#335 - EV Tax Credit Explained

This is the Independent Dealer Podcast, Education by Dealers for Dealers. Now here are your hosts, Luke Godwin and Jeff Watson. Hello and welcome to the Independent Dealer Podcast brought to you this week and almost every week as far as I can remember, Luke.

Yeah, pretty much.

Our good guys at Buckeye Dealership Consulting. Of course, to get that out of the way, get your reinsurance set up, call the guys at Buckeye. I cannot tell you my CPI penetration is going up, Luke. It's pretty exciting to see those extra dollars come in.

Sure is. I, I share with you what we collected last month in cpi. And, and you, you asked the, the question of, well, what were your claims? And I said I don't want to discuss claims right now.

As long as it still comes out in the black. Right. Is you didn't know that not only have you gotten some CPI money that you've paid out in claims, but you have actually also sent me about $200,000 this year so far. Did you know that?

I did.

Yeah, you did.

Oh good. I'm glad.

I'm guessing it's about half of the income tax bill that you paid to the IRS last year.

Oh, no, you do.

Luckily I have another six months to get the rest of that tax money out of your pocket and into my pocket.

Oh man, you're talking about EV tax credit.

Yes. So you know, I got set up early 20 or mid 2023 to be a clean vehicle dealer. So you guys probably have heard about the EV hybrid tax credit. We're going to break it all down this week.

Let's rephrase that.

This one.

Jeff, Jeff, Jeff. Is going to break it all down.

I've kept this one a little close to my chest because I've been riding this wave and I haven't wanted to to blow up my own spot on this. But you guys that are listening, you know, I'm sure a hand of you, handful of you are already set up to do this. A bunch of you have reached out to me directly through Facebook and things like that to get more education on how to get yourself set up. But for those of you that don't know, back in the Inflation reduction Act of 2022 or whenever that caused that caused more inflation. Yeah, I talk about that, but this was to reduce inflation. Right? So what they did is they came out with a big old chunk of money that they're giving out for EVs and hybrids. Right. If you buy one new, you get 7,500$. It was a tax credit back in the day. Or if you buy a Used one, you got a four thousand dollar tax credit that you would take off your taxes in 2022. So they realized that didn't work for a lot of people because a lot of people didn't even have that kind of a tax bill to pay. And it wasn't a refund, so you didn't get the cash you it as a credit. So starting In January of 2024, they changed it over to an actual rebate that the dealer then claims from the IRS on the customer's behalf. Right. So when you got set up with the IRS to be a clean credit dealer, you now have access to a little portal where when you sell one of these qualifying cars, and we'll get into that, that you can go in, punch in the customer's name, their social, punch in the VIN number, punch in the size of the battery, punch in the purchase price, and you can submit that directly to the irs and they will give you the rebate directly to your bank account. Currently takes about seven days for me to get the money when I file. I have filed to date 50 of them, so. But 50 is pretty good for me for six months. So that brings me exactly to the tune of 200,000 to date.

Man, that's great. I. You told, you told me to do it. I never did it because I was focusing on something else. And so I'm glad you did it. I, you know, I hate government programs, number one. But when it, you know, when it benefits one of my buddies.

Well, here's the thing. Yeah, yeah. It's like, it's like the EIDL loans. It's like the PPP loan or forgiveness thingy. You have mixed opinions on them. They're government programs that these politicians put out to try to buy votes or whatever their special interest is that they're catering to. I get it. I'm gonna play the game. I have no problem with that because here it is. It benefits the customers, Right. It benefits me. So that's $200,000, the majority of which were my buy here pay here customers that I didn't have to put on the books and carry. So they had $4,000 to show as a down payment. So let's break this down a little bit more so you guys can understand this program. There are. Let's start with the vehicle because that's kind of the first step in the process, right?

Yep.

When you go to the IRS website, there is a list of qualifying vehicles that actually work in this program. That's kind of the funny thing. So you go to fueleconomy.gov you find the list. There's 121 different models that qualify for this program. From what I understand, that's based on where the chemicals for the batteries came from. Right. So you got 121 cars. Luke. One of the qualifiers is that as a used EV, the purchase price can't be any more than 25 grand. Guess how many of these 120 models you could actually buy for under 25 grand?

Probably five. And, you know, when we started looking at this and you were talking about. I'm like, well, Jeff, there's. I mean, I'm not going to sell a bolt in a Volt, and I know you will. And I. And I'm. I'm thinking, okay, maybe a Prius. No, they don't really qualify. And then the next thing that's. That you're left with are Teslas, which I would want to sell. And you think about model Threes at best. There's no way you can get a Model Y. Maybe a Model Y, but not many Model Y's under that price.

Yeah.

And it. I didn't see it seemed like there was me. A lot of hard work to sell a few cars on this. And So, I mean, 50 cars in. Shabby, though. So. Good job.

Yeah. So. So you're right with the. With the. The cars that are on that list, the majority of 100 of them are just not under 25 grand. I don't know if you're finding the 2022 GMC Hummer EV absolutely silly. Why is that on that list? Lucid air. You might actually pick those up for a couple bucks nowadays.

No, you can't. They're still. They're 200 grand new.

Good luck getting that serviced.

You might get some. No, that's the Fisker. You could get a Fisker Ocean, the.

The E Transit. I love that one. I wish. Okay, so some of these are just nonsense. A lot of BMWs, a lot of Audis pretty much make and model Porsches, all the Cayennes, the Panameras, the Tay Cams, all the Rivians. So if you can get your hands on a Rivian, an RS R1S or an R1T. Yeah.

Anybody out there has a Rivian under 25 grand? I'll take it right now.

So what it leaves you with is the ones that do qualify. Now, if you got 20 cars that actually qualify for under 20 grand, 15 of them are just. I wouldn't touch them with Luke's money. Right. Like, I'm not buying an E Focus. Like, those are the worst electric.

Oh, and you would rather. You'd rather have an E. You'd rather have a bolt or a volt instead of E Focus. Come on.

I would, I would. And I'll tell you why. Mini Cooper. Oh, my goodness. Polestar. Yeah. So a lot of these cars are nonsense. You guys can go through the list. Here's the thing. What I did was I identified a handful that I actually of okay tackling. Right. Of course. Tesla model threes, no problem. You can get them ton of them for under 25 grand right now with Hertz dumping so many higher miles. Get them under warranty, make sure you got the right battery chemistry. There's. That's a whole nother episode. The issue is, is they're a commodity car, so everyone's offering the credit. And there's so many of them that it's just. I don't know how long anyone makes any money selling those things. I haven't figured it out. Please let me know what I've really focused in on. And out of those 50 that I have sold, I would say the huge majority of them are Chevy Volts with a V. Now, I didn't want to talk about this because even those have started to skyrocket in price now that everyone's caught on. But they're actually not that bad, man. There's a handful of issues that we figured out. We know where to get the parts from where we've had a couple battery failures. Still not the end of the world. Because now as these things, we start to have a few more. And now we're getting some CPI claims on a couple. We're getting some injured grenades. Now I'm starting to have a boneyard. Right?

Oh my, oh my.

And I've got so many of them that now I can start Franken Frankenvaulting these things together. And I actually. They're all black.

Frankenvault. I like that.

Frank and Volt, they're all black volts. They don't make any other color. Occasionally a red or a silver, but good luck getting those. A blue one is like a unicorn anyway, so we know them, we can buy them, right? And that means I can sell them. Right? And that's the key, is you get 30% of the sales price up to four grand.

Okay.

So a Chevy Volt that you buy at like five or six grand, say it's a 2013 with a hundred thousand miles, no more battery warranty, that only goes up to eight years and 150,000 miles. So you're. You're taking a risk, but you buy that thing at five, you sell it at 13,500, which is the magical number to get the full four grand. That four grand comes off the purchase price of the vehicle, or you can show it as their down payment if you want. That's a pretty decent buy here, pay here situation.

It's a. I'm not arguing the buy here, pay here situation, because it's probably good. I mean, you have. How do people. I mean, I can even imagine selling these things. My customers like, how can I put them in it? I don't.

You open the door, there's a handle like every other car.

I mean, I don't even see how. Why anybody in their right mind would want to own one of these things.

They're really not bad. I mean, if the battery's healthy, you get 20 to 30 miles on a charge. So you plug it in at night, you get 30 miles during the day. And if you travel, the gas engine kicks in, and you've got unlimited range.

Oh, so it's a plug in hybrid.

It's a plug in. It's. It's like the. The first version of a plug in hybrid.

Now, the first version of a plug in hybrid was prius, like, yeah. 10 years ago.

Yeah. But they did a decent job. Well, I should hold my breath on that, but time will tell. Luke. Yes. I'm going to static pool this. We will see. I've shoved a ton of them in there. The biggest issue you have and a note for buy here, pay here, guys, is your salesmen love to push them, because guess what? Now they think Mr. Customer has $4,500 down because he got five grand from the IRS, four grand from the IRS, and 500 bucks that he pulled out of his pocket. And he brings it to you thinking that you have some great freaking deal. And you're like, no, no, no. Just because they score amazing in Neo, because you said they had four, 500 down, doesn't mean they're a good deal.

Great. Them with 500 down, everybody. That's. That's how that should be done. Yes.

Yeah. That is free money.

Hey, I'm gonna break in here because Jeff's talking so much in this episode, and I know y' all are getting tired of his voice, so here's my voice, and we're talking about Blitzpay, and we're talking about getting paid. You know, Jeff, it's easier to get paid by Blitzpay after you take money than it is the federal government. I'M sure.

Yeah, I'm. I'm sure Blitz Play is not going to yank that money back out of my account someday, so.

Yeah. So, you know what's great about BlitzPay is people can pay anywhere. They can walk into a cash option. They can do it from their phone. All these different ways to get paid. It gets in our bank account usually within 48 hours. And it's really helped our collections. It's a great product, and we recommend it. We both use it, and many of our 20 group members use it as well.

A couple more comments on the vehicle. You do have to make sure that it's at least two model years old to get the used EV credit. So 2022s and older, obviously the IRS.

But that shouldn't. But that shouldn't matter if you're under 25 grand.

It. It does for like a, like a. A model three. Oh, okay. Yeah. 2023 model threes for under, under 15 grand right now.

Oh, wow.

Geez. They've tanked under 20 grand easily. I mean, I'm talking.

Well, you know, it was funny. This all started before the Hertz dump of the ev.

Yeah. And this. This made it worse.

It made it worse because I think Hertz probably realized that they had an opportunity to get rid of some because of this.

Yeah.

Wonder how much money Hertz gave these lawmakers.

So all the 2017 through 2023 model threes qualify the standard and the long range anyways. So you've got to make sure that's two model years old, which is okay because you check the list on the IRS website. Anyways, it gives you a year range. The other really, really hard thing that you have to watch out for is the vehicle cannot have changed hands private party after August 16th of 2022.

Why does that matter?

You have to check the history report. I think what they're assuming is that if someone has bought it after August 16th of 2022, they claimed the credit at that point on their own taxes or through the EV credit. They have no database. So here's the issue. When you drop a VIN into the time of sale report, it will tell you if that car qualifies based on its VIN, the first, you know, 10 digits. It won't tell you if that specific vehicle has already been claimed, from what I can see.

Well, how do you. I mean, would you ever be audited on it?

I don't know. It's not up to you now. It's up to the customer. The customer is the one that's taking the Credit and has the liability from everything. I understand.

Huh. Okay.

Now, if you sell a car that has been sold after August of 2022 to a customer and you help them claim a credit, that's going to be really interesting to see where that falls. Is it the customer's fault, is it the dealership's fault for selling a car that didn't qualify? I don't know where that lands, but I check the auto check on every single car before I buy it to make sure that it hasn't changed hands after August of 2022. Yeah, that's a really important one to note. Now, transitioning to the customer side, the qualifications are they have not claimed a vehicle tax credit, I think new or used, I don't think they could have done either. And they have to make under 150 household AGI. So, so I qualify. Luke doesn't qualify. So that's a problem for you.

150. Who makes under 150?

Come on.

So I got a question here, Jeff. And this has been something that's been sticking in my brain for a while about selling a full electric car. I've sold hybrids for years. I got plenty of hybrids in my portfolio. I'm a, I'm a Toyota guy, period. I love Toyotas. The Es hybrid, the Avalon hybrid, the Prius. People really don't care for Priuses anymore, it seems like around us, but they're just amazing products. I love it. I think hybrid is, is the way to go. But hybrids, you don't have to worry about charging. How do I incorporate Tesla model Threes into my portfolio when a vast majority of buy here pay here? Customers are not homeowners. They're, they're renters. And unfortunately, around here, we don't have infrastructure for people to charge their cars overnight at their, at their home. So they're reliant on superchargers, which we have a decent supercharged network in South Carolina. It's decent. But that two, three, four questions here, how do these people charge it?

Yeah.

Does, does supercharging denigrate the battery in any way? And what happens if they go on a trip? I mean, I, I, I'm just so, as much as these people drive, I'm just so concerned about that when I start thinking about putting evs into my portfolio.

Yeah. I think obviously each person's situation, you've got to explain that to them, just like we do for us. It's step number four in our sales process. Right. The wants and needs.

Yeah.

And we look at the car Selection and say, great, Mr. Customer, based on what you're proof for, let's look at the cars that work for you. So you go into that and you say, well, of course, if I'm going to sell you a Tesla Model 3, how are you going to charge it? Do you have a plug? Can you put it. Plug it in at night? Do you have a destination charger, maybe at your apartment complex? What's funny to me is you go to hotels and you go to these apartment complexes, and they have, you know, chargepoint or Clipper Creek or a Tesla destination Charger, which is a level two charger that's free. They're giving away. They give away power. It's like. It's like having a gas station at your apartment complex. Hey, man, every time you come here at night, we're gonna drop, you know, a tank full of gas into your car, like so. Right now there's opportunities to take advantage of that. I don't think that will last. As though that becomes more and more abused. I think people will start charging for those destination chargers, but if your customer has one, that. That works for them.

So apartment. So apartment complex, have. What I have at my house is what you're telling me.

A lot of them do because they all got incentives, you know, they got 30 of it or 40% of it, you know, comped by the IRS or a tax credit to put in their. Their electric hybrid charging stations. And then the other option is, yes, you do have to just supercharge. So just like, you know, if you don't have a level two at your house, you're going to stop at the Supercharger every other day or every third day, and you're going to have to pay for electricity directly from Tesla at a supercharger. Right? You'll be there for 20 or 30 minutes to get enough charge to continue on with your, you know.

Does that. Does that hurt the battery, Jeff?

It depends on which one, and it depends on who you talk to. Okay. Supercharging to a point is supposed to be not great for all the older lithium iron batteries, lithium ion batteries. But the new lithium iron, what's called the LFP battery, is supposed to take more supercharging, and it also allows you to charge to 100% every single day. So you're going to find that in, like, the 2022 Tesla Model Threes, but not in mine, not in any Model Y, and not in any long range. Right now, from what I know of, I don't know if that's coming out Soon. But that's why I only look at the 2022 Model 3 Standard Ranges. They're cheap and it's got that new battery. So you know that those Hertz cars were supercharged every single day. And that's what that battery is built for. So. And if you look at, if you notice on Manheim, they've started to integrate the battery health score on a lot of Teslas. When I scan through it, all of those 2022s with those batteries that have a hundred thousand miles on them, they're still at like a 93 health.

And. And we. Yeah, I saw an article the other day that was showing the battery health of Teslas at 300,000 miles.

Yeah.

And you know, any Tesla that makes it 300,000 miles has been supercharged a good bit. But they were still at 80 plus percent. The graph still showed them at 80 plus percent, which is very counterintuitive as to what we would think was going to happen. So, you know, that's good for Tesla and I think good for consumers.

Yeah. What's interesting in this whole situation is you say, okay, when I sign up to be an EV tax credit dealer, is this a program that helps me as a dealer? Right. Am I selling more cars or am I chasing shiny objects? Right.

And I think that's you and I had this conversation.

That's the answer. You know, that's kind of the, the takeaway from this entire episode today, guys, is we run into these situations a lot. I know you and I have had this conversation before of. Are these credits distracting me from my buy here, pay here and my regular dealer operations, or is this an opportunity? That's a window that you could steer into, really make a couple bucks over the next few months and then that window is going to close and back to business as usual.

Yeah. So at the end of this year, is it done, Jeff?

No. So this is supposed to go through 2035.

Whoa.

Yeah. Yeah. I think that's the date I saw. Is that this program is like a 10 year program or something crazy. So eventually these cars are going to time out as far as like they were purchased after August of 2022. Like for me, chasing Chevy Volts, 2012 13s, 14s, 15 16s, those are going to time out pretty soon and there's just not going to be another one left out there. Right. And of course, when I have a repo like I did the other day with a little lady, we put in a Chevy Volt, she claimed the credit. I can't do it again. So now that Chevy Volt went from being worth eight grand because there was a credit, you know, kind of built into the, the price of the car when I bought it from auction. Now it's worth two grand, right, or four grand. Like you see, you see the wholesale markets have priced in this EV credit to a lot of the cars and.

After they, after they've been sold, once they're done. And yeah, so it's gonna, yeah, this, that 2035 is not gonna matter. It's gonna be done way before that. Okay.

They're just a regular old Volt at that point, which for me now it probably becomes a parts car. And I can go out and buy a Volt that hasn't been sold after August of 2022, but maybe has a bad battery, so it's worth a lot less. And I can Frankenstein it with one of my previously claimed ones. So it's all based off that VIN number. So, yeah, once the VIN numbers used up and been claimed, those, those cars lose a good portion of their value because that credit's not available anymore.

Interesting.

Yeah. So, guys, that's the episode. If you have any more questions about this program, obviously check out the IRS website first. You can definitely message us. I'll help you guide through. Right now, getting set up to be an EV credit dealer with the IRS is like a four to six week backlog from what the last I've heard of dealers trying to get signed up. So I'm not saying the boat has sailed already, but it's definitely leaving the harbor, if you know what I mean.

Yeah, it's interesting. You know, I'm glad you did it. I'm glad you did the homework here and did it because that's a, it's an interesting avenue.

Yeah. Well, you're. If you're trying to sell an EV or a hybrid that fits the program, you're at a disadvantage if you can't claim that credit. Right.

So you should get signed up either way then.

Yeah. If you're trying to sell a Tesla right now and you don't know why yours isn't moving, that's because you're not signed up to be an EV credit to claim that credit at the time of sale. Right. That puts you at a disadvantage to the guy down the street that's selling one and it can give them that $4,000 rebate at the time of sale.

Yeah.

So. All right, guys, good talking to you. Yeah, Luke, talk to you next week. Thank you for listening.

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We'll catch you in the next episode.