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Buying a Tesla Vehicle Just Got $3,750 More Expensive

Tesla vehicles will be costing more as the company's qualification for the federal tax credit begins its wind-down.


Tesla's luxury cars are about to cost buyers more. The reason is that the $7,500 federal tax credit that electric vehicles come with is limited to 200,000 units. Tesla has passed that milestone. Going forward buyers will not qualify for that full credit.

Once an automaker hits the limit for the full tax credit, as Tesla did this summer, a wind-down of the credit begins. The first step for Tesla buyers begins for vehicles that will be delivered starting on the first business day of 2019. Unlike with most brand's cars, Tesla buyers generally order their vehicle and deliveries are multiple weeks out in the future. And relatively unpredictable according to most sources. As November approaches, Tesla deliveries for vehicles not yet ordered will start to be scheduled for after the first of the year.

Those Tesla vehicles will qualify for a reduced federal tax credit of half the original, or $3750. That means if your approximately $50K base Tesla Model 3 with no options other than those Tesla insists you take is delivered to you after the first of the year, your car just got about 7.5% more expensive after incentives are factored in.

Tesla tax credit

That's actually the good news. The really bad news is that after July 1st of this coming year the incentive drops by half again to just $1,875. That makes a Tesla Model 3 about 11% more expensive. By the end of next year, the tax credit expires completely and that same Model 3 will cost 15% more.

Tesla's Model 3 sales accelerated the tax credit's expiration. Other automakers who sell over 200K units will eventually see the same wind-down, but likely not for the coming year. Those who want a new electric vehicle, but who don't require that it be a luxury model could consider that after incentives and dealer discounts, Toyota Prius Primes in some EV-friendly target markets are costing buyers under $20K. As are Nissan Leafs. Those who still want a luxury electrified vehicle will find that those from BMW, Jaguar, and other luxury brands still have their full federal tax credits in play.

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