The Inflation Reduction Act’s $4,000 tax credit is certainly a godsend for used EV buyers on a budget. However, despite the program being one of the highlights of the IRA’s plug-in vehicle-positive policies, used car shoppers haven’t had the easiest time actually getting the money in their hot little hands. Well, things have gotten easier.
One of the biggest online used car dealership chains, Carvana, announced that it has streamlined its buying process. The EV tax credit can now be factored right into the price.
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The Inflation Reduction Act Covers Used Cars
The IRA's incentives also include used cars. Used cars under $25,000 are eligible for up to a $4,000 tax credit. The credit can only be used once every three years, and is limited to single filers who earn $75,000 per year or less. The income limit is $112,000 for single filers who are head of household, or $150,000 for couples that file jointly.
To some, this may sound silly, but this is actually kind of a big deal for used car buyers who are on a budget (which these days, is basically everyone.) For 2024, the used car EV tax credit shifted from a refund given to a tax filer at the end of the year to a rebate directly redeemable at a vehicle’s point of sale, so long as that place is a registered dealership.
That sounds easy enough, but it meant that dealerships had to opt in and offer the service to their customers. Many dealerships didn’t, forcing their clientele to file the paperwork themselves and accept the tax credit at the time of filing their taxes, rather than right in the dealership’s finance office.
For the buyer on a budget, that’s no bueno. Dealerships that did opt-in and take the credit at the point of sale would put that $4,000 directly toward the price of the vehicle. That big bump would help with financing, since the vehicle’s total financed price would be $4,000 lower, leading to a lower monthly payment. That instant $4,000 off could be the difference between a sale and a disappointed EV hopeful pushed out of their reasonably priced electric dream car.
Yet, dealerships have been slow to make sure used EV buyers can take advantage of the vehicle’s point of sale. Carvana's biggest competitor CarMax has a whole page on how a buyer can file for the tax credit, but it doesn’t actually let shoppers use the money at the vehicle’s point of sale.
Ultimately, this is good for EV buyers and good for Carvana. “Rather than waiting for a lower tax bill next year, customers can now seamlessly access up-front savings of up to $4,000 on the price of the vehicle. These savings also automatically flow through to eligible customers’ financing terms,” Carvana said in a press release. Each EV eligible for the tax credit has a green icon. Carvana said it will smoothly determine eligibility before financing or payment, and tabulate the final sales price.
Of course, the same eligibility for the used car tax credit still applies at Carvana. The car must be under $25,000. Single earners can’t earn more than $75,000 per year, and the credit can’t be claimed more than once every three years.
Still, if you’re looking for a cheap EV, Carvana might not be a bad way to go. I certainly got pretty caught up searching for deals while writing this piece.
Contact the author: kevin.williams@insideevs.com
