Tesla Buyers: Act Fast for the $7,500 Tax Credit!

Individuals looking to purchase a Tesla ( TSLA 2) Electric vehicles, or any electric vehicle sold in the U.S., should move quickly if they wish to obtain a federal tax credit.

The federal electric vehicle tax credit worth $7,500 for buying new cars and $4,000 for purchasing pre-owned EVs will expire under President Trump's funding legislation. This change is set to take effect by September 30th.

Although some smaller state-level incentives still exist, the federal tax credit played a key role in promoting electric vehicle sales in the U.S., starting under the first Obama presidency. During his time in office, President Biden increased the credit, allowing both pre-owned and lease-based vehicles to benefit from it, along with immediate point-of-purchase discounts, enabling buyers to apply the credit right at the time of buying.

In short: You have fewer than two months to take action.

The reduction in credit will impact widely favored models such as the Tesla Model Y, Honda ( HMC ) Prologue, and Kia ( 000270.KS ) EV9. Certainly, Tesla's Model Y, which was updated this year, will increase from approximately $37,500 to $45,000 prior to any state and local rebates.

A car research company named Cox Automotive reports that electric vehicle stock stands at approximately 111 days of supply in May, which is much greater compared to the 60-90 day level seen for gasoline vehicles. However, this situation might change soon.

Barclays' auto analyst Dan Levy stated, 'We expect 3Q to experience a major EV purchase surge, followed by steep drops in the subsequent months.'

"We could witness another surge in electric vehicle rush purchases over the next few months," said Ed Kim from AutoPacific, referencing the strong EV sales early this year, to Automotive News .

Read more: How to prevent unexpected costs when insuring a Tesla vehicle

Additionally, the electric vehicle tax credit mandated that vehicles be manufactured within the United States, imposed maximum sticker price restrictions, and disqualified high-income individuals from eligibility, thereby limiting the selection of available EVs. However, there is a significant exception.

Any electric vehicle available in the U.S., starting with the most affordable Hyundai models, HYMTF ) IONIQ 5 versus Porsche's P911.DE ) Taycan, is eligible for a lease incentive of $7,500 Without restrictions. The $7,500 could be applied toward lowering the overall lease payment amount, resulting in a reduced monthly expense.

Although this could be an excellent period for customers during the coming one and a half months, there are worries about the impact of the loss on the automobile sector, which continues to encounter obstacles in electric vehicle uptake, including increased costs for buyers, insufficient access to public EV charging stations, and fears related to limited driving range.

A study indicated that electric vehicle sales might plunge by 30% When the credits run out. However, some experts think the dip could be short-lived.

Read more: Six methods for securing affordable auto insurance in 2025

A positive indicator for the sector: Deepwater Research's Gene Munster noted There were certain times—specifically between 2020 and mid-2022—when Tesla customers could not take advantage of the tax credits because of rules set by an earlier law. However, sales remained strong during this time. According to Munster, Tesla saw an average annual delivery growth of 75% as the Model Y became more accessible, making it more appealing. This suggests that better electric vehicles can achieve increased sales even without financial incentives.

Additional elements that support electric vehicle owners and alleviate challenges associated with owning an EV should continue to develop, Munster stated, indicating that the end of EVs may still be far off due to the decline in incentives.

"Once traditional consumers realize that an electric vehicle costs about half as much to 'fuel' and significantly less to upkeep, acceptance is likely to increase, particularly as charging networks expand and attractive models under $40,000 become more available," Munster noted.

That benefits the business sector. However, for ordinary Americans right now, utilizing the $7,500 tax incentive makes sense if shoppers plan to buy within the next few weeks.