The recently passed Inflation Reduction Act includes a new tax credit for used electric car purchases, making it more affordable for some shoppers to buy a used electric car.
The credit, which becomes available in 2024, is only valid for vehicles that have been used for at least two years and are sold by licensed dealers for $25,000 or less. It is also only valid for the first time a vehicle is being resold from new.
The credit’s maximum value is $4,000 or 30% of the vehicle’s price, whichever is less, with a cap on vehicles priced at $13,500 or less. However, there are also income limits that apply, which are half of those for the new electric car credit. The income limits for the used electric vehicle tax credit are as follows: single filers are capped at $75,000, head-of-households at $112,500, and couples at $150,000.
The National Independent Automobile Dealers Association, which represents the used car dealer industry, believes that the credit will not benefit the used EV market much due to the restrictions. The organization stated that the criteria outlined in the IRA make it challenging for consumers looking to purchase a used electric vehicle (EV).
According to the National Independent Automobile Dealers Association, the criteria for the used EV tax credit limits the choices of finding a used EV under $25,000 that is two years old and makes it nearly impossible for families with one, two, or three children who are within the criteria of the joint filing, as it serves all levels of income. This criterion, while a good start, leaves more questions than answers on how our dealers and the consumers we service can receive these credits.
The used electric vehicle tax credit does not have the same domestic manufacturing and materials sourcing requirements as the new car credit, which has already disqualified all but 21 plug-in vehicles from eligibility. Consumer Reports advises buyers to act quickly if they are considering purchasing an electric vehicle (EV) or plug-in hybrid, as it may not qualify for a tax credit in the future.
Jake Fisher, senior director of Consumer Reports Auto Test Center, suggested that those thinking about buying a used EV may benefit from waiting. CarMax, the largest used car retailer in the US, has reported that their retail sales of used electric and hybrid vehicles have more than doubled in the last two years, making EVs one of their fastest-growing categories.