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Tesla's unfair absorption of tax credits

Discussion in 'Model S: Ordering, Production, Delivery' started by NoMoGas, Nov 19, 2014.

  1. NoMoGas

    NoMoGas Member

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    #1 NoMoGas, Nov 19, 2014
    Last edited: Nov 22, 2014
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  2. Zythryn

    Zythryn MS 70D, MX 90D

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    That seems the only fair way to do it.
    Let's say someone is looking at two Teslas, identical in every way except one.
    One has been previously titled so no tax rebate. The other has not, so it gets the tax credit.

    They are both priced at $80k. Would you buy the one with, or without the tax credit?
     
  3. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    It's totally reasonable.
    The tax credit is available on new cars, not used cars.
    The used value takes that tax credit into account, essentially increasing depreciation by the amount of the tax credit. If it didn't people would just buy a new one instead.
    (Note that if you trade your car in quickly (e.g. to get a D), you're still entitled to the tax credit.)

    This impacts other plug-ins and leads to poorly educated headlines like "Electric Cars Depreciate Faster Than Their Gas-Powered Counterparts" (Electric Cars Depreciate Faster Than Their Gas-Powered Counterparts). If you take current new prices, current incentives and tax credits into account they're actually holding price well (unless it's a Leaf from AZ, I guess).
     
  4. yobigd20

    yobigd20 Well-Known Member

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    yea while I am 100% in agreement with you NoMoGas that it seems unfair (and it is), the PROBLEM is what Zythryn stated and it's a logical business decision (not for personal greed) on Tesla's end. If someone receives delivery and sells it right back to Tesla the next day with 0 miles added, the problem is that it is no longer eligible for the credit. So a new buyer comparing that car to an exact duplicate spec brand new car is going to chose the brand new car because they can get the $7500 credit. The mathematical induction is that the minimum break even price for Tesla is $7500 off what you paid for it. If they sell it for anything higher than $MSRP-$7500 nobody will buy the car as they would save money with a brand new one. So basically they need to subtract $7500 immediately and then subtract for usage or else it will just sit on Tesla's lot forever depreciating value and losing money for the company.
     
  5. bonaire

    bonaire Active Member

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    US Bank is absorbing the credits on the new leases. It seems to be a hedge against possible value loss after 3 years. Much like the Leafs and Volts and so on had seen on their leases originating back in 2011 and 2012. If you want an escape hatch from ownership, choose a lease. I prefer to keep cars 6+ years and leasing is not good for me.
     
  6. jaguar36

    jaguar36 Member

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    The tax credit is irrelevant when calculating the trade in value. If a buyer did or did not take the credit, did or did not pay sales tax (EVs are sales tax exempt in some states) its all irrelevant. The trade in value is related to what the car is worth, and what Tesla will be able to resell it for. The person who buys the used Tesla cares not what the original owner received or paid in taxes and credits.
     
  7. techmaven

    techmaven Active Member

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    The way to think about it is what you would do if you were buying your car after 1 week. In determining the value of the car, would you factor in the tax credit? I suspect you would factor it in for any offer... you wouldn't ignore it. If you paid $105,000 new and there is tax credit, would you offer to someone to buy their 1 week old Model S for, say, $104,000 and ignore the tax credit? No. You would not. No one would.

    So if the value of the car takes into account the tax credit even after just 1 week, it would certainly be the case in 1 year, and in 3 years. Everyone's Model S in the U.S.A. is valued with the tax credit removed.

    Now, what really peeves me is that you get an additional CA tax credit, which means my VA Model S is undercut by your car when it comes up in the used car market.
     
  8. lolachampcar

    lolachampcar Active Member

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    and it is a nit, but you get to pay state sales tax on that extra $7500 then get to wait a year to get the $7500. In Florida, you pay 6% sales tax on that $7500 and then loose 5% cost of money waiting for the tax credit to apply (unless you do quarterly estimated payments at which point you can decrease the next quarter's payment and realize the benefit sooner). Small but not insignificant.
     
  9. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    You shouldn't be losing 5%, given that new car loans can be had for less.
     
  10. lolachampcar

    lolachampcar Active Member

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    I use 5% as my cost of money. It will vary from person to person.
     
  11. markb1

    markb1 Active Member

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    You are right that the buyer does not care if the previous owner took the tax credit. But the value of used cars is reduced by the mere availability of the tax credit on new cars.
     
  12. TI Sailor

    TI Sailor Member

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    Just like an ICE car where one buyer pays full price or more and another pays below invoice for identically-spec'd cars, used car values will ultimately be determined by the market. Newer low-mileage one owner vehicles will command higher prices, but probably not close to what a new one would cost unless the car is rare, hard to find or otherwise considered a collectible. Taxes, rebates, credits, whatever won't matter once the car has some years and/or miles on it. Buyers will compare on many levels and then pay what it's worth to them at the time and no more.
     
  13. MsElectric

    MsElectric Active Member

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    I'm sorry but this whole mentality sounds like you feel that only you are entitled to this rebate and you get to keep it all. The rebate reduces the cost of the car and thereby the car costs less by that amount. Of course when you factor in depreciation, most reasonable people will assume that it is from the actual cost of the car including an applicable rebates that everyone gets.

    If you feel you get to keep the $7,500 good luck trying to sell your car to someone. You may feel you are entitled to keep all of that rebate to yourself but someone considering buying the car might only buy it if the rebate is factored into the asking price of the car as they can always buy it from someone who calculated depreciation from the actual cost they paid for the car. No one has to buy the car at the price you set as the values are set by the market. Most prospective buyers with a sufficient percentage of functioning brain cells will calculate the value of the car based on the cost of the car including the rebate and then depreciation for time and miles. If you don't want to do that, good luck finding a sucker :)
     
  14. stopcrazypp

    stopcrazypp Well-Known Member

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    The reason Tesla does this (as well as practically every other estimation of depreciation for EVs subject to the tax credit) is the because for a used EV to even be viable on the market, it must take the $7500 tax credit off of the price tag or people would just buy a new one.
     
  15. NoMoGas

    NoMoGas Member

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    #15 NoMoGas, Nov 20, 2014
    Last edited: Nov 22, 2014
    ...
     
  16. wycolo

    wycolo Active Member

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    What about the buyer who was unable to take *any* of the 7500 credit due to large charitable deductions (or relative poverty) for that year? Or only half of it? As it turned out I just squeeked the full 7500 so maybe I'm worrying here about a miniscule population.
    --
     
  17. lolachampcar

    lolachampcar Active Member

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    I can not help but return to the reality of the situation. The tax credit effectively reduces the price of the car for MOST people. The net affect is that the car cost MOST people less money thus the reduction is carried through to the secondary market. It is reality that two cars sitting on the Tesla lot with the exact same milage and age (one demo, one trade in) will be $7500 different in price simply because one can make use of the tax credit while the other can not. The privately owned car is likely a much better car as it was probably well loved by its first owner.

    The simple truth of tax credits like this one is that they help the manufacturer with margins until they are established. We will pay what we will pay so Tesla simply increases the price of the car accordingly to capture that tax credit. They try to overcome the emotional resistance to the higher price by showing the credit reduced amount on their site at every opportunity.

    Is it right or correct? I can not say. It is reality. Absolutely.

    As for the person that can not take the credit, they are probably evaluating the situation and choosing to go secondary where the credit is already wrapped in.

    Again, I am not defending anyone's actions. I'm just acknowledging the reality of the situation and reasons why it is unlikely to change.
     
  18. jhs_7645

    jhs_7645 VIN: #3305

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    I think you said it best. Another even simpler way to look at it is this:

    The price of anything is what people are willing to pay. The market will always dictate that, not the seller. Tesla is selling the cars for what the market will bear. period. end of sentence. So if you want to blame anybody, blame the market, not the seller.
     
  19. ItsNotAboutTheMoney

    ItsNotAboutTheMoney Active Member

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    #19 ItsNotAboutTheMoney, Nov 20, 2014
    Last edited: Nov 22, 2014
    - - - Updated - - -

    The answer is: tough doodoo. The reality is that tax credit is just another thing that affects the price that most people will be willing to pay for the used car.
     
  20. breser

    breser AutoPilot Nostradamus

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    #20 breser, Nov 20, 2014
    Last edited: Nov 23, 2014
    Yes you are being unreasonable. You're still going to get that $7,500 tax credit on the vehicle. So what you're actually asking here is to make money on the deal. The best you can ask for is an even trade, which in my opinion would be require that you pay $7,500 (that you'll get back in a few months anyway). In your situation the only time I think you would have a point is if you weren't eligible for that tax credit and you had extraordinary circumstances causing them to buy back the vehicle.

    For what it's worth I'm turning in my September 2014 built S85 today in order to get Autopilot. I didn't blink at Tesla deducting the tax credit.
     

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