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Gaming the Fed Tax Credit for PHEV (plug-in hybrid) cars??!!
Old 12-21-2018, 06:48 PM   #1
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Gaming the Fed Tax Credit for PHEV (plug-in hybrid) cars??!!

Curious if anyone is playing the Fed Tax credit game with PHEV (plug-in) cars? After the first year, sell or trade-in the car for about the amount of the rebate, so the net cost for the year is limited to sales tax paid.

Background: I'm in CA and PHEV cars qualify for the Fed Tax credit (up to $7.5k depending on battery size... so size matters). In addition, the PHEV cars qualify for single occupancy carpool sticker which can save time on the daily commute (important to me). There is a State Tax rebate too, but I'm not including due to income limits.

For example: I'm seeing 2018 Prius Prime Prem being net cost of $22.5k ($28.5k sale price -$1.5k rebate -4.5k Fed tax credit) or 2018 Honda Clarity for $23.5k ($31k sale price -7.5k Fed tax credit). Pricing does not include taxes or DMV fees. (Yes, I pay much more than $7.5k in Fed Taxes so I would qualify).

If I like the car, I would keep it, but I'm thinking each year or so, just upgrade to a newer model if the Fed Tax credit is available.

This assumes I'm just looking for a daily commuter, driving about 12k miles a year, most in the HOV alone. I have a weekend car for fun and DW has a minivan for family trips.

What am I missing?
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Old 12-21-2018, 08:14 PM   #2
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How do the cash flows look for the alternative of playing the game as you described vs buying a car and keeping it for 5 years?
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Old 12-21-2018, 08:25 PM   #3
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Not sure ... 1 year = most of depreciation (estimate 18%) is within the Fed tax credit. Holding for 5 years is not a good comparison as years 2 - 5 do not offer a tax credit.

Replace each year if a Fed Tax credit is available, allows the depreciation get washed.
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Old 12-21-2018, 08:32 PM   #4
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You missed the point. Follow the money. All the money... not just the tax credit.
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Old 12-21-2018, 08:35 PM   #5
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I think you will find that first year depreciation on EV's is more than 18% as people are still leery of buying used cars with a battery.

Plus, you will pay sales tax on each new car.
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Old 12-21-2018, 08:38 PM   #6
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You could do either of those manufacturers for quite a while see this site. Also the GM Volt is available with 7.5K credit until Mar 31st I think.

http://evadoption.com/ev-sales/feder...-by-automaker/

Quote:
Originally Posted by Aiming_4_55 View Post
... just upgrade to a newer model if the Fed Tax credit is available. ...
Here is the kicker to me ... how are you going to upgrade or sell it at a price that makes it worth while. The buyers know you got $7.5K off.
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Old 12-21-2018, 08:39 PM   #7
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Have you checked the used car market for these cars that were sold 1 year ago?


I would think anybody that was buying would look at the net cost of a new car vs the cost of used... why pay more for a 1 yo car that has 12K miles on it when you can buy new cheaper?


Maybe that is what you are missing...




BTW, whenever the incentives go away and it is now a true comparison then the car might go up in price... maybe...
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Old 12-21-2018, 09:00 PM   #8
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Quote:
Originally Posted by Texas Proud View Post
Have you checked the used car market for these cars that were sold 1 year ago?

I checked Edmunds and KBB for trade in value on a 2017 Prius Prime with 12k miles, it came out as $20.5k which is about what a 2018 Prius Prime is new now.

I would think anybody that was buying would look at the net cost of a new car vs the cost of used... why pay more for a 1 yo car that has 12K miles on it when you can buy new cheaper?

Looking at a few car sites, I first thought about buying a 1 year old PHEV and found most better buying new with the tax credit.I checked looking at Prius Prime and Pacifica minivan.

Maybe that is what you are missing...

BTW, whenever the incentives go away and it is now a true comparison then the car might go up in price... maybe..Agreed, once incentives dis appear, it's time to hold the car long term..
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Old 12-21-2018, 09:02 PM   #9
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Quote:
Originally Posted by eroscott View Post
You could do either of those manufacturers for quite a while see this site. Also the GM Volt is available with 7.5K credit until Mar 31st I think.

http://evadoption.com/ev-sales/feder...-by-automaker/


Here is the kicker to me ... how are you going to upgrade or sell it at a price that makes it worth while. The buyers know you got $7.5K off.
I checked basic trade in values on Edmunds and KBB. I'm avoiding Chevy Volt since it'll be discontinued.
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Old 12-21-2018, 09:04 PM   #10
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Originally Posted by pb4uski View Post
You missed the point. Follow the money. All the money... not just the tax credit.
Yup, missing the point. Share your thoughts and help me understand. You are better with numbers than I.
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Old 12-21-2018, 09:10 PM   #11
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Originally Posted by aja8888 View Post
I think you will find that first year depreciation on EV's is more than 18% as people are still leery of buying used cars with a battery.

Yes, depends if calculated from MSRP. My % is based on MSRP - Dealer discount - rebate. I could be off, but I was comparing lowest purchase price and trade-in value after 1 year based on Edmunds and KBB

Plus, you will pay sales tax on each new car.
Yup, unless I move to a state that reduces sale price with trade-in, only paying taxes on the net purchase. New car $25k - $20k trade-in= $5k. $5 is taxed. This is only true in some states, not CA, but I might be moving in 1 to 2 years.
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Old 12-21-2018, 10:34 PM   #12
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I have a Prius plug-in. I enjoy driving it. I had it out tonight on the ice. Our home is solar powered and we recharge our Prius Prime at home from our solar system.
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