Sun Tzu Tax Credit and the Art of Electric Vehicle Tax Credit: How Not to Get Scammed by Dealerships (Part 1)


I know it is unwise to count your chickens before they hatch, especially when you are relying on the US Congress for something. So, maybe I’m getting ahead by discussing upcoming tax credits for electric vehicles. As currently written, they would give GM and Tesla buyers access to tax credits again, but give US-made cars and unions the most credits at $ 12,500. . Plus, it’s supposed to be a refundable and transferable credit, so you can get (up to) $ 12,500 in point-of-sale rebates when you buy a new EV.

Like everything else in the Build Back Better Act, it’s stuck right now as Democrats try to find a way to make Senators Joe Manchin and Kyrsten Sinema happy enough to get their votes. On top of that, foreign governments warn the United States that favoring vehicles made by unions or in the United States would violate international trade commitments, so Congress can revise credits to give each buyer the same amount.

Whatever they choose to do, it seems very likely that the EV tax credits in the final law will be refundable and transferable, but there is one final hurdle between you and saving up to $ 12,500 on an EV: thief “.

The dealers are Salivate thinking about your tax credit About to get you a bargain!

If you’ve seen the 1996 movie Matilda, you know who Harry Wormwood is. It’s a caricature of the American car dealership. They are always there to make the extra money while giving you a little less. They’ll cover up facts, lie to you, sell thousands of dollars worth of worthless add-ons, replace paperwork, and even commit forgery if that’s what it takes. The only people who really enjoy going to car dealerships are the people who just don’t care or care how much they spend.

But the dealers are going to prove me “wrong” on all of this once the tax credits go into effect.

Go to any electric vehicle dealership and you will find AMAZINOTg price of new cars with guarantees. I did the silly rainbow thing because the prices will be really amazing. If you’re not already gay, you will be at least in the 1920s sense (back when it just meant ‘really happy’) after seeing the prices. Did I mention the prices will be amazing?

“See, Jennifer hates normal auto companies that work with dealerships,” you might think. “She works for this rag online CleanTechnica where everyone owns Tesla shares, then all she does is talk bullshit about Tesla’s competitors to pump the shares. After all, look at these amazing prices! How dumb does Jennifer think we are? ” (FYI, I don’t own Tesla stonks and I’m personally not a Tesla fan these days, but that’s another story)

Take this Volkswagen ID.4 for example:

A screenshot from one of my local Volkswagen dealers. Fair use, comment.

After the tax credits (assuming VW buyers end up getting the full $ 12,500), you’ll see that the price at many dealerships will magically drop to:

$ 38,023 Sale price !! Below MSRP! Below the invoice! $ 8,000 off the price without haggling!

“Soft baby cheese and crackers!” It’s incredible ! They give these cars away for less than what they paid for! you’ll say. “Where do I sign? Shut up and take my money!

The obvious scam

You don’t have to be a rocket surgeon to see the scam on the surface here, but many customers will do exactly as above and jump on the “right” deal. With a government rebate of $ 12,500, the dealership offers customers only $ 8,000 in rebate and pockets the remaining $ 4,500. It will be a great Christmas for many dealers and their sellers.

So if you’re smart you’ll tell them you want the MSRP price ($ 45,425 in the website screenshot above) minus the EV tax credit ($ 12,500 if they give up. to international pressure and offer this to all car manufacturers). You would end up with an even better deal, paying $ 32,925.

The dealer will try to chat with you a bit and see if he can convince you that you are getting a big discount when he steals some of your tax credit, but he won’t fight you too hard if you tell him that you know that all of the EV tax credit is supposed to be deducted from the price of the car. So this is where you sign the papers and get your good deal, right?

It would still be a scam, however

MSRP minus incentives (EV tax credit is an incentive) is not a good formula for a fair price on a car. Sure, you’ll get the most out of your tax credit, but you really shouldn’t be paying the MSRP for a car to begin with. This is the price at which negotiations usually start, but you should at least get something out of it.

Before you can figure out what to pay, you first need to know your enemy and their position on the car. As Sun Tzu said, “If you know the enemy and you know yourself, you don’t have to fear the outcome of a hundred battles… If you don’t know the enemy or yourself, you will succumb in every battle.

The person who paid “$ 8,000 in rebate” did not know what the dealership paid for the car, nor that he was bringing a $ 12,500 tax credit with it. They did not know the enemy or themselves, and they lose big.

The smartest person in the last section knows themselves (and the $ 12,500 owed to them here), but doesn’t know their nemesis and ends up paying the MSRP.

The smarter buyer both knows himself (that he is owed $ 12,500 off), but also does research to know his enemy (by determining what the dealership paid for the car), so that it can arrive at a fair final price. To do this, you will need to go to a site like Edmunds and determine the price charged by the dealer for the vehicle. In theory, that’s what they paid Volkswagen for the ID.4.

In this case, Edmunds says the invoice price was $ 43,696, but that’s not all. There is also a hidden profit margin called a holdback, which dealerships and manufacturers use to disguise the real price of the car. In the case of Volkswagen, Edmunds says the holdback is 2% of MSRP, or $ 910.50. So the cost to the dealer is actually around $ 42,785.

To be fair, the dealership probably paid something to have the car transported to its lot from the factory, and they might also have paid for options if the car has them, so make sure you get them. keep in mind when determining what the dealership’s actual cost is.

Also, keep in mind that if there are any manufacturer, state, or local incentives, these are deducted from the dealer’s cost, just like the electric vehicle tax credit.

In Part 2, I’ll explore the specific numbers for this example car more so that you can see how it works in the end, give you some more tips for avoiding common dealer scams, and ask yourself if this is of a game we want to play at all.

Featured Image: A lot of used cars selling Nissan LEAF. Photo by Jennifer Sensiba.

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