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The Chevrolet Volt tax credit shell game and how you can win it

By: · June 8, 2011

It’s an old car dealer tactic: If you can’t find a retail customer for a car, try to find another dealer to sell it to. According to an investigation by the National Legal Policy Center (NLPC), now that’s happening with Chevrolet Volts. NLPC blogger Mark Modica says he found several Chevrolet dealerships, and at least one Kia dealership, selling Volts with very few miles as used cars.

Consumers who buy used Volts may not be eligible for the federal $7,500 tax credit designed to bring down the price of the car, Modica writes. The tax credit, instead, goes to the dealership that first bought and titled it. However, the dealer may choose to apply what is essentially added profit to the deal. The downside of even this arrangement is that the money that was intended to be directed to the buyer is now out of the consumer’s control.

When we bought the first Chevy Volt to hit Manhattan on Dec. 22, the dealer charged us $5,000 over sticker. The “additional dealer markup” was supposed to reflect hot demand for the vehicle, which was number 57 to come off the assembly line.

But Modica’s math may not add up.

Jesse Toprak, vice president of industry trends and analysis at TrueCar.com, says today most Volts are selling for between $150 under sticker to $1,000 to $1,200 over sticker, implying there is still no shortage of demand. But on average, demand does not appear high enough to consume $7,500 in mark up—or lost customer discounts.

According to the latest sales numbers from Automotive News, GM has produced just fewer than 3,400 Volts since January 1. (The factory is now temporarily shut down for converting the plant from building the phased-out Buick Lucerne and Cadillac DTS to the next-generation Chevrolet Malibu.) Just over 2,100 Volts were sold this year, leaving 31 days of inventory as of May 31. Automakers generally consider 60 days of inventory a good balance between supply and demand, showing the Volt to still be in demand.

Toprak says most Volt sales are still pre-orders and that most dealerships have waiting lists.

For GM’s part, the company says it knows of only 10 Volt sales between dealerships. Some of those can be explained by dealerships outside the initial launch states trying to get cars to sell before next year.

Looking on AutoTrader.com, we found 13 used Volts listed for sale, most at Chevrolet dealerships, and three at a Kia dealership in Glendale, California, with mileages ranging from 7 to about 1,200. Most, but not all, were in the seven states where the Volt is being launched. (Cars.com, another big car classifieds site, listed 16.) That’s about 2 percent of the 700 units Automotive News lists in inventory.

One challenge in selling new electric cars is that the federal tax credit designed to offset the purchase price can’t be claimed until buyers file their federal taxes the following year.

That may be one reason many electric car early adopters are leasing, rather than purchasing their cars. Both the Chevrolet and Nissan have been advertising lease deals for around $350 a month on the Volt and Leaf. On a lease, the finance company (usually a captive finance company owned by the automaker) owns the car and qualifies for the tax credit. But because they have an incentive to sell you the car, they can pass the amount of the credit through to you on the lease price, lowering your payments.

If you’re buying the car, not leasing, General Motors spokesperson Rob Peterson says you have two options. One is to wait for the credit. The other is to take out a 12- to 16-month balloon loan up front for the $7,500, then pay it off after you file your taxes and receive the refund.

In the end, if Volts are in short supply, dealers have every incentive to sell or lease them to consumers, not just try to profit from glomming onto tax credits and creating more $7,500 hurdles to car sales. Playing shell games with the tax credits will not foster consumer loyalty or goodwill. The law requires dealers who have traded cars and taken the tax credit to disclose that act to consumers.

Bottom line
If you’re in the market for a Volt, or a Nissan Leaf, you’re entitled to the tax credit. If the car you’re thinking of buying is used, or has more than a handful of miles on it, check with the dealer to make sure the car you’re buying still qualifies for the incentive and negotiate accordingly.

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