M3 returned, purchased new one, federal tax credit?

[davidk2213]

Had delivery of my M3 on June 25th. Absolutely LOVE the car. 6 days later it stopped. Major shuddering on brake pedal when depressed and loud knocking noises from the front. I managed to slowly get it to the service center for them to diagnose (after the roadside assistance told me 2 ways to reboot the system). I also had about 8-10 warning messages on my screen.

End of day 7, which was the 2nd July they still had not found the problem and said it must be a bad wiring harness somewhere in the car. I think they would have to tear the car up to find it and I didn't want my brand new car to have that done to it.

I spoke to the delivery manager (who was exceptionally nice) and explained my predicament. He offered to take the car back and I would get a refund check in 30 days. I said I would like to buy exactly the same model and not be out of pocket, which he assured me they could do. I even spoke to them about the difference in federal tax credit and he told me not to worry.

If I acquired the car when it was $3750 and returned it, I presume I could not claim that, so now I would only be able to claim the $1875 and be out $1875?

They have also organized a loaner car through Enterprise while I wait for my next car to come in, which is excellent service.

I just wonder what this will cost me in the end.

Here are the areas I think I am going to feel hurt.

My trade in was $28000 which reduces my tax on a $48000 car by $840
$1875 on federal tax credit
I probably will need to finance the full car and refinance once I get refund check. (Not sure of interest for both loans)

Even though the delivery manager assured me it wont be a financial hit on me, I am very skeptical.

Any comments/tips would be appreciated.

 

[Az_Rael]

Even though the delivery manager assured me it wont be a financial hit on me, I am very skeptical.

You are right to be skeptical. If they agreed to cover the tax credit difference and your sales tax hit, I would get that in writing and make sure it is part of the new purchase contract.

 

[davidk2213]

I had the delivery manager and sales guy in the conversation. Unfortunately I did not have anyone else with me and feel like this is not going to end well. If they open tomorrow, I think I may swing by and see if I can find someone that can add it to the new purchase contract.

Pitty, I could not just do a VIN swap (at credit union too), and be on my way.

 

[ewoodrick]

You indeed purchased the car. I don't remember if there is a "how long" portion of the credit though. Just search and look up the form, it's easy. Get lucky and you may be able to qualify for two cars.

 

[Rockster]

When Tesla did a buyback on my S, the buyback and repurchase was in the year that followed my original purchase. Tesla promised that the net cost to me of the entire transaction would be zero. In order to adjust for the fact that I would be getting a second tax credit, Tesla juggled the buyback and repurchase to come out to negative $7500, which was offset by the second tax credit I received This seemed reasonable to me. Otherwise, I would have, in effect, been double dipping on the tax credit. The only other option would have been to not juggle the numbers and make me pinky swear not to file for the second tax credit but I guess that wasn’t really an option. I could have gone back on my word and then some reporter would have found out and written an article with a headline about Tesla being a party to scamming multiple tax credits.

 

[jebinc]

You are right to be skeptical. If they agreed to cover the tax credit difference and your sales tax hit, I would get that in writing and make sure it is part of the new purchase contract.

Ditto

 

[davewill]

When Tesla did a buyback on my S, the buyback and repurchase was in the year that followed my original purchase. Tesla promised that the net cost to me of the entire transaction would be zero. In order to adjust for the fact that I would be getting a second tax credit, Tesla juggled the buyback and repurchase to come out to negative $7500, which was offset by the second tax credit I received This seemed reasonable to me. Otherwise, I would have, in effect, been double dipping on the tax credit. The only other option would have been to not juggle the numbers and make me pinky swear not to file for the second tax credit but I guess that wasn’t really an option. I could have gone back on my word and then some reporter would have found out and written an article with a headline about Tesla being a party to scamming multiple tax credits.

What the hell? That makes no sense AT ALL. If you were eligible for a second tax credit, then it was yours, Tesla had no claim on it. If you weren't, then you shouldn't have filed for it, period. In neither case should Tesla have profited by $7500.

 

[srs5694]

My advice: Speak to an accountant, and preferably one with more than the usual level of knowledge of this area of tax law. Unless somebody here has such expertise and chimes in, I'd take opinions here with a very big grain of salt. Do this now, and if the answer is bad, take it, in writing, to the Tesla store and try to haggle a reduction in the purchase price (in writing) to cover your loss.

 

[OCR1]

I’m not sure I’m following what the delivery manager has offered to do for the OP. I find these verbal conversations to be fraught with miscommunication and Tesla is not know for standing by an employee’s statements if they spoke in error. I think the OP will need to ask for something specifically in writing about what Tesla is planning to offer here.

The tax credit on the second car is definitely only going to be $1,875 so a discount for that amount would seem fair. Offering a free loaner while waiting for the new car was a nice touch. Tesla did that for me as well.

 

[Rockster]

What the hell? That makes no sense AT ALL. If you were eligible for a second tax credit, then it was yours, Tesla had no claim on it. If you weren't, then you shouldn't have filed for it, period. In neither case should Tesla have profited by $7500.

I don’t agree. They replaced my car at no cost to me, buying back an inventory car that I had bought, gotten a tax credit for, and driven for 18 months. A car that now had 30k miles on it. And in exchange they were giving me a brand new factory build. The deal was it was to be net zero cost to me. Had they not juggled the numbers in this way I would not only have gotten a new car but I would have profited by $7500 by getting a tax credit for a car that I really didn’t pay for. That didn’t seem right to me.

 

[Az_Rael]

Had they not juggled the numbers in this way I would not only have gotten a new car but I would have profited by $7500 by getting a tax credit for a car that I really didn’t pay for. That didn’t seem right to me.

Sure, but it seems like that is between you and the IRS not you and Tesla. For example, the State of California will claw back the EV rebate if you don’t own the car for a certain amount of time. If Tesla had made this same deal on a buyback in CA, the owner could end up out $2500 when the state comes looking for the money back. I don’t know what the rules are for the IRS rebate, but if you got audited and they determined you weren’t eligible for the first one due to the buyback, you would then owe the IRS $7500 and now you are in the hole $7500 on the transaction since Tesla charged that money.

 

[Rockster]

Sure, but it seems like that is between you and the IRS not you and Tesla. For example, the State of California will claw back the EV rebate if you don’t own the car for a certain amount of time. If Tesla had made this same deal on a buyback in CA, the owner could end up out $2500 when the state comes looking for the money back. I don’t know what the rules are for the IRS rebate, but if you got audited and they determined you weren’t eligible for the first one due to the buyback, you would then owe the IRS $7500 and now you are in the hole $7500 on the transaction since Tesla charged that money.

I don’t think there was any risk of the irs demanding the credit back. I owned the first S for eighteen months. I then traded that S in to Tesla when buying another S. The fact that I got a good deal on my trade in and purchase price doesn’t change my eligibility for a tax credit. It just wasn’t appropriate for me to make a $7500 profit getting that tax credit when Tesla was going above and beyond to do the right thing. I’m perfectly fine with breaking even on the buyback. If someone else wants to get a tax credit on a car that they’re essentially getting free, that’s up to them.

 

[OCR1]

I’ve never been able to determine if there is a minimum amount of time one has to own a car to be eligible for the federal tax credit and not subject to potential clawback. For California I seem to remember it’s 30 months.

 

[Knightshade]

I’ve never been able to determine if there is a minimum amount of time one has to own a car to be eligible for the federal tax credit and not subject to potential clawback. For California I seem to remember it’s 30 months.

there isn't one, federally.

Though you have to have purchased with the "intent" to own the car (rather than resell it or something immediately)

 

[OCR1]

there isn't one, federally.

Though you have to have purchased with the "intent" to own the car (rather than resell it or something immediately)

So if you ended up returning the car to Tesla after six months and replacing it with a new one there is no rule that says to you can’t take the second tax credit.

 

[davidk2213]

I’m not sure I’m following what the delivery manager has offered to do for the OP. I find these verbal conversations to be fraught with miscommunication and Tesla is not know for standing by an employee’s statements if they spoke in error. I think the OP will need to ask for something specifically in writing about what Tesla is planning to offer here.

The tax credit on the second car is definitely only going to be $1,875 so a discount for that amount would seem fair. Offering a free loaner while waiting for the new car was a nice touch. Tesla did that for me as well.

BTW Thank you everyone for your replies.

The delivery manager was very sympathetic to my concerns that I did not want a car that stopped and they could not find the problem for 2 days. He said I could return this one and place another order and there would be no financial difference to me. I am going to go in tomorrow and take my original purchase agreement that has my car price, less trade, and tax/title/reg and try have them adjust the next car price so that it comes to the same (tax difference). And get it in writing, or updated online.

I will have to jump through loops on the financing side as it is by following these steps. (I have financed 17k @ 2.49 at FCU A)

New finance at FCU B for full car.
Wait for check from tesla for full amount of 1st car.
Pay FCU A the remainder as principal
Refinance with FCU at lower rate back at 17K

FCU A will not allow you to refinance an existing loan with them so I need to use FCU B

I probably will try take the gamble on the federal tax rebate.

 

[jebinc]

BTW Thank you everyone for your replies.

The delivery manager was very sympathetic to my concerns that I did not want a car that stopped and they could not find the problem for 2 days. He said I could return this one and place another order and there would be no financial difference to me. I am going to go in tomorrow and take my original purchase agreement that has my car price, less trade, and tax/title/reg and try have them adjust the next car price so that it comes to the same (tax difference). And get it in writing, or updated online.

I will have to jump through loops on the financing side as it is by following these steps. (I have financed 17k @ 2.49 at FCU A)

New finance at FCU B for full car.
Wait for check from tesla for full amount of 1st car.
Pay FCU A the remainder as principal
Refinance with FCU at lower rate back at 17K

FCU A will not allow you to refinance an existing loan with them so I need to use FCU B

I probably will try take the gamble on the federal tax rebate.

Best of luck!