Car dealers are always advertising that now is the best time to buy, but if you're in the market for an electric vehicle, now might actually be the best time to buy.
The reason: Congress voted to pull the plug early on a massive tax incentive that could save buyers up to $7,500 on new EVs. Instead of expiring in 2032, the tax break now ends Sept. 30 of this year. An EV you buy in October or later won't qualify.
The move by congressional Republicans and signed by President Donald Trump was designed to help pay for the continuation of tax cuts from Trump's first term, which some say are most helpful for the wealthiest taxpayers. Congress gutted a host of clean-energy tax breaks in the bill Trump signed on July 4, essentially repealing much of the Inflation Reduction Act passed under President Joe Biden.
With the EV credit expiring mid-year, it sets up a weird 2025 for an auto industry that also faces potential challenges from Trump's tariff policy. Thanks to international supply chains for parts and materials, this is likely to increase the cost of cars and trucks even if they're assembled in the US.
If you're in the market for an EV, that means you might want to think a little more closely about your buying schedule. "My ordinary advice for everyone all the time is don't be in a big hurry, take your time and make a careful decision," Sean Tucker, lead editor at Kelley Blue Book, told me. "This is the one circumstance where you might want to be in a big hurry."
It makes sense that EV sales are at a record pace through the first six months of the year, according to KBB data, and the end of the tax credit could lead to a third-quarter boom, with the bottom falling out in the fourth quarter.
Watch this: Optimizing Your EV's Efficiency Is Easier Than You Think 07:14
What is the EV tax credit?
Right now, the federal government provides a credit of up to $7,500 for a new electric vehicle, plug-in hybrid or fuel cell electric vehicle. The credit is split into two equal parts, with a $3,750 credit each if the vehicle meets requirements for the sourcing of materials for the battery components and critical materials. Because of those requirements, only a handful of vehicles qualify. You do need to meet some income limits -- you can't have taxable income above $150,000 if you file individually, $300,000 if you're married filing jointly or $225,000 if you file as head of household.
There's also a credit for used EVs equivalent to 30% of the sales price up to $4,000. The list of qualifying vehicles here is more extensive, but the used EV market is also a lot smaller than the new EV market. Although that has been changing -- more than 100,000 used EVs were sold in the US in the second quarter of the year, compared with more than 300,000 new EVs, according to KBB data.
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