Globally, electric car sales have been increasing.
Norway will go all electric by 2025 and 80% of their new cars sold are Electric Vehicles (EVs). Entire countries, including the Netherlands, France, Germany, the UK and India, have considered banning the sale of all internal combustion engines. All new Volvo models are either hybrids or powered solely by electricity. Volkswagen has announced a move to electric, spending $193 billion dollars on developing electric cars and batteries. While the international EV trend seems to be clear, in the U.S. manufacturers like Ford and GM have recently slowed production of EVs in response to a 506% increase in available inventory from the previous year.[1]
Because there were some changes in the EV tax credit availability and eligibility starting in 2023 and because EVs are an available option for consumers looking to buy a vehicle, we thought now would be a good time to provide not only some pros and cons about EVs in general, but also pros and cons to consider when deciding whether to buy or lease an EV.
When weighing EVs as an option, it is important to know that there is much more to think about than fuel savings. While this list is by no means comprehensive, here are a few things worth thinking about as you begin your research.
Technology:
Cost:
The amount of tax credit available to you basically comes down to whether the EV assembly qualifies, the EV purchase price, and your income.
New EV:
Filing Status MAGI </=
Joint tax returns or surviving spouse $300,000
Head of household $225,000
Individual or any other filing status $150,000
Used EV:
Filing Status MAGI </=
Joint tax returns or surviving spouse $150,000
Head of household $112,000
Individual or any other filing status $75,000
Historically, most financial planners recommend buying vehicles rather than leasing. However, with rapidly changing battery technology and uncertain residual value, leasing an EV may make sense. And if the leasing company passes along some of the value of their EV tax credit to you, it may make a lease even more compelling.
Electric vehicles present a rapidly changing situation from a technology, tax and financial perspective. We strongly recommend you do thorough research (weighing all the pros and cons, not just those mentioned here) and discuss all of this with your tax preparer and Modera advisor before making a final decision.
[1] https://www.usatoday.com/story/money/personalfinance/2023/11/14/ev-sales-2023-slow-inventory-pile-up/71572499007/
[2] https://www.autoweek.com/news/green-cars/a38658354/electric-car-battery-life-explained/
[3] https://www.findmyelectric.com/blog/electric-car-prices/#:~:text=Currently%2C%20most%20estimates%20put%20the,of%20last%20year%20(2022)
[4] https://www.self.inc/info/electric-cars-vs-gas-cars-cost/#:~:text=The%20average%20annual%20cost%20of,needed%20to%20drive%20this%20milea
[5] https://www.greencarreports.com/news/1140592_study-collision-repair-remains-much-more-expensive-for-evs
[6] https://www.edmunds.com/fuel-economy/the-ins-and-outs-of-electric-vehicle-tax-credits.html#:~:text=Critical%20battery%20minerals%3A%20To%20qualify,trade%20agreement%20with%20the%20U.S.)
[7] https://www.policygenius.com/auto-insurance/electric-car-incentives-by-state/#federal-vs-state-electric-vehicle-tax-credits
[8] https://www.reuters.com/business/autos-transportation/us-treasury-details-ev-tax-credit-rebate-rules-2023-10-06/#:~:text=Currently%2C%20consumers%20can%20only%20take,may%20help%20boost%20EV%20sales
[9] https://taxfoundation.org/data/all/state/electric-vehicles-ev-taxes-state
[10] https://www.edmunds.com/fuel-economy/the-ins-and-outs-of-electric-vehicle-tax-credits.html#:~:text=Critical%20battery%20minerals%3A%20To%20qualify,trade%20agreement%20with%20the%20U.S.)
[11] https://www.edmunds.com/fuel-economy/the-ins-and-outs-of-electric-vehicle-tax-credits.html#:~:text=Critical%20battery%20minerals%3A%20To%20qualify,trade%20agreement%20with%20the%20U.S.)
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