Posted by: Jerry Garrett | May 13, 2010

The Great Electric Car Tax Credit Ripoff

The Nissan LEAF is the first mass-produced EV in America. (Nissan)

The Wall Street Journal had a story today about what they called “Welfare Wagons” – electric cars whose purchase prices can be offset somewhat by applying available federal and state tax credits.

These include vehicles such as the Nissan Leaf, Chevrolet Volt, Tesla Roadster and Fisker Karma.

Nissan said it will offer the Leaf at what the WSJ noted was “a surprisingly modest price for an electric car of $25,280.”

Hold on there. The Leaf costs $32,780 – period.

Just the same as the upcoming Tesla Model S will not cost $49,900, as the manufacturer has been touting. It will cost $57,400 (and only if you settle for the puniest power pack). General Motors is fond of saying the Volt’s expected $40,000-plus price will actually be thousands less, thanks to federal and state tax credits.

But the car companies have conveniently (for their own interests) already deducted from the true purchase price the amount of a federal tax credit – a credit for which not everyone will qualify. It’s just a big tease.

In all honesty, these manufacturers should not be quoting anything other than the actual MSRP. To buy an EV, the MSRP is the amount you will have to write a check to the car companies for. There aren’t any rebates, discounts or cash back. The news media do their readers a disservice by reporting anything other than the MSRP.

“The credit is a direct ‘offset for taxes that are owed’,” noted Craig Castanos, a San Diego-based CPA. That means if you owe between $0 and $7,500 in federal tax, in a given tax year, your electric car “credit” will only be deducted from the balance you owe. Anything leftover goes to waste; you lose it. There are no “rollover” credits, like cell phone minutes.

If you pay the dreaded Alternative Minimum Tax (AMT) you wouldn’t be able to offset any credit against that. There is no escape from the AMT.

The same math would apply to any state credit, such as the $5,000 credit California may offer.

And there’s no guarantee how long such tax credit programs will even be offered.

In fairness to Nissan, they do note in a website FAQ about the Leaf, “The federal government provides up to $7,500 tax credit for eligible EV buyers and a tax credit for installing a home charger if they have the tax liability to seek the credits.”

But what percentage of people owes $7,500 or more in federal taxes, and another $5,000 or more in state taxes? I wonder. If I did, I doubt if I’d be in the market for a new car – electric or otherwise.

Jerry Garrett

May 13, 2010

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Responses

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  3. This sort of thing has been happening forever. Hence the tiny disclaimer info at the bottom of every document or the bumb message played at high speed at the end of a radio spot.

    The consumer see’s the low MSRP and thinks they are getting a loaded car. But its really a stripped down version…add on the extras and the price swells by a few grand.

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  6. Great article.

  7. […] The Great Electric Car Tax Credit Ripoff | Garrett On The Road – May 13, 2010 · Posted by: Jerry Garrett | May 13, 2010 The Great Electric Car Tax Credit Ripoff… […]


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