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Running low on electric rebate

December 24, 2010|Jerry Hirsch

California consumers counting on a $5,000 state rebate for purchasing an electric car may be in for a shock: The money may not be there when they go to collect.

The state Air Resources Board, which is offering the program for eligible electric and other zero-emission vehicles, has $8 million in its coffers. That's enough to pay out incentives to about 1,600 buyers, estimated Jay Friedland, legislative director of Plug In America, an electric-vehicle advocacy group. But it's well below the expected pace of sales for vehicles such as the Nissan Leaf, which is just now hitting the market. Friedland doesn't expect those funds to last beyond mid-2011.

"There's likely to be more than that sold before July. We believe the rebates will run out," Friedland said.

And with California mired in fiscal crisis, there's no guarantee that rebate funds intended for future years will actually be there, Air Resources Board officials said.

That's unsettling to electric-vehicle enthusiasts who see the financial incentives as a way to even the playing field with conventional gasoline-engine autos.

"You can apply for all this stuff, but you don't know if you will get it. There are a lot of unknowns," said Sam Lin, an electrical engineer from San Marino who recently ordered one of Nissan's new Leaf electric sedans.

Consumers banking on government help to purchase electric and hybrid vehicles should do their homework. Though car companies tout tax breaks and rebates to lure prospective buyers, those incentives aren't necessarily guaranteed.

Consider the federal tax credit available to car buyers who purchase a plug-in electric vehicle such as the Chevrolet Volt and the Nissan Leaf. How much you get depends on your tax situation. That's because the incentive, worth a maximum of $7,500, doesn't come right off the top of the cost of the car. Rather, it's a credit against what you owe Uncle Sam in income taxes. Some buyers won't qualify for the full tax credit. Others might have to wait a long time to reap the benefit.

"If I buy in January, I have to pay it now and I won't get it back until April in 2012," Friedland said. "That's why we have been advocating for change to a rebate that is paid in 60 days rather than a tax credit."

Then there are sales taxes.

In California, buyers must pay sales tax on the price of the car before government rebates or incentives, according to the Board of Equalization, the agency that regulates California sales and use taxes.

So while a Nissan Leaf, for example, would cost $20,280 if a buyer qualified for the maximum federal and state breaks, California purchasers would have to pay sales tax on the full sticker price of $32,780. Sales taxes vary by community. But in Los Angeles, where the rate is 9.75%, that difference would cost a buyer more than $1,200 in extra sales taxes.

To be sure, going green can carry perks that are hard to put a price tag on. In California, for example, qualifying electric and alternative-fuel vehicles are eligible for coveted car-pool-lane stickers. Still, many of the early electric buyers -- people who are eager to shed their internal combustion engine for an electric motor -- are surprised by the tax treatment and its resulting extra expense.

"Some sort of instant rebate would be better, or if I can be taxed on only what I am paying, that would be great," said Benjamin Key, a science teacher at Santa Monica High School who has a Leaf on order out of his desire to break "the addiction to fossil fuel."

Although the automakers go out of their way to pitch the incentives, the potential pitfalls show up only in the fine print. Nissan mentions the issue with the California rebate program several pages into its Leaf website, saying, "it is anticipated that funding will not be sufficient to allow this. Therefore, rebates are awarded on a first come, first served basis." That might explain why some of the California residents who are on Nissan's waiting list for the Leaf are getting antsy over the notices the automaker sent out saying that many won't be able to take delivery for four to seven months.

Chevrolet's website has an asterisk that explains that actual savings from the federal tax credit will range from zero to the full $7,500. (The Volt does not qualify for the California rebate.)

Both Chevrolet and Nissan also offer what appear to be attractive lease deals for their cars. Chevy advertises a 36-month lease with a monthly payment as low as $350 with $2,500 due at lease signing. Nissan is selling a lease of the same length at $349 a month with $1,999 due at signing. But in the footnotes, the automakers note that the deals exclude sales tax. Once those and some other fees are included, the leases cost about $400 a month. That's almost double the payment for a lease on a similar-size conventional car with a comparable down payment from those auto companies.

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