Recurrent has been on a mission to popularize and demystify the preowned clean vehicle credit, and it turns out there are some civic-minded car shoppers trying to do the same.
I recently came across an excellent guide written by Jonathan Seiden on Reddit, detailing his experience in the DC area trying to find and buy a car eligible for these credits. He was kind enough to answer some questions so you can know what to expect if you, too, want to save some money on a second-hand EV.
Unfortunately, no one seems to have all the answers just yet, but we will update our main used EV tax credit page as we learn more.
Liz: How did you learn about the used clean vehicle tax credit?
Jonathan: I think it was after I posted a question on Reddit asking about vehicle recommendations for hybrids/fuel efficient cars in the $20k range. While I had been interested in EVs, the affordable vehicles didn’t have enough range to enable road trips. Someone mentioned the Chevy Volt--I hadn't really had any PHEVs on my radar before then. Seeing that many would come into my budget with the tax credit, it seemed like a good idea.
Have you had an electric car before?
Nope, this was my first time buying a car of any kind!
That’s very cool! Congratulations. Why did you decide now was the time?
My wife and I have lived in major metropolitan areas for most of our adult lives and have never owned a car. We recently moved to be with my parents in a more suburban area. While we are not sure how long we'll be here, it was pretty clear we couldn't rely on public transportation the way we had always before. I was always kind of proud of not having ever owned a car, but I felt that if I got an EV, then I would feel less bad about car ownership.
What sort of research did you do prior to reaching out to dealerships? Did you know what sort of car you wanted? PHEV or EV?
With unlimited funds, I would have loved to purchase a pure EV with good range and fast charging. Unfortunately, a lot of the EVs in the $20k price range have limited range and relatively slow charging speeds [editor’s note: unless you happen to find a real bargain. Model inventory will depend on your market]. Given that our home doesn't have a level 2 charger, and that one of the big upsides of car ownership would be that it is easier to take road trips, we prioritized looking at PHEVs that we could use in EV mode most of the time around town, but then use as a hybrid for longer drives. We did a lot of research and narrowed down our search to a Chevy Volt, Ford Energi, Prius Prime, Honda Clarity, Hyundai Ioniq or Hyundai Sonata PHEV.
Once you knew what you wanted, did you go to a dealership with a specific VIN in mind, or were you browsing available cars?
I had search filters for the models listed above, so every time we reached out to a dealer, it was for a specific car. I set up the filters to ensure that any vehicle we reached out about would be affordable assuming we got the tax credit.
How many dealers did you reach out to?
Somewhere around 15.
That is a lot! I’m curious to hear how these dealers reacted when you asked them about the used EV tax credit. On our side, we’ve heard of dealers that flat-out refuse to sign anything, or to share their tax identification number.
It was definitely an exhausting process. The vast majority of dealers I spoke with had never heard of the used EV credit.
Once I started telling them about it, there were a range of reactions. Many of them told me I was wrong and that it was for new EVs only. Others said that the guidance required final assembly in North America, which is true for new but not used EVs. Several told me that I should just talk about it with an accountant, and that they couldn't help. A few were unsure how to proceed but said they’d be willing to work with me to figure it out.
It sounds like there is a big opportunity for dealer education here. Ultimately, though, you were looking to work with a dealer who would provide you with the required documentation, and will hopefully report to the IRS in January 2024.
Exactly. After providing a lot of information, a few dealers said that they could provide the documentation for my purchase, so long as I helped them figure out exactly what they needed to do. So I ended up basically creating a report with all the required information for the dealer according to my best understanding. The dealer reviewed this, added information like their tax ID number, and signed it when I bought my car. I'll reach out to them again whenever the IRS clearly states how reports should be submitted [to them in 2024].
It was definitely a hassle, but at the end of the day it's still worth it, and I'm hoping this process will get easier as time goes on!
Did any dealers ask you for more information?
Not really! After the first one or two dealers I contacted hadn’t even heard of the credit, I started assembling all the information in one place and tried to provide as much information as possible up front. I had a number of emails/text threads that I would share that tried to answer everything they might ask. I figured all that research might be useful to others as well, so I assembled them into the guide.
What questions are still outstanding from your research?
The three outstanding questions I have are:
1) What is the definition of the sales price? I made sure that my purchase would be clear under literally any definition, but it seems like this is a more complex question than the MSRP definition for used vehicles. I wasn’t trading in a car, but I can imagine that this definition gets even more complex if you are--there are definitely some strange incentives. We also asked the IRS for qualification, but we strongly believe it’s the price excluding any taxes and fees!
2) Will there ever be an official report format for the dealer to complete? That would make this whole process much easier if there was an actual form rather than just homemade reports. Agree - the IRS has not published anything, yet. We’ll let you know if we hear anything!
3) How will dealers need to submit reports to the IRS? I'm going to keep an eye on the IRS website to make sure my dealer submits the report when guidance is clear, but it would be a real shame to purchase an eligible vehicle, get a report, and then not receive the tax credit because the dealer did not submit the report correctly. Again, we agree. We know at least one shopper who was hoping to use the credit but was told that the dealership would not participate. It’s really unclear how that is going to play out in this first year, but hopefully the IRS is reasonable about how many questions remain.
The most frequent question we get is how can a shopper know for sure if their purchase ise the “first qualifying sale” since August 16, 2023. While this is pretty easy to know early in 2023, it will only get harder to be sure the longer the program is in effect.
Yes, in my case, it was pretty easy to verify since CarFax had it listed as a one-owner vehicle.
Note that research suggests that a CarFax report showing multiple past owners may not always mean the car is ineligible. For instance, if you move states and re-register the car, CarFax may count that as two owners. Recurrent’s tax credit VIN checker is another tool that can give you some information about the eligibility of a specific car.
