Car dealers are worried that a repeat of the “Cash for Clunkers” scenario of delayed government payments will leave them waiting months for funds if they participate in the upcoming transferable EV tax credit program.
The government assures car dealers that EV tax credits will be paid to them promptly, but many remain skeptical, according to Automotive News.
The transferrable EV tax credit program is defined by Section 30D and Section 25E of the Inflation Reduction Act for new and used electric vehicles respectively. It allows qualifying EV purchasers to make the down payment to car dealers with their EV tax credit rather than cash, after which the dealers can obtain payment from the U.S. Treasury Department via an IRS Internet portal.
The transferable EV tax credit program will begin on January 1st, 2024, with Treasury Department assurances participating car dealers will “promptly receive payments for transferred credits.” The IRS portal enabling payments will be rolled out during the next several months, officials claim.
The “Cash for Clunkers” experience looms large in the recollection of many car dealers, however. Cascade Auto Group managing partner Michelle Primm noted “horror stories out there that dealers didn’t get paid for six months,” though her dealership received payment in one month. Other dealers reportedly have similar concerns.
Primm also noted “car dealers are asset rich and cash poor,” meaning it’s urgent to get payments to meet payroll and other bills. Another dealership owner, Mike DeSilva, told Automotive News “a fair repayment time would be within five to seven days.” However, dealers were eventually paid under “Cash for Clunkers” as well, and the program “did move a lot of metal” California New Car Dealers Association president Brian Maas observed.
Several differences between the current program and “Cash for Clunkers” might mitigate the risks for car dealers. The transferrable EV tax credit program is thoroughly developed while “Cash for Clunkers” was rushed out quickly. Additionally, lower EV sales volume is expected, reducing the risk of overloading the system. More limited EV sales also mean dealerships will have less money tied up in the program.
Meanwhile, GM is aggressively pursuing the EV transition and its plans to globally launch 30 new EVs globally by 2025. The automaker plans to have EVs in the best-selling third of automotive segments by then and is strengthening its capacity to make enough GM Ultium battery units for its ambitious goals by investing in cathode active material (CAM) plants and affordable iron-based CAM research.
The General also counters rumors that it will need a smaller workforce for EVs, noting it plans to hire more workers next year and expects payroll size to be “very similar” to ICE assembly lines even after the EV transition is complete.
Subscribe to GM Authority for more GM electric vehicle news, GM business news,  GM-related electrification news, GM technology news, and around-the-clock GM news coverage.
Comments
How can the dealer know the credit is valid. I thought there was an income restriction, IE, AGI greater than 200K or ? then no credit available to the taxpayer. At least I thought I saw that restriction somewhere.
It’s normal for dealers to have what is called POI’s (proof of income) for buyers. The customer would have to qualify and if that customer falsified info, then the dealer would go after the customer for payment. Not fun, but that’s how it works.
POI from a job is pretty easy to account for. However, a dealer might not be aware of rental income, trust fund, 1099 income, etc. EV’s have yet to show any profit for most dealers. The last thing they want to do is chase down their money.
They won’t have to. They are getting reimbursed from the IRS. The IRS will get their money back from the taxpayer at tax time, if the buyer doesn’t qualify.
I know I am in the minority, but being self employed my income can go all over the map. Even I don’t know what my income will be until December 31st. I’m guessing the dealer would decline me from the program.
@mkAtx
Don’t quote me here but I think you can utilize the current year W2 or the one prior to qualify for the $7,500 EV Rebate. My friend is waiting on his CPA to verify.
Not how it works. The IRS offers prepayments to the dealers to cover the expected credits. The dealers give the buyers the credit as a reduction in the price of the car.
If the buyer is not eligible, they have to pay the IRS back at tax filing time.
The dealer will file the paperwork with the IRS, so the IRS will know the buyer bought an EV and received the credit amount. If the taxpayer’s AGI is higher than the cap, the taxpayer will owe that money back to the IRS. The dealer does not have to verify taxpayer eligibility.
Ah, the cash for clunkers program. One of the biggest jokes in automotive history. I was working at a Buick, Cadillac, GMC and Honda store at that time. Because that specific dealer didn’t care (still may not) about the GM products, they stocked few and what they did stock was the huge SUV’s and trucks from GMC and Cadillac. They refused to stock any of the smaller more fuel efficient Buick’s. So here come all these people wanting to get more efficient vehicles and let their old vehicles get scrapped. The only real thing we had was the Honda’s and I refused to take part in that scam. The amount of harm this program caused to the American brands was beyond belief while sending millions of TAX PAYER money into Japan’s economy. What made the program worse was that they were scrapping some really nice/clean/good running vehicles that caused way less pollution than the many really old and higher polluting vehicles that the low income people were driving. That’s where the worst pollution was (still is) coming from.
The CFC program should have been restricted to American brands for the full $4,500 and $2,000 for an import assembled in the US and ZERO for any import not assembled here. Then they should have taken the nicer vehicles turned in and given those to the people driving the really bad cars while scrapping their junk cars. At least that would have helped clean up the air more.
I will forever hold a grudge with the government and dealers for using our American taxes to send all that money back to Japan! It’s one thing if someone wants to spend their money on one. But forcing me to fund a Honda or Toyota or Nissan or Mazda or Subaru purchase was the ultimate slap in the face.
During the cash for clunkers I was in charge of chasing the $’s so to speak. When it was all send and done, America sent just about 2 billion $’s back to the mother country Japan. America screwed again by its own government.
Thanks KC for that info. I knew it was a lot, but to hear it was around 2 billion just makes me sick.
I can’t tell you how many GM drivers I saw come in and turn in a perfectly good vehicle (one that they liked by the way and many never had any issues with them) just to buy a new Honda. Absolutely the worst thing ever. So not only did the government f-up and give a lot of our taxes to Japan, but they also turned a lot of GM owners into Honda and Toyota buyers.
I’m not aware of any program requirement forcing anyone to purchase a specific brand.
There are several arguments and opinions, and different areas of the country obviously experienced different results, but I can tell you that in our part of the country, every dealer I’m aware of – both domestic and import – essentially sold out of product which means they ordered more vehicles, which was good for the manufacturers and their workers. That may not be the case everywhere, but regardless of location there are a couple common denominators:
The program set a new low bar for used car values, because it literally made “junk” worth $4,500 & while it destroyed the “cheap vehicle” market, a lot of people also realized an immediate increase in value of their used vehicles.
The program was deeply flawed & Dan B makes some very good points…I’d agree that the people who needed the program the most were unable to benefit from it & there were some very nice cars that were crushed. A tiered system based on domestic vs import sounds good, but may have been counterproductive. The demand was there, dealers sold out of inventory. If the domestics would have been incentivized more, it would have created more demand with no more product and may have led to overcharging the consumer more than already happened by some dealers…dunno, crystal ball is murky on that one.
“Clunkers” were put in classes, and the program rules mandated a purchase within a certain range of class. IE if you had a “class III” you couldn’t take advantage of the program and purchase a “class I”, which meant that a person with an old, gas guzzling , 4×4, 1 ton pickup was prohibited – due to program guidelines – from purchasing a car – from any manufacturer – that got 30+ mpg, which was what the program was allegedly designed for. The consumer who had the old gas guzzler pickup ? To take advantage of the program, the consumer had to purchase another HD Pickup. The program was a classic example of “The Law Of Unintended Consequences”, which frequently happens when politicians on either side of the fence regulate things they have no knowledge of, and getting reimbursed – because dealers fronted the money to the consumer – was a nightmare similar to most gov’t. programs. Dealers also took a lot of heat from politicians for “taking advantage of the program” and selling the HD customer another HD instead of an economy car…. but the dealers were just following the rules of the program or they wouldn’t have been able to apply for the govt. $$s…typical Washington Politcos refusing to take responsibility for their mistake.
CFC was another government program that hurt low income people. It took a lot of inexpensive vehicles and used parts out of the marketplace.
No one should trust the federal government. Most, if not all of the problems we face have been created by a president, and a congress that are just in it for themselves. There are a few examples of people in DC that really want to solve issues in a reasonable way, but let’s face it, they are far out numbered byt the folks getting wealthy on insider trading and bribes.
Why do I have to help pay for someone else’s EV? This is a Dim scam for the rich.
@Carl
We the Tax payers pay for many, many things….including Oil
Are you upset about subsidizing your neighbors ICE vehicle?
If you have no kids should you be up in arms over schools?
The Oil companies pay far, far, more in taxes than they get in subsidies from the government.
A big myth the taxpayers are giving big oil a free ride. They pay for leases on taxpayer owned land.