It’s The Most Wonderful Time Of The Year

There are only 37 car shopping days left in 2014. Now is the best time of year to buy a plug-in vehicle. Why? Well, here’s several reasons:

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  Dealerships, like all sales organizations, measure performance by sales goals, the most important of which is total annual sales. Every dealership likes to claim they’re the highest volume dealership in the city or state or nation (or universe). The owners of the top dealerships are fawned over by the manufacturers and there are financial rewards as well (not to mention those bragging rights, used in advertising).

• Each salesperson’s performance is evaluated by their annual sales, among other criteria, such as customer satisfaction surveys, sales of accessories, etc. As the year comes to an end, some may be on the verge of reaching a threshold where the manufacturer or dealership rewards their performance. An example of this is the “GM Mark of Excellence.” Salespeople who achieve the Mark of Excellence can order business cards, clothing, etc with the Mark of Excellence logo emblazoned upon them. Those salespeople that are close to the goal, at the end of the year, may care a bit less about their commission and more about total unit sales, giving you a little more leverage when negotiating.
• In the case of plug-in vehicles though, there is another much more important factor: The federal income tax credit for alternative fuel vehicle purchases. The U.S. government gives a credit of up to $7,500 for the purchase of certain plug-in vehicles. Currently, (no pun intended) there are twenty-two vehicles covered by this program. There are caveats (as with all government programs) including:
  • The vehicle must be a new vehicle, never before titled/registered by anyone else.
  • The vehicle must be purchased, not leased.
  • You get back up to $7,500. You can only get back as much tax as you actually pay in, up to the $7,500 limit. For example, if you’re retired and your total federal income tax due is only $4,000, that’s all you get. There is no roll-over into next year’s income tax. This is confusing to some people I’ve spoken with. It’s not the size of the check you send in with your income tax return. It’s the total amount of income tax you paid in all year long plus any check you have to send in (or minus any refund you would normally get) with your return. Take a look at your most recent paycheck stub and locate the federal tax withheld so far this year. Surprised by the amount you’ve paid in? How’d you like to get up to $7,500 of that back? I’m going to, because I bought our 3rd Volt back in October!
  • It is a tax credit, not a tax deduction. This is a big deal. If you’ve claimed a tax deduction in the past, for instance the deduction for mortgage interest, you may have noticed you only get a portion of that deducted amount back. The amount of a deduction is subtracted from your income, NOT from your taxes. For instance, you may have paid $10,000 in mortgage interest. When you deduct that from your income, it only reduces your tax burden by a portion of the deducted amount. For instance, if you’re in the 25% income tax bracket, you’d only get 25% of the amount deducted. Deduct $10,000 and you’d get $2,500 off your taxes. THIS TAX CREDIT IS DIFFERENT! You could get all of the $7,500 back!
  • When you purchase a qualifying plug-in vehicle, you file an extra one page form when you file your income tax return the following year. This is hugely important. If you buy a qualifying vehicle between now and December 31st, you get that cash back when you file your income tax return a couple months later. However, if you buy on January 1st or later, you’ll have to wait up to a year before you can file for the credit. (yes, I know dealerships are probably closed on New Year’s Day…)
  • Finally, after the last election, there may be attempts to dismantle the program, as some more conservative politicians see it as an entitlement rather than a way to get these important vehicles adopted quickly. The program is supposed to start tapering off, for each model of vehicle, once sales reach 200,000 units in the U.S. As of the end of last month, only 70,531 Volts and 66,804 Leafs had been sold in the U.S., since their inception in December 2010. Those two are by far the most common plug-in vehicles in the country. Without interference by our elected officials, this program should last several more years, but you never know…

So if you’ve been on the fence about getting a plug-in vehicle, NOW is the time to pull the trigger. Start saving money on fuel and maintenance right away and early next year the IRS may seem a bit more like Santa Clause than Ebenezer Scrooge!