Number one source of greenhouse gas emissions

The number one source of greenhouse gas emissions in the U.S. is transportation. Over the full life of a car, a conventional ICE vehicle creates nearly four times as many carbon emissions as an EV. But adoption is still limited: California has more EVs than any other state, yet ICE vehicles still outnumber zero-emission vehicles 44 to 1. 

One of the best ways to encourage the shift to clean vehicles is with incentives. Like the $7,500 federal tax credit for new EV purchases, incentives lower the cost of electric cars, making them more affordable for more Americans. Automakers build more electric cars as demand increases, and the additional EVs on the road drive demand for improved charging infrastructure. In turn, easier access to reliable charging encourages more drivers to switch from gas to electric. 

EVs for Everyone: Incentives improve access

Although most of us know about the incentives that exist for new EVs, more Americans buy used vehicles than purchase a brand new car. Incentives are particularly important for low- and middle-income families that are likely to buy used. Low-income earners, who often have older, unreliable cars and long, gas-guzzling commutes, could benefit most from the cost-saving advantages of EVs.

Even though almost all car-owners would save on transportation costs by switching to an EV, the lowest-income households bear the highest transportation energy costs.

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Financial incentives for getting a used electric car are not yet as widespread as for a new EV, but we can help you see what's out there.

Not Just Global Warming: Other community benefits 

Getting more clean vehicles on the road isn't just beneficial for individuals - they benefit communities. Air pollution is responsible for increased rates and severity of respiratory illness, cardiovascular illness, and death. Having more EVs on the road improves air quality, providing an immediate benefit for surrounding communities. Reducing noise pollution is also vital to our health, as louder environments increase the risk of heart disease, heart attack and death. EVs are nearly silent and can significantly reduce noise pollution. Incentives help get more get more EVs on the road, fast.

Air pollution from combustion cars

Why Used?

At first, it seems unclear how increasing sales of pre-owned cars helps put more EVs on the road - used cars have already been manufactured and driven. However, when it comes to climate change, the important thing is how many gas cars are being replaced by electric. 

Used electric cars are extra green, too, since the majority of carbon emissions are released during manufacturing. Because they produce zero tailpipe emissions, EVs become cleaner than gas cars in less than two years. The average new car lease lasts three years, meaning most used EVs have already made up for their manufacturing emissions by the time they reach their second owner. Plus, most EV drivers don’t switch back to gas, so the original owner will likely buy or lease a new EV, encouraging automakers to keep investing in electric.

What kind of incentives are available for used EVs?

The incentive making the most waves right now is the federal government’s first-ever used EV tax credit. Buyers can get up to $4,000 back on their taxes for a used EV purchase. However, buyers and vehicles must meet certain qualifications to be eligible. Fortunately, Recurrent can help consumers find out how to qualify, and how to work around the complications that come with a government benefit. However, this incentive is limited by how much you owe in taxes. If you don't make that much money, and don't owe that much in taxes, it may not help you that much.

But, there are dozens of state and local incentives available for both used EVs. It's true that the big bucks still go for new EV adoption, but utility companies, air quality management districts, and environmental groups often offer their own incentives. How much buyers could qualify for varies significantly by location and other factors, like household income. Kelly Blue Book has a great resource to help shoppers find out what incentives they may be eligible for, and there are other websites that can help buyers, too.

Examples of the types of incentives on offer include:

  • Credits, rebates, or bonuses for the purchase of a used EV: Vermont’s MileageSmart program offers low and moderate income car buyers an incentive covering 25% of the upfront cost of a used EV, up to $5,000.
  • Discounted electricity rates or bill credits: North Carolina’s Roanoke Electric Cooperative offers a discounted time-of-use rate for residents who own or lease an EV. 
  • Credits and rebates for installing EV chargers: in Texas, CPS Energy offers a $250 bill credit to residents who install a Level 2 charging station and an additional $125 bill credit for agreeing to charge their EV during off-peak hours.
  • High Occupancy Vehicle (HOV) lane access, such as Arizona allowing EV drivers to use HOV lanes if they have an AFV (alternative fuel vehicle) license plate.
  • Grants for residents of disadvantaged communities: The Clean Cars 4 All (CC4A) program in California offers up to $12,000 in rebates for the purchase of a new EV if you live in a disadvantaged community.
  • Point-of-sale rebates: These programs, such as California’s Clean Fuel Reward Program, are the gold standard. However, since they rely on limited funding, they often run out of money. You should check to see when they refresh for your best chance.
  • Financing incentives, such as Colorado’s Clean Energy Credit Union offers low APRs and fixed interest rates for electric vehicle loans.
  • Incentives to exchange gas cars for EVs: The South Coast Air Quality Management District in California has a Replace Your Ride program offering a rebate up to $9,500 for income-qualifying residents who replace a high-polluting vehicle with an EV.

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An Example

How much can incentives bring down the cost of an EV? They can slash the price by thousands! Let’s look at an example: a low-income family of 3 living in San Diego, CA, looking to trade in their old gas car for a new or used Tesla. Since there are still the most incentives available for new car purchases, let’s start by looking at a new Model 3. 

White Model 3 in a garage

New Car Price: from $40,240 to $15,420

The starting price for a new 2023 Tesla Model 3, one of the most popular EVs on the market, is $40,240. Assuming average credit and an average APR with a down payment of 10%, taking out a 5 year loan to pay for a car with that sticker price would result in monthly payments of $749.33 and a total interest cost of $8,743.57. Yikes. That’s not easy for a low-income family. That’s where incentives come into play.

Buyers can often find discounts by using the WaitingForTesla website. I found a Tesla Model 3 for $38,030. There’s also a $1390 destination fee, so the actual cost is about $39,420. Our sample family has several incentives that can help lower the price by more than 50%.

  • The $7,500 federal tax credit for new EVs will offset any taxes owed at the end of the year. Note that this is not yet money up-front for a purchase, but starting in 2024, it can be used as a point-of-sale incentive
  • California Clean Vehicle Rebate Project’s increased rebate offers another $7,500 off as a purchase incentive.
  • California also offers the Vehicle Retirement Consumer Assistance Program, which can give low-income families up to $1,500 for retiring their old vehicle. 
  • In addition, the Clean Vehicle Assistance Program offers grants to low-income families living in disadvantaged communities, like those with exposure and vulnerability to pollution. That includes a decent chunk of downtown San Diego. The CVAP can provide a grant of up to $7,500. 
For this low-income family, all those incentives bring the price of the new Tesla down from $40,240 to $15,420.

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That’s not too bad!

New car financing 

Of course, most buyers won’t be able to pay in full, so it’s important to look at the monthly costs as well. KBB recommends planning on a down payment of at least 10% and, if the buyer has an average credit score, the average APR for a new car will be about 8.86%. A 5 year loan for this family would mean a monthly payment of about $287.14 with a total interest cost of $3,350.54. However, San Diego County has its own incentives, including financing incentives that can lower interest rates for eligible households. An interest rate of 5.99% would bring the monthly cost down to $268.24 and a total interest cost of $2216.17.

A person is looking at paperwork with a calculator

Used Car Pricing: from $22,500  to $9,500

Now, let’s look at a used model. I was able to find a used Tesla Model S for $22,500. With the qualifying $4,000 federal tax credit, that brings the price to $18,500. Many of the incentives for new EVs are also available for used EVs: 

  • Used vehicles are eligible for the Clean Vehicle Assistance Program 
  • This family is still eligible for the Vehicle Retirement Consumer Assistance Program.
Together, these incentives bring the total cost of this used Tesla from $22,500 down to $9,500. 

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That’s $5,920 less than the new Tesla with all eligible incentives. For a low-income family, that makes a huge difference!

Looking at the monthly cost, the APR for a used car is about 13.28%. For a 36 month loan (the recommended maximum for a used car) with a 10% down payment, that would be a monthly cost of $289.24 with a total interest cost of $1,862.56. But, remember, there are local financing incentives available. With an interest rate of only 3.99%, the monthly payment would be only $252.39 with a total interest payment of $536.11. If this low-income family needed to stretch out the payments over a longer period of time, a 5 year loan at the same rate would mean a monthly payment of only $157.42 and a total interest payment of $895.36. That’s much more achievable than paying the base price! For a family on a tight budget, all those incentives make owning an electric car a real, financially sound, possibility.