In his first State of the Union address last week, President Joe Biden highlighted his economic agenda as a way to fight inflation. Part of that plan includes reducing the cost of electric vehicles (EVs), which he says would be achieved by boosting U.S. auto manufacturing, building more public charging stations and improving the vehicle tax credit. electrical.
“Ford is investing $11 billion to build electric vehicles, creating 11,000 jobs across the country,” Biden said in the March 1 speech. “GM is making the biggest investment in its history – $7 billion to build electric vehicles, creating 4,000 jobs in Michigan.”
Still, electric vehicles tend to be more expensive than gas-powered vehicles, which is a barrier for potential buyers. To make electric vehicles more affordable, Biden touted the improved tax incentives for electric vehicles offered in the Build Back Better Act.
If enacted, the bill would effectively lower the initial cost of purchasing an electric vehicle by increasing the amount of the tax credit. Dealers would be allowed to collect it on behalf of the buyer, allowing them to lower the price. However, Build Back Better failed to garner enough support from moderate Democrats like Sen. Joe Manchin, who worried about the growing federal deficit.
Keep reading to learn more about buying an EV with current and proposed EV tax credits. And if you’re making that purchase, you might want to consider getting a comprehensive car insurance policy. You can visit Credible to compare car insurance quotes for free without affecting your credit score.
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Biden’s electric vehicle tax credit proposal draws criticism from automakers
During his State of the Union address, Biden said his administration is working to increase access to public charging stations by building a network of 500,000 electric vehicle charging points as part of the trillion dollar project. bipartisan infrastructure law passed last year.
But these new chargers can only be used if consumers can actually afford to buy an EV. The average transaction price for new electric vehicles sold in September 2021 was $56,312, according to Kelly’s Blue Bookcompared to $45,031 for all new vehicles.
Under current IRS code, consumers who purchase a qualifying plug-in electric motor vehicle may be eligible for a federal tax credit worth up to $7,500, depending on battery capacity. The incentive begins to disappear after a manufacturer has sold 200,000 eligible vehicles. Since Tesla and General Motors have already reached that threshold, buyers have fewer choices when buying an electric vehicle that qualifies for the tax credit.
To resolve this, Building back better Extend the existing electric vehicle tax credit by creating an additional $4,500 credit for vehicles assembled domestically with U.S. materials and union labor. With another $500 incentive for US-made batteries, the new maximum credit would be $12,500.
Due to strict eligibility restrictions and union labor requirements, only electric vehicles made by U.S. manufacturers such as Ford, General Motors and Stellantis would be eligible for the additional credit. In particular, it leaves out the big manufacturers such as Audi, BMW, Honda, Hyundai, Toyota, Tesla and Volvo.
In a recent letter to House Speaker Nancy Pelosi, several prominent automakers wrote that the bill “discriminates against American autoworkers” and “limits consumer choice”. And Elon Musk, CEO of Tesla criticized the president on Twitter for the union-imposed demand.
It’s important to remember that the electric vehicle tax credits proposed in Biden’s economic plan are contingent on congressional approval. To learn more about electric vehicle insurance, you can visit the Credible Marketplace.
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The hidden costs of owning an EV
In his speech, Biden said families could save $80 a month by switching to an electric vehicle “because you’ll never have to pay at the gas pump again.” While it’s true that EV drivers could save on soaring gas prices, they’ll still have to pay for the energy needed to charge their car.
The Energy Department estimates that charging an electric vehicle with a range of 200 miles will cost $9, assuming electricity costs of $0.13 per kilowatt-hour (kWh). Given that gasoline prices are currently high at $4.17, according to AAA, it would cost more money—about $34—to travel the same distance in a gas-powered vehicle. That translates to about $25 in savings per 200 miles by switching to an electric vehicle.
Nevertheless, there are other costs associated with owning an electric vehicle that potential buyers should keep in mind:
- Domestic charger: Owners of electric vehicles need a home charging socket to avoid relying solely on public charging stations. Installation costs between $250 and about $2,000, depending Home Advisor.
- Maintenance: EVs do not require oil changes or air filter replacements, which means EV maintenance costs around $330 less expensive annually than the maintenance of a gas-powered vehicle, AAA Reports.
- Car insurance rates: Since electric vehicles are generally more expensive to purchase, they may come with higher car insurance premiums. But some car insurers offer discounts for environmentally friendly vehicles.
“Your total price could be offset by an electric vehicle insurance discount,” said Janet Ruiz, spokeswoman for the Insurance Information Institute. “You can find quote comparison tools online to get an idea of the cost of EV insurance in your area.”
You can visit Credible to compare auto insurance premiums from multiple companies at once to find the most competitive rate for your situation.
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