US tax credit for electric cars ends
As the US President Trump decided in the summer, the tax credits of $7,500 for the purchase of new electric vehicles and $4,000 for the purchase of used electric cars will end on September 30. According to information from Reuters, Ford and General Motors are trying to get car dealers to sign up for financing programs to extend the $7,500 benefit for leased vehicles beyond the expiration of the government subsidy.
In doing so, the manufacturers are apparently exploiting a loophole in the subsidy guidelines: the manufacturers themselves, together with their financing service providers, are making a down payment for vehicles that are already in stock at dealerships but have not yet been sold to customers. “Those down payments will qualify the lending arms for the federal $7,500 tax credit on those vehicles, according to the documents and dealers. From there, dealers would offer leases on those cars to retail customers as usual for several more months, with the $7,500 subsidy factored into the lease rate,” Reuters writes, citing information from dealers who were informed about this procedure by the manufacturers.
With this trick and the “internal” sale before September 30, dealers could continue to offer discounted vehicles in their leasing rates from October onwards until the “subsidized” stock is depleted. However, the Reuters article does not contain any information on how many vehicles this trick was used on.
“We worked with our GM dealers on an extended offer for customers to benefit from the tax credit for leases,” General Motors explained in response to a query from the news agency, but also did not provide any details on the scope of the offer. Ford, on the other hand, stated that it was working on “working to provide Ford EV customers with competitive lease payments on retail leases through Ford Credit until December 31.” At least a specific offer period, the fourth quarter, is mentioned here, but Ford also leaves open how many vehicles can be offered in this way.
The Reuters report only mentions General Motors and Ford. According to three people familiar with the matter, the two companies developed their dealer programs after discussions with representatives of the US Internal Revenue Service (IRS), so they have presumably secured legal cover for their actions. According to Reuters, the IRS did not comment on the matter. It is also unclear whether other car manufacturers are offering similar deals with their dealers.
Experts expect there to be another rush for electric cars in September in order to take advantage of the subsidy. However, a slump in sales figures is forecast for the fourth quarter, similar to the trend in Germany after the abrupt end of the environmental bonus subsidy at the end of 2023. It is unclear how long it will take for the US market to recover from the subsidy effect.
The US tax credit was introduced in 2022 under Trump’s predecessor Joe Biden as part of the Inflation Reduction Act. Since August 2023, the tax credit has also been available for used electric cars, although these had to meet certain requirements to qualify for the subsidy. Since the turn of the year 2023/2024, it has also been possible to assign the tax credit, which was actually paid out with a delay when filing the tax return in the following year, to the dealer at the time of purchase. The dealer could then grant up to $7,500 as a discount on the purchase and, in turn, apply for the subsidy from the government.
Some international automobile manufacturers have since decided to withdraw electric vehicle models from the US market, such as Honda and Nissan, while local manufacturers, including Tesla, are seeing lower sales and margins in their automotive sales. While some conditions are changing, such as the tariffs on imported cars from Europe, and the US government is investing in the mineral supply chain, it remains to be seen how the US industry will recover.
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