Model Y electric vehicle bodies stand on a conveyor belt at the Tesla Gigafactory in Berlin Brandenburg.
Patrick Pleuil | Picture Alliance | Getty Images
There are many reasons not to buy an electric vehicle in 2024: Car loan rates are high. Despite the recent wave of discounts, many EVs remain more expensive than gas-burning cars. And an incomplete network of chargers that sometimes malfunction has fueled drivers’ “range anxiety” about running out of juice.
But while the all-electric market is slowing, sales are forecast to continue to grow. Cox Automotive expects EVs to make up 10% of the United States vehicle market by the end of the year, up from 7.6% last year — when domestic sales hit a record 1.2 million — and 5.9% in 2022. And first-time EV adopters continue to fuel the expansion, with LexisNexis Risk Solutions tells NBC News that 3 in 4 new EVs are driven by people switching from an internal combustion engine vehicle.
Here’s what you need to know if you’re thinking of buying this year.
Tax credits cover fewer models, but no waiting
Car buyers can still expect to be rewarded for going electric, thanks to tax breaks from the Inflation Reduction Act, but the rewards won’t be as widespread.
The law’s tax incentives are limited to electric vehicles whose batteries are not actually manufactured in certain foreign countries, particularly China, or with minerals sourced there. The number of models that qualify for the full $7,500 federal tax credit, or a partial $3,750 credit, has dropped from 43 last year to fewer than 15 currently on the books. The discontinued models include popular choices like the Tesla Model 3 and Nissan Leaf.
And income caps still apply: Individuals making more than $150,000 a year or couples making $300,000 qualify for the credits, which stop at electric sedans over $55,000 and SUVs and trucks over $80,000.
“Maybe you’re a person who’s overwhelmed with all the options, and starting with a smaller list helps,” said Alison Flores, director at the H&R Block Tax Institute. But “if you’re really into the technology or certain nuances and you’re looking at a certain thing, you can get frustrated,” he admitted.
A narrower selection of electric vehicles eligible for tax incentives could push more consumers toward leasing, said Jay Turner, a professor of environmental studies at Wellesley College and author of “Charged: A History of Batteries and Lessons for a Clean Energy Future.” .
Many of the exempt vehicles still qualify for deductions when leased, he said, because the U.S. Treasury Department considers leasing an EV a commercial transaction, exempting the vehicles from certain IRA rules.
“This may be a more attractive strategy for many consumers over the next couple of years,” Turner said.
A “pretty big” change taking effect this year, Flores noted, is that consumers can now apply their full federal tax credit immediately at dealerships, rather than waiting to file their taxes to get it.
The rule “allows the dealer you bought the vehicle from to effectively advance the tax credit to you,” he said, which can lower financing costs for buyers taking out auto loans.
Lower prices and local incentives can add up to bigger savings
Auto industry experts said the combination of federal and state incentives, at a time when many EV prices are falling, could allow customers in some places to drive a new or used EV off the lot for as little as $10,000 this year.
Tesla and GM have slashed prices on some electric models to stimulate demand as inventories have piled up. Cox said These price cuts have helped average EV prices drop by nearly 18% over the past year. They are now approaching parity with natural gas cars, the company said: At the end of 2023, the average EV cost, even after factoring in Tesla’s most expensive models, was $50,789. within spitting distance of the average gas vehicle at $48,759.
Edmunds, an online car shopping resource, put the average price of a used EV at $50,000 as recently as December 2022, but now estimates it to be around $37,000.
“Oddly enough, it’s one of the few areas where you can make a lot of money right now,” said Joseph Yoon, consumer intelligence analyst at Edmunds. “A lot of dealers are seeing that the demand for electric vehicles has kind of gone down. So there are rebates beyond the federal stuff.”
This year may also be the best time to own, Turner said. “Normally we think EVs are only for people who are well off. But tax incentives, especially for used EVs, definitely open up the market to more consumers,” he said.
While the IRA used EV credit went into effect last year — offering buyers 30 percent off the car’s purchase price, up to $4,000 — some states and municipalities have since launched their own incentive programs.
Turner’s back-of-the-envelope math suggests that, thanks to a combination of stacked federal and state credits, consumers in California or Massachusetts looking at a used Chevy Bolt with 30,000 miles and a list price of $20,000 could buy it for about $10,000 – “crazy,” he added. “And I think a lot of people who are in the market for a $10,000 car don’t think an EV is within reach.”
In some areas, the discounts could go even deeper. Colorado, for example, allows residents who meet a certain income threshold to trade in a gas-powered vehicle for a tax credit of up to $6,000. An eligible buyer in that state could pile on the available incentives and take home a brand-new Chevy Bolt for a four-figure price.
Using those same incentives — the $7,500 federal tax credit, $7,500 in state credits and the $6,000 vehicle trade-in program — strategic Colorado residents could theoretically get a Tesla Model 3 for $14,000. That is, if the company regains eligibility for the list.
Turner noted that leased Teslas can still benefit from the full tax credit and that Hertz is currently sold out Model 3s from its rental fleet for just $20,000. Matching tax credits for qualified buyers could reduce the cost by between $13,000 and $18,000, he said, “a pretty good deal when a used Toyota Corolla falls in the same price range.”
Expect more range soon
On Thursday, the Biden administration announced $623 million in new grants to fund 47 EV charging projects in 22 states and Puerto Rico. The move was a tacit acknowledgment of the need to upgrade and expand a charging network whose limited reach and reliability have turned off many current and would-be EV drivers.
“All the early adopters and all the people living in big cities with easy access to charging bought their electric cars now,” Yoon said. “And now the manufacturers have to find a way to get regular people, if you will, to buy the cars.”
Some have found driving battery-powered cars outside of large metro areas a difficult proposition, given the lack of chargers in less populated places. Still, consumers “should be optimistic that better charging experiences are coming this year,” Turner said.
Big car companies struck deals with Tesla last year to access its network of superchargers, which are designed to power an EV for hundreds of miles after charging for an hour or less. As of last July, the company was operating 1,900 supercharging stations—with 10 times as many connections—across the country.
As part of these agreements, Passage and GM will supply EV owners with adapters for the connectors and begin incorporating Tesla’s unique plug with their new models in 2025.