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Car buyers prefer rebates over tax credits for electric vehicles, study finds

Experts say many consumers prefer immediate incentives over time-delayed incentives

Electric vehicle and money concept
Photo (c) Stadtratte - Getty Images
More U.S. automakers have been making strides in recent years to produce electric vehicles, and U.S. officials have encouraged prospective car buyers to choose these vehicles through tax credits. But a recent survey shows that most consumers would prefer another type of incentive. 

Researchers from George Washington University found that many car buyers would prefer to get an immediate rebate at the point of sale after buying an electric car. 

"The current federal electric vehicle tax scheme is a pain," said study co-author John Helveston. "First of all, you have to have money. You have to be wealthy enough to buy the whole car and then wait for your tax-break kickback in April. But if you're not in that class of buyers, you often need the money when you buy the car or you're not going to buy it. Our study shows that an immediate rebate at the point of sale would be more equitable and potentially more effective in broadening the buying market for electric vehicles."

Immediate rebates over tax credits

The researchers conducted a national survey that asked prospective car buyers if they would prefer a tax credit, a tax deduction, a sales tax exemption, or an immediate rebate for purchasing an electric vehicle. 

They found that respondents "overwhelmingly" preferred the rebate option, valuing it by an average of $1,450 more than a tax credit. While that sounds like a lot, the team found that the valuation was nearly doubled among lower-income households, used vehicle buyers, and buyers with lower budgets. 

"If you gave the incentive to car buyers as cash on the hood, our study found that you could lower the subsidy by almost $1,500. That's how much people value immediacy," said lead author Dr. Laura Roberson. "So $7,500 in April when I file taxes is the same to me as $6,000 if you gave me that money at the point of sale. That's a huge difference in valuation."

The researchers estimate that the federal government could have saved around $2 billion if a federal subsidy had been available for electric vehicles between 2011 and 2019 and it was delivered as a rebate instead of a tax credit. The team believes spurring wider adoption of electric vehicles could be more possible if incentives are aimed at a wider range of consumers. 

"All the incentive money that we've been spending to try to get people to buy electric vehicles, it's mostly gone to the wealthiest car buyers," Helveston said. "Our results suggest that structuring incentives as immediate rebates would deliver a greater value to customers, be more equitable, and accelerate electric vehicle purchases in the United States."

The full study has been published in the journal Environmental Research Letters.

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