The US Inflation Reduction Act’s allotted tax credits of up to $7,500 for qualified electric vehicles have effectively encouraged automakers and customers to support the shift to clean energy vehicles.
However, the US Government continues to improve it with certain changes from time to time to ensure that the positive effects of the legislation are maximized.
That said, the US Treasury Department announced a new process for eligible customers to receive the credit easier and faster than the prior approach. However, this major change alarms most of the dealers in the country, Automotive News reports.
Status quo
Eligible electric vehicles, including cars, trucks, or SUVs, will gain access to a maximum federal tax credit of $7,500.
However, this credit only reduces customers’ tax liability. That said, if you owe below $7,500, you could not benefit from the full credit.
Moreover, you also need to wait for tax time to realize the benefit. It must be noted that the credit will only lessen your taxes. You must still pay in full at the dealership.
Meanwhile, leasing an EV may be simpler as the dealership gets the credit to pass the value to customers in the lease terms.
The new process
Motortrend reports that customers can finally pass the federal tax credit on purchases to car dealerships in 2024.
In return, dealers will provide an instant credit on their car purchase through a down payment. Therefore, it would immediately benefit customers, unlike the prior process through a tax deduction.
This new process is indeed a piece of good news for customers as it offers an easier and faster process without tax liability calculations.
However, US dealerships are not as happy as the buyers with the new down payment process.
Dealers’ concerns
Automotive News indicated that the dealerships’ concerns are due to their bad experience with the Cash for Clunkers program, which is significantly similar to the new process we’re talking about.
For context, the US Government offered customers a cash credit of $3,500 to $4,500 for a new, more fuel-efficient car.
However, it prompted the dealerships to front the money and reimburse it to the government. However, the reimbursement process took several months, leading to the credits continuously adding up.
Now, they are worried that the same scenario would happen again. To appease their concerns, the White House pledged to facilitate “prompt” reimbursement.
See Also:
- UK automakers demand tax credits to encourage customers to switch to EVs
- Tesla price cuts partly offset by federal tax credits
- Tesla warns customers on the looming federal tax credit reduction of the Model 3 in 2024
- Tesla competitors struggle with increasing car inventory in the US, probably due to tax credit ineligibility
- Tesla battery suppliers enjoy shares growth amidst IRA tax credits
The IRA’s offered tax credits significantly aided the government in promoting the shift to electric mobility. However, it continues to cause confusion among the customers. Hopefully, the new down payment scheme will be effective in simplifying the purchasing process for eligible customers.
