Electric car quest: MSRP, rebates, incentives, and leases

(Part 4 in a series on choosing an electric vehicle)

How much does an electric vehicle (EV) cost to buy and operate?

Like the question of battery range, this is a tricky question.

Let’s start with sticker price.

Chevy Volt:

  • GM is advertising an MSRP of $32,780.  But this includes the big federal tax credit of $7,500 (see below).  The actual MSRP is $40,280.  And this number may be artificially low, as many MSRPs are.  The model I drove at a Chevy dealer was listed for several thousand dollars above that.

Nissan Leaf:

  • Advertised MSRP $25,280 for basic model Leaf SV, including tax credit.  Real price is $32,780.

Tesla Model S:

  • According to the Tesla Motors blog, the base model with 160-mile range battery will cost $49,900 (after deducting tax credit); the model with a 230-mile battery, about $60,000 (after tax credit); and with a 300-mile battery, about $70,000 (after tax credit).

Note that to qualify for the tax credit, you must pay at least that much in federal income tax.  Since these are expensive cars, potential buyers likely have high enough incomes to benefit.  Warning: if you have to pay the Alternative Minimum Tax (AMT), your actual tax credit may be less than $7500.

As I stated, the federal tax credit for qualified electric vehicles is $7500.  It began Jan. 1, 2010, and remains in effect until the EV manufacturer produces 200,000 vehicles, after which the credit will be gradually phased out over a year.  In 2012-13, all three car makers are shooting for sales volumes in the 20,000 range, so the tax credit should be in effect for a while.  (Incidentally, the tax credit for gas-electric hybrids is now over.  Sorry, Prius fans, your car is yesterday’s news.  Only plug-in electrics receive favored status now.)

EVs that qualify for the federal tax credit:

  • 2011 Chevy Volt
  • 2011 Nissan Leaf
  • Tesla Roadster models
  • 2012 Tesla Model S will qualify
  • 2010 Coda sedan

There is an effort afoot to change the tax credit to an instant discount at the time of purchase, which would be a big improvement for the buyer.

Additional incentives

  • A federal tax credit of $1,000 or 30% of the cost of charging equipment installation (until Dec. 31, 2011)
  • State-based incentives, including a $5,000 rebate in California and Georgia. **UPDATE: As of July 1, 2011, the California program is out of money.  A new, smaller rebate of $2500 may be introduced in 2012.**
  • Utility/private incentives.  In California and elsewhere, a number of utilities are offering various incentives to customers who own EVs.
  • Carpool lane privileges: For a limited time, owners of Volts and Leafs qualify for a green HOV (high occupancy vehicle lane) sticker in California, which allows you to drive alone in the car pool lanes.  A huge bonus for Bay Area commuters!

The federal tax credit is a one-time thing on new cars only.  If you lease an EV instead of purchasing, you do not get the tax credit. The leasing company gets to claim the $7500.  Because of this, lease rates may seem artificially low compared to the sticker price.


Which brings up the question of buy vs lease.  Normally, if you have the cash or ability to get a loan, leasing is a poor financial choice that will cost you more in the long run.  But EVs are an unusual case because of the many question marks surrounding the technology.  Will you have to replace the battery?  How much will that cost?  What if I hate the car?  And most of all, how much will my EV be worth in a couple of years?

This question of residual value–the resale value–is one that the manufacturers can only guess at.  For leasing companies, a lot is riding on the guess.  If the resale value turns out to be lower than they predicted, they’ll be on the hook for a bunch of returned lease-expired vehicles that they must sell at a loss.  But if they price the monthly lease too high, they’ll sell fewer cars.

As a consumer, it might be worth the extra cost of leasing to protect yourself from the same risks.  Some experts are recommending this.  In a couple of years, you may be sick of dealing with range anxiety, or perhaps the technology will be so much improved that you’ll want a newer EV.  A lease would let you walk away.  But of course, you’ll miss out on the $7500 tax credit.

Nissan has come forward with clear leasing options for the Leaf.  For the base model, it’s $2000 down, $349 per month for 36 months.  Installation of a docking station/home charger is not included.

In July 2010, GM vowed to match Nissan’s $349 monthly payment for the Volt, with $2500 due at signing, even though the Volt is much more costly than the Leaf.  They justified this decision based on predictions of a higher residual value.  According to what I read in online discussion groups, what actual lease terms will be offered is as yet unclear and the individual dealers are still trying to work it out.

Don’t do it for the money

Let’s face it.  At current prices, EVs are an indulgence.  People will buy them for philosophical reasons, for status, or because they’re technophiles, but despite the fact that electricity is cheap and gas is expensive, you will not save money owning an EV.  If money is your only motive, get a traditional fuel economy car like the Ford Fiesta ($15,000) or Toyota Yaris ($13,000).  The price gap between EV and economy car–including sticker price and installation of a charging station in your home–is too large.  General Motors spent in the range of $750 million developing the Volt.  Somebody has to pay for that investment.  Eventually, when large numbers of EVs are being sold, the price will fall.  Hopefully the cost of the batteries will also come down, even as the range goes up.

Next: I test drive a Chevy Volt

Series of electric car quest posts:

Chevy Volt vs Nissan Leaf; the hot electric cars of Tesla Motors: Model S vs RoadsterEV BatteriesMSRP, incentives & leasesChevy Volt test drive

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2 Responses to Electric car quest: MSRP, rebates, incentives, and leases

  1. Robert Sharp says:

    The price of a gasoline powered car can be $32,000.00. One big cost is the internal combustion engine. The cost of manufacturing an electric motor is far less than the cost of an internal combustion engine. Batteries are heavy but are simple to manufacture. So how does the price of an electric car get as high as a Internal Combustion Engine Car? It’s simple, the government is giving a $7,500.00 tax rebate and the automotive companies and dealers want it. The consumer thinks they are getting the tax rebate but since the price of an EV is inflated by approximately $7,500.00 the Auto Companies are getting that money, not the consumer. If the government gets out of the rebate services than maybe the battery price will fall.

    • Amy says:

      You may be right that the rebates allow manufacturers to inflate their prices. However, the price of an EV reflects not only the cost to manufacture it, but the cost to develop it. In the case of GM and the Chevy Volt, the amount of money they have to recover from EV sales to pay for their investment runs to the tune of a billion dollars. What will really bring down the price is volume of sales. As far as the cost of batteries, I don’t know why they’re so expensive, but I’m sure that materials (exotic metals) and development costs have a lot to do with it beyond the actual cost to build the thing.

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