New EV prices post-$7500 tax credit

[whitex]

I disagree. When you are negotiating with the dealer, the dealer knows (today) that you will get the tax credit, so will hold out for a higher price. When the tax credit goes away (which it will eventually, now or later) the dealer knows that you are not getting the tax credit and so cannot use that as a negotiating point.

The tax credit lowers your total cost, but works against you in the negotiation. When it ends, the absence of the credit becomes a point in your favor when negotiating. The dealer does not have a set price. He wants to get as much out of you as he can, and will hold out for more if he knows you're getting the tax credit.

In addition, if the end of the tax credit does result in reduced demand and there are cars sitting on the lot, the dealer will settle for a lower price to get them off the lot. Prices will drop when the tax credit ends, though they will not drop as much as the credit.

Tesla is a different story because there is no negotiating. I like that about Tesla.

Rebate or no rebate makes no difference to the bottom line of the dealer, hence the lowest price at which they are willing sell is the same. While they may use this "but you get a rebate" argument in the negotiation, it's no different than "I have kids to feed" negotiation argument. The only difference could be the demand part. If the federal incentive made the cars fly off the lots like hotcakes causing shortage in inventory, then sure, I agree that it would be harder to negotiate. However, if there is sitting inventory, then the rebate makes no difference to the final dealer price, assuming you are a good negotiator, come it armed with information and are willing to do the negotiation work.

 

[daniel]

Rebate or no rebate makes no difference to the bottom line of the dealer, hence the lowest price at which they are willing sell is the same. While they may use this "but you get a rebate" argument in the negotiation, it's no different than "I have kids to feed" negotiation argument. The only difference could be the demand part. If the federal incentive made the cars fly off the lots like hotcakes causing shortage in inventory, then sure, I agree that it would be harder to negotiate. However, if there is sitting inventory, then the rebate makes no difference to the final dealer price, assuming you are a good negotiator, come it armed with information and are willing to do the negotiation work.

Your mistaken assumptions are that:

1) There is a "lowest price" at which the dealer is willing to sell; and
2) That you can negotiate the dealer down to that price.

Negotiation is like a poker game. It's psychology, it's body language, it's whether the dealer is in a good mood or a bad mood. There are far too many factors for there to be a simple "lowest price" or for you to be able to get to it. Further, the tax incentive alters demand, and any change in the demand:supply ratio will alter the dealer's calculus about what price he thinks he can get for his cars. There's bluffing involved. If the dealer reads your body language to mean he thinks you'll be back, he won't lower his price. If he thinks the next person will buy the car he won't lower his price. If he has a big shipment coming in tomorrow he'll want to move the cars today to make room, but if he's only got 2 or 3 left he'll hold out for the highest price he can get.

The biggest factors are how good a negotiator you are, and the demand:supply ratio, which changes with the tax credit or its absence.

The tax credit does alter the dealer's perception and calculus and therefore how much he's willing to sell the car for.

 

[tashtibet]

speak up don't wait!!!

Plug In America

 

[pkodali]

Unpopular opinion but I am totally fine with the ev credit running out. A couple years down, when prorsche and Mercedes unveil their bevs, Tesla will have run out of ev credit by then, so buyers will be able to justify a premium over tesla

 

[whitex]

Your mistaken assumptions are that:

1) There is a "lowest price" at which the dealer is willing to sell; and
2) That you can negotiate the dealer down to that price.

Negotiation is like a poker game. It's psychology, it's body language, it's whether the dealer is in a good mood or a bad mood. There are far too many factors for there to be a simple "lowest price" or for you to be able to get to it. Further, the tax incentive alters demand, and any change in the demand:supply ratio will alter the dealer's calculus about what price he thinks he can get for his cars. There's bluffing involved. If the dealer reads your body language to mean he thinks you'll be back, he won't lower his price. If he thinks the next person will buy the car he won't lower his price. If he has a big shipment coming in tomorrow he'll want to move the cars today to make room, but if he's only got 2 or 3 left he'll hold out for the highest price he can get.

The biggest factors are how good a negotiator you are, and the demand:supply ratio, which changes with the tax credit or its absence.

The tax credit does alter the dealer's perception and calculus and therefore how much he's willing to sell the car for.

There is definitely an art to negotiation, no argument there, however having negotiated a decent number of new car deals I will tell you that with a good negotiator, the rebate doesn't play a role because it doesn't affect the seller's bottom line. The ONLY thing the rebate affects is demand, so as I said before, if there is high demand and the dealer thinks they can sell it to someone else for more profit, then yes it affects the selling price. In few of my past deals I had to walk away (buy few months later) because demand was so high that the dealers were selling above MSRP (Acura NSX, Toyota Sienna, Lexus RX400h - all when a new model first came out were flying off the lots). The key to negotiating is coming prepared with all the facts, be able to quick calculate things like monthly payments to price and vice-versa (a lot of dealers don't like to negotiate price of a car, only want to talk monthly payment because amounts are smaller), be firm (don't fall for tricks like "you said "$800's was acceptable" when they come back with $899 per month to your $800 per month offer), and most importantly be willing to walk away (so don't shop for a car when you actually need one).

 

[tpatana]

On many products the more they sell, the less margin they can allow. So if the tax credit going away makes them more expensive for the buyer, that might reduce the number of EVs sold and for that reason the manufacturer might want higher cut per sold car. Naturally dealer might want to sell cheaper if the car is sitting on the lot for long time, so it's impossible to guess which way the price goes. My gut feeling / guess is that initially there'll be small price reduction, sort of "good will" from the dealers to compensate for the loss of tax credit, but fairly soon after that they'll increase the prices to compensate for the reduced sales and also the profit lost on those good will cars.

 

[HopeToGolf]

This could get interesting if the tax reform bill is not enacted by the end of this year. What will folks do at the beginning of 2018 when the status of the EV credit is unknown and if it is unknown whether any changes are retroactive to the beginning of 2018.

 

[daniel]

This could get interesting if the tax reform bill is not enacted by the end of this year. What will folks do at the beginning of 2018 when the status of the EV credit is unknown and if it is unknown whether any changes are retroactive to the beginning of 2018.

A law retroactively changing the tax consequences of a purchase made before the law was passed would be an "ex post facto" law.

From Wikipedia:

Ex post facto laws are expressly forbidden by the United States Constitution

My own guess is that if they cannot pass a law before January 1, any law they do pass will probably not take effect until 2019, because of the mess it would create throughout the entire tax system if everybody had to apply one set of rules and tax rates for part of the year, and another set for the rest of the year.

Perhaps they could end certain deductions effective on the date the law is passed, but I don't think this is a big enough issue for them to make a special case of it.

 

[dgpcolorado]

...My own guess is that if they cannot pass a law before January 1, any law they do pass will probably not take effect until 2019, because of the mess it would create throughout the entire tax system if everybody had to apply one set of rules and tax rates for part of the year, and another set for the rest of the year.

Perhaps they could end certain deductions effective on the date the law is passed, but I don't think this is a big enough issue for them to make a special case of it.

My understanding — perhaps incomplete — is that it is a bit more complex than that. The push to get the tax law passed this year is to take advantage of a quirk in the Senate rules that allow adjusting spending laws, so long as they don't exceed certain financial limits (the need for a passed budget, and that large deficit increase number often talked about, are among criteria). This would allow the changes to be passed by a simple majority vote. If the tax change law is kicked into next year those rules no longer apply and the law would need to go through the whole process of committee hearings and would require 60 votes (or be subject to a filibuster). This is actually how such a profound change in tax policy ought to happen, but it also explains the push to ram the law though before the end of the year.

What will actually happen I couldn't say.

 

[Tonymil]

If the big auto minds are smart, short-sighted, and decide to act on their greed, they'll keep EV prices where they're at and drop some of their ICE prices in an effort to sway folks from going EV. I expect ICE makers to fight the EV movement until they absolutely have to get serious about making the switch to EVs.

I think any car company that moves away from EV's would be engaged in a risky game of chicken. It would be betting that enough other companies also move away to dampen the growing interest in EV's. But Nissan, Hyundai/Kia, VW and of course Tesla seem to be on an EV mission. Of the domestic companies, Daimler/Chrysler is the one that is most opposed to EV's. Ford has clearly staked out a position as a follower, not a leader. GM has made a major investment but can't be trusted to lead the EV push without other companies also making a push. So, long and short of it, I think too many car companies are too invested to turn back the tide. Losing the credit would definitely slow things down, but not stop it. However, since the global environment depends on a movement away from fossil fuels and moving toward EV's is a big part of that, any slowdown would be incredibly harmful. And that what we all care about most, right????

 

[insaneoctane]

A law retroactively changing the tax consequences of a purchase made before the law was passed would be an "ex post facto" law.....

May want to dig a little deeper....
"The Constitution itself bars ex post facto laws. Since 1798, the Supreme Court has said that limit applies only to criminal laws, not civil measures."
Supreme Court OKs Retroactive Tax Collection

 

[shokunin]

Lease prices will likely go up for Volts and Leafs. A good portion of the $7500 federal tax credit was applied as a capital cost reduction or an increase to the residual. EIther way it nearly cut the lease payments in half.

Nissan and GM moved a lot a cars with great lease deals that were made possible by the $7500 rebate. Eliminate the rebate, then those $250/mo leases become $450-500/mo leases.

 

[daniel]

May want to dig a little deeper....
"The Constitution itself bars ex post facto laws. Since 1798, the Supreme Court has said that limit applies only to criminal laws, not civil measures."
Supreme Court OKs Retroactive Tax Collection

Well, sh!t.