Cars are more expensive than ever before. However, thanks to an electric car tax credit you can save over $7,000.
Buying a car is not an easy financial feat. For many, searching online ads for used vehicles is usually the way to snatch a bargain. But even used cars had an exponential price increase throughout the pandemic. Needless to say, people have been waiting patiently for a monetary exemption on their new vehicle purchases. Now thanks to a recent bill, an electric car tax credit may be implemented to sweeten a potential deal.
President Joe Biden recently signed a healthcare bill into law last week, which also focused on subsidizing electric vehicle companies. The law includes a $7,500 electric car tax credit for those wishing to buy a new EV or $4,000 for a used one. As the government redesigns its focus on climate change and environmental conservation, new bills have popped up in recent years that are ready to tackle America’s carbon footprint. Allowing a tax exemption for EV buyers doesn’t only help average citizens to purchase a new vehicle but provides an incentive for car manufacturers to start producing electric models.
With this new electric car tax credit, there are a few caveats. First, not every electric vehicle will be eligible for credit. The bill focuses on the car’s assembly and if the parts of the EV were assembled in North America. This exempts many vehicles on the market from getting the tax credit since numerous EVs require batteries and parts shipped from China. Fortunately, more than twenty-five vehicles meet this requirement, but more rigid restrictions will be implemented next year, narrowing down the roster tremendously.
Second, there are income requirements for those wishing to get the electric car tax credit. Individuals with $150,000 or less yearly income will be allowed the tax exemption or couples with a combined income of $300,000 or less. This requirement will probably be less cumbersome for individuals who need the money since the law is designed to help lower-income groups afford expensive EVs.
Batteries and how they’re manufactured must also fulfill requirements for a person to gain the electric car tax credit. A specific percentage of the battery‘s minerals must have come from North American deposits or a country with an established free-trade agreement with the US. Most of the assembly for the battery must occur within North America as well, which will surely complicate the assembly process for most American automotive companies. Since 90% of lithium refining occurs in China, car companies within the US will have to reconstruct their manufacturing plans to accommodate Biden’s EV tax credit.
Though the US government wants to make it easier for people to afford EVs, $7,000 off of an electric car might not be a substantial enough incentive for someone to purchase one effectively. Currently, new EVs on the market average around $60,000, far more expensive than the average gas-powered models. Taking $7,000 off with the electric car tax credit would hardly make a dent in a Tesla or Rivian’s price. The US, and the automotive market in general, has a long way to go before average citizens can consistently afford EVs.