by Looking for a new vehicle? Want to also reduce pollution, save money, and save time (and thus also more money)? Continue reading to learn more about the various electric vehicle incentives you might want to consider before purchasing your next vehicle.
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Types of Electric Vehicles
When you first start your research on electric vehicles, you may come across the acronyms HEV, PHEV, and BEV.
HEV stands for Hybrid Electric Vehicle. Its fuel is gasoline, which powers its electric motor.
PHEV stands for Plug-in Hybrid Electric Vehicle. Its fuel is gasoline and/or electricity from the grid.
BEV stands for Battery Electric Vehicle. Its fuel is 100% electricity from the grid.
Environmental Incentives
Are you worried about climate change? Purchasing an electric car may provide you the environmental incentive to reduce your carbon footprint.
Although there will be climate change deniers, there is a vast amount of evidence and growing consensus across the scientific community that climate change is real.
One way to address climate change is to reduce greenhouse gas (i.e. Carbon Dioxide) emissions.
The California government has taken steps to reduce emissions on a state-wide policy level. On 9/23/20, California governor Gavin Newsom issued an executive order requiring sales of all new passenger vehicles to be zero-emission by 2035.
How do emissions of gas-powered vehicles compare to electric vehicles? There are two types of emissions that can be used to compare greenhouse gas emission impact.
Direct Emissions
Direct emissions measures the emissions to operate a vehicle. Direct emissions from a gasoline powered vehicle would be the emissions released into the atmosphere from the burning of fuel. Direct emissions from an all-electric vehicle would be the emissions from the electricity generated to power the vehicle.
Typically EV charged vehicles will release less direct emissions than a gasoline vehicle per mile driven. Source: Energy.gov
Life Cycle Emissions
Life cycle emissions measures “cradle-to-grave” emissions. It includes emissions from vehicle production, processing, distribution, operating, and recycling.
Calculating life cycle emissions is extremely complex. The source of electricity (i.e. the proportion of gas, coal, nuclear, etc.) is different for each state. The production of electric vehicle batteries requires increased extraction and processing of lithium and other raw materials.
Should we all rush out to buy a new electric vehicle tomorrow because it is good for the planet?
Not so fast. According to an MIT study, while a battery-electric vehicle (Tesla Model S) has lower lifecycle emissions than a BMW 7 Series, it actually has HIGHER lifecycle emissions that an Mitsubishi Mirage with an internal combustion engine.
Furthermore, purchasing a new car when you have a perfectly operational and reasonably efficient combustion engine vehicle will just add to the world’s vehicle production emissions.
Financial Incentives
Various government programs provide financial incentives to encourage consumers to purchase electric vehicles. These incentives include rebates and tax credits.
A rebate is direct cash back to you. Think of a $2000 rebate as a discount of $2000 off the purchase price.
A tax credit is affected by your tax liability. For example, if you purchase an EV eligible for $7,500, but you owe only $4,000 in taxes, you will receive a $4,000 credit. Source: California Clean Vehicle Rebate Project
The amount of rebates and tax credits you can expect to receive depend on a number of factors including your income, your state, number of people in your household, delivery date, type of vehicle, and even specific model of vehicle.
Rebates – State
Clean Vehicle Rebate Project (CVRP)
Eligible car models may provide direct savings to consumers through a rebate.
See which vehicles are eligible here: https://www.fueleconomy.gov/feg/taxevb.shtml
The amount of your rebate can depend on the EV type of the vehicle:
If you or your household make over a certain amount of money, you might not qualify for a rebate.
Applicants with low-to-moderate household incomes (less than or equal to 300 percent of the federal poverty level) are eligible for increased rebate amounts.
Federal Tax Credits
The federal government provides a tax credit up to $7500 per vehicle, dependent on the capacity of the battery. Tax credit by vehicle can be found here: https://www.fueleconomy.gov/feg/taxevb.shtml
Tax credits begin to phase out when a manufacturer of an EV vehicle sells 200,000 of its qualifying vehicles. Tax credits will decrease by 50% for the next two quarters after the sales mark is reached, and decrease another 50% during the following two quarters, before it is phased out completely.
More State Incentives
California Clean Fuel Reward (CCFR)
The California Clean Fuel Reward is available to all California residents who purchase a new electric vehicle. The program provides a reward of up to $1500 depending on the battery size.
How much you can receive is listed by vehicle here: Clean Fuel Reward Eligibility
Clean Vehicle Assistance Program (CVA Program)
Grants may be available to those who are under the income threshold. Grants are limited and not guaranteed. Check eligibility here: Clean Vehicle Assistance Program
Trade in bonus for electric vehicles?
I did some research to see if there are any bonus incentives for trading in a gas powered vehicle for an electric vehicle.
In 2019, US Senate Minority Leader Chuck Schumer (D-NY) proposed a plan that would provide car owners with “large discounts” if they trade in their polluting, gas-powered vehicles for “clean” electric ones. Source: The Verge
However, this plan has not passed through legislation. Be sure to keep an eye out for any future legislation if this would be important to you!
EV Discount Example
I attempted to calculate theoretical discounts for the purchase of a 2017–21 Prius Prime Plug-in Hybrid based on information I found online. Disclaimer: These are MY interpretations of the information I found online, thus they do not provide any guarantee, legal or financial. Please do your own research before purchasing!
One example is for a single-person head-of-household tax filer, and the other is for a family of four with joint tax-filing.
Do remember that the highest known potential discount assumes that the federal tax credit does not exceed your federal tax liability.
The sources for my numbers come from the following figures:
Time Incentives
Tired of waiting in rush hour traffic on the freeway?
Another incentive the government offers to get people into electric cars is the carpool sticker.
The California Department of Motor Vehicles (DMV) provides decal stickers to qualifying electric vehicles for single occupancy use of Carpool lanes.
The California Air Resources Board lists the eligible vehicles here: California Air Resources Board
So not only do you save money from the financial incentives, you also save time (which we know equates to more money).
Putting it All Together
If you’re thinking about buying a new vehicle, you may want to consider purchasing an electric vehicle. Purchasing the right electric vehicle might reduce your environmental impact and save you time. Various financial incentives may make purchasing an electric vehicle even more attractive.
Let me know your thoughts below!
Are you thinking of purchasing a vehicle? Are the electric vehicle incentives enough to sway your decision?
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