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Tesla's unfair absorption of tax credits
- Thread starter NoMoGas
- Start date
I'm still trying to figure out how you can earn enough to afford a Tesla yet not owe at least $7500 in taxes. Maybe I should ditch H&R Block at home and spring for an accountant to do my taxes.
I do not qualify for the full $7500 credit, I got max $5K back last year for the first Tesla I bought. I make ok money and have very little living expenses besides food and whatnot. That is how I can afford it.
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And property managers with no rent and or other living expenses.:wink:
Merrill
Merrill
My wife and I are retired, but do generate some taxable income from investments and I work part time. I was unable to use the tax credit when I purchased my Tesla because I still had some federal tax credit from solar installation. If I end up purchasing the Model X next year I will probably sell off some investments to purchase part of the X and hope then to use some of it to offset the capital gains. We certainly do not have much earned income like we did when we were both working. Having said that, I would have purchased the car even if there was no tax credit.
Larry93428
Member
Couldn't agree more with @NoMoGas. The price of the car is the top-line number. I chose to finance - love that buyback guarantee! - and the finance deal was reduced by $7500.
I love love love Tesla(*). But it annoys the heck out of me that they act as if they are entitled to the tax credits. The tax credits are incentives to buyers, not grants to the car company.
I also disagree with the notion of knocking $7500 off the resale price before any other discussions begin, whether for a private resale or a sale back to Tesla. Why not also knock off the state tax credit? Why not add back the sales taxes paid?
The day after the federal tax credit ends, will everyone suddenly agree to pay $7500 more for a used Model S?
It's strange that everyone seems to act as if the tax credit belongs to anyone *except* the first owner -- it goes to Tesla, it goes to the next buyer, but only stays with the first buyer if the first buyer keeps the car. Oh, and the folks who unfortunately can't benefit from the credit at all on their taxes just get shafted at resale time. Weird.
Alan
(*)My kids would argue that I love the car more than I love them. That is not true! However, I do expect the kids to throw themselves between hot liquids and the upholstery in the event of a drink-related mishap.
I love love love Tesla(*). But it annoys the heck out of me that they act as if they are entitled to the tax credits. The tax credits are incentives to buyers, not grants to the car company.
I also disagree with the notion of knocking $7500 off the resale price before any other discussions begin, whether for a private resale or a sale back to Tesla. Why not also knock off the state tax credit? Why not add back the sales taxes paid?
The day after the federal tax credit ends, will everyone suddenly agree to pay $7500 more for a used Model S?
It's strange that everyone seems to act as if the tax credit belongs to anyone *except* the first owner -- it goes to Tesla, it goes to the next buyer, but only stays with the first buyer if the first buyer keeps the car. Oh, and the folks who unfortunately can't benefit from the credit at all on their taxes just get shafted at resale time. Weird.
Alan
(*)My kids would argue that I love the car more than I love them. That is not true! However, I do expect the kids to throw themselves between hot liquids and the upholstery in the event of a drink-related mishap.
breser
AutoPilot Nostradamus
I've said this before. If you're going to sell a Model S at this point you're going to be competing against a new sale. The pricing has to be attractive to the buyer over buying a new car or otherwise they'd buy the new car. There are of course some exceptions to this. People that don't qualify for the tax credit or that are too impatient to wait for a new car to be made. There are some of those people out there. You might get lucky and manage to find one of those people. More power to you if you do. But in general the market is going to subtract the federal tax credit in the US, which means even those people are going to be inclined to expect the same price reduction.
Nobody includes sales tax from the new purchase when figuring the value of a used car because generally both parties end up paying sales tax and thus the used car is still attractive regardless of the sales tax. However, as I've argued before in my state sales tax only applies to sales of used Tesla vehicles because there is a sales tax exemption on new alternative fuel vehicles. So you have to reduce the price of the vehicles enough to account for the sales tax difference on the used market. I just traded my vehicle to Tesla, they didn't deduct this off the value of the vehicle. The reason being is that the car will be moved to a state without such an incentive and sold where used vehicles are more attractive to buyers.
Same thing is true with the state incentives. You can just move vehicles around to where they have the most value. But the federal tax credit applies to the entire country. The vehicles can't easily just be moved to some other country because there are differences in vehicles destined for different countries. Usually these differences are a matter of regulatory differences (e.g. vehicles destined for Canada have red buckle releases versus the black for US vehicles). So to move these vehicles you'd have to make those changes. Plus you may have tariffs that are due when moving the vehicle. Combined the costs of moving the vehicle to another country probably exceed the value of the tax credit. So as a result the federal tax credit gets deducted from the value of the vehicle.
The federal credit phases out, so it'll go down to $3750 and then $1875. So I'd expect that once the phase out starts that the used market will rise slightly to account that there's less incentive to buy new.
This isn't about who the credit belongs to. It's about the simple economics of a buyer choosing between a new or used vehicle. There is some point where the depreciation is enough that the tax credit doesn't matter anymore. However, even if the depreciation on the vehicle is more than what the tax credit decreases a new vehicle by then it still may not be enough that the savings from buying used is worth not getting a new vehicle. Where the break point lies (where the tax credit doesn't matter) isn't something that anyone can answer easily.
Tesla is entitled to use whatever formula they want. And the value of the car certainly is reduced by the existence of the tax credit. It can be argued that it might not be reduced by the full $7500, but it certainly is reduced by some amount.
majorlance
Member
Just an anecdote about moving cars around. Apparently Leafs that are lease turn ins are sold in other markets (ie not US). Perhaps a rumor.
With the Leaf, $7500 is really really significant. The used market in the US is pretty bad because of this. If you have a good number of cars bought at perhaps $10k at auction, it makes sense to ship them to a country that has a better incentive to buy a used EV - such as no credit on new ones and high gas prices (or congestion tax etc).
This is in reply to "you can't go moving cars around to where they have the best value". Sure you can.
In comparison to most markets in the world (not Norway), the US generously helps on the new car price but then nothing after that. This hurts the used car value.
Unrelated but the Tax credit of course goes to the buyer but it really is a gift/aid to the manufacturer. That was its intent - to encourage OEMs to make EVs. If the OEMS make them, they will get bought (usually). So in a sense, it really is Tesla's tax credit. Look at it this way, the tax credit was not meant to reduce your tax burden, it was meant to encourage EV adoption. Sure EVs have to get both made and purchased. But it was just politics to make it a tax credit on the purchase - really stupid stuff that punishes retirees. The sad part is that it also punishes the lower 60% of incomes.
Of course with Nissan and GM, most are leased. Then the buyer never sees the tax credit - the manufacturer gets it.
While I am on a rant for stupid policies, the tax credit lowers the residual on EVs. That makes the long term economics look worse. If the Leaf just cost $23k instead of $30k, the resale value would look just fine. But some people don't take the tax credit into account when factoring used values which makes the resale value look terrible. That makes EVs look like stupid financial choices which doesn't help anything.
With the Leaf, $7500 is really really significant. The used market in the US is pretty bad because of this. If you have a good number of cars bought at perhaps $10k at auction, it makes sense to ship them to a country that has a better incentive to buy a used EV - such as no credit on new ones and high gas prices (or congestion tax etc).
This is in reply to "you can't go moving cars around to where they have the best value". Sure you can.
In comparison to most markets in the world (not Norway), the US generously helps on the new car price but then nothing after that. This hurts the used car value.
Unrelated but the Tax credit of course goes to the buyer but it really is a gift/aid to the manufacturer. That was its intent - to encourage OEMs to make EVs. If the OEMS make them, they will get bought (usually). So in a sense, it really is Tesla's tax credit. Look at it this way, the tax credit was not meant to reduce your tax burden, it was meant to encourage EV adoption. Sure EVs have to get both made and purchased. But it was just politics to make it a tax credit on the purchase - really stupid stuff that punishes retirees. The sad part is that it also punishes the lower 60% of incomes.
Of course with Nissan and GM, most are leased. Then the buyer never sees the tax credit - the manufacturer gets it.
While I am on a rant for stupid policies, the tax credit lowers the residual on EVs. That makes the long term economics look worse. If the Leaf just cost $23k instead of $30k, the resale value would look just fine. But some people don't take the tax credit into account when factoring used values which makes the resale value look terrible. That makes EVs look like stupid financial choices which doesn't help anything.
To support this point about moving cars around, there is one dealership in Quebec known for importing used Chevy Volts from the USA. They sell them at such a rate that they are selling 33% of their used inventory as used imported Volts. With gas over $4.00/gal up to $5.00 and electricity down in the .08 or lower per kWh, it makes sense to customers to buy used electric cars and a used Volt works out for them.
lolachampcar
Well-Known Member
Hurts the used market is one way to look at it. Another is to say the tax credit continues to work in the secondary market making the cars that much more affordable...... Of course, this assumes the price of the car in the beginning was not increased by the credit amount (which, of course, I believe it is).
Lola, correct. The federal credits, state credits and ZEV credits are there to kick start the market. But not last forever. The car makers had to raise prices in the glory years of government money to at least help pay back the R&D. But eventually the market will demand lower prices to continue or grow sales. Basic economics. I think tesla will have to lower Model S prices on the sticker when Model x and 3 come out. Or raise horsepower. Power is money.
i doubt that $7500 fed credit lasts beyond 2018 if the government switches to heavy republican bases in 2016. By then, costs of scale should be in effect to lower prices naturally. Tesla already has offered inventory deals on Model S cars enough to show they could start to lower prices before then.
i doubt that $7500 fed credit lasts beyond 2018 if the government switches to heavy republican bases in 2016. By then, costs of scale should be in effect to lower prices naturally. Tesla already has offered inventory deals on Model S cars enough to show they could start to lower prices before then.
breser
AutoPilot Nostradamus
I'm sure other cars are moved around, but we're talking about the Model S not those other cars.. For whatever reason Tesla has made decisions in their build of the cars that make them difficult to move around. I'm not surprised that Leafs and Volts get moved around because I'd bet that Nissan and GM don't have very many if any differences between cars destined for different countries.
The only logical place to send a US spec Tesla is Canada because it's fairly close. Both countries are LHD and have the same charging setup. Japan has the same charging setup as North America but is RHD. Europe/UK/Austrailia/China are all Mennekes Type 2 with different chargers making it non-trivial to export to these places.
Except the US Spec Model S is not allowed to be imported into Canada as it is on Transport Canada's list of excluded cars:
TESLA MOTORS
GM and Nissan have no inadmissable vehicles at all:
GENERAL MOTORS / BUICK / CADILLAC / CHEVROLET / OLDSMOBILE / PONTIAC / SATURN
NISSAN / INFINITI
So you can't even begin to just start changing parts to make it meet Canada standards.
From what I recall the following things have to change:
Daytime Running Lights have to be programmed not to be allowed to turn off.
Seat belt releases have to be red.
Key Fob frequency has to change (and it has to comply with tougher security restrictions).
The DRL is just a software change that Tesla could do. The key fob probably needs a different module and new key fobs (could be software but I doubt it).
In summary moving Model S vehicles around to different countries is difficult. This is something Tesla could solve by just complying with the most difficult regulations. Making all the cars essentially identical other than minor changes like DRL and driving sides. Given the charging situation they're pretty much locked into difficult to change differences for some subset of cars since they can't really undo those choices now.
cpa
Active Member
Lola, you can also file an amended W-4 with your employer (claim exempt) until you have recovered the $7,500 in reduced taxes. Once you have received this amount on your net pay, file yet another W-4 to claim the exemptions you were taking previously. This might take a several pay periods, but better sooner than in March-April.
lolachampcar
Well-Known Member
Yeah, interesting dynamics in Canada. The Volt should be a screaming hit up there, helped by what fleet sales did to its value in the USA. When/if Model E ever gets to the point of "fleet EV", I imagine the squawking over Tesla matching the depreciation curve of a GM product will be much worse than "tax-credit-gate". This isn't to deny their offers are low, and their OA's aren't completely snowed about it. The spread between Earth's and Starwood's asks, and Tesla's offers are the widest I've ever seen. No need to compare notes.
Lola was smart, to park it in a different car for a while. P85 prices are coming within the cross hairs of P85D deliveries. I mean, any day now, the retail price could fall to just 10k over a Tesla offer :tongue:.
lolachampcar
Well-Known Member
I think Tesla knew the slide in price was coming, knew it would take them time to turn the CPO cars around and thus HAD to low ball the cars. I just wish they had allowed for their wholesale channel to competitively bid until the market adjusted the price (instead of Tesla doing it). Of course, that would have been problematic for Tesla as it would have put a ton of MS product in dealer's hands.
Thumper
Active Member
Why was the tax credit created in the first place? It exists to get more EVs BUILT. There is an implicit assumption that more EVs are a long term overall a benefit to the country. Once the credit has done its work and gotten the EV created, it has done its job. There is no reason for the credit to move from person to person.
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