Dealers Are Freaking Out About Buyers Using The EV Tax Credit As A Down Payment

Dealers are starting to sweat. Starting next year buyers will be able to apply the EV Tax credit directly to the sale price of an EV. But as Automotive News reports, dealers are worried the government won’t pay them back in a timely manner.

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Starting in 2024, the EV tax credit will work very differently than it does now. Currently, if you buy a brand new EV that qualifies, you’re eligible for a $7,500 tax credit. It’s not a discount, even though car companies and others calculate EV prices as if it is. The credit only really works against a tax liability; if you owe less than the credit, you can’t really take full advantage of it. At best, you’ll end up paying less in taxes.

But starting next year, EV buyers will be able to apply that credit directly to the price of the EV in the form of a down payment. Sounds great for buyers right? Not for dealers. Like anything that makes things easier for car buyers, dealers are worried. Dealers that spoke with Automotive News say that they’re worried about how complicated the process is going to be and whether or not they’ll get their money back from the government, something some dealers say would be a repeat of the Cash For Clunkers era.

“History would tell us we have a lot to be nervous about,” said Tyler Slade, operating partner at Tim Dahle Nissan Southtowne in suburban Salt Lake City.

While applying the credit to a vehicle at the point of sale — or cash on the hood — is the “optimal situation,” it puts more burden on the dealerships, Slade said.

“You’re going to have plenty of dealers that aren’t going to be comfortable with that risk … waiting for the government to pay, much like Cash for Clunkers,” he said.

Some dealers say they recall waiting weeks or months for repayment during Cash For Clunkers. The issue is how dealers are set up financially. If they don’t get the money back that they’re handing out to customers, they can get screwed quickly, or at least that’s what they’re claiming.

“Car dealers are asset rich and cash poor. Cash flow is something we look at every single day in a car dealership,” she said. “What if that $200,000 the government owes me is the same time I have a big payroll, and I have floorplan to pay off and, oh, it’s tax time? All of a sudden, the dealer is in a cash crunch.”

One New Jersey based dealer said he’d like to see repayment times as quick as 48 hours with a max time of seven days.  Meanwhile NADA is working with the government over the dealers concerns to streamline the process.