-term financial and environmental benefits. Over the lifespan of the vehicle, electric cars typically cost less to operate thanks to reduced fuel and maintenance expenses. Drivers can expect to save money on fuel costs alone over 10 to 15 years.

Lastly, if you listen to me, you know I say to LEASE electrics, don’t buy them.  That’s exactly what I did with my BMW.  Should you purchase one and find out it is not for you, you are stuck like chuck.  The depreciation is awful.  The $7,500 applied to a lease makes the payment drop a LOT, especially on a 36 or 42 month lease.

To qualify for the federal credit, income caps apply: individuals must earn less than $150,000 annually, or $300,000 for married couples filing jointly. New vehicle price limits also apply—$55,000 for passenger cars and $80,000 for SUVs and trucks. The vehicle must be assembled in North America and meet battery component sourcing requirements to receive the full credit.

Time of delivery is also critical. Buyers must take possession of their EVs on or before September 30 to remain eligible. Ordering a vehicle now with late delivery could disqualify the purchase if it arrives after the deadline.

In short, shoppers interested in an electric vehicle should act quickly to secure available credits, avoid potential price hikes, and lock in dealer incentives. With the tax credit nearing its end, and no guarantee of future extensions, there may be no better time to plug-in than now.

So, what happens after the $7,500 goes away?  It is hard to say, but between the rush to get the incentive and dealers not ordering more EVs, the selection will be sparse, and sales will tumble.  There will always be EVs, and I predicted years ago the market would peak at 10%, which we never quite got to, but close.  After the rebate is gone, I think we settle into about a 5% share of the U.S. market and stay there while automakers adjust production to building more hybrids, and ICE fuel-efficient vehicles.