State officials are putting finishing touches on an electric vehicle rebate for income-qualified buyers willing to trade in an older gas-fueled vehicle, adding up to $6,000 in price cuts on a new vehicle to a menu of credits that can already include $5,500 from utilities or up to $7,500 from federal sources.
The program is expected to launch in mid-July, with $2 million in state money over the following 12 months. Colorado is paying for the instant rebates and other EV infrastructure, such as public chargers, with a 6.9-cent portion of the 27-cent delivery fee passed as part of a sweeping 2021 transportation policy and funding bill.
Shoppers who are looking for used EVs and have an old car to trade in could get $4,000 from the new state rebate program, taken off the sale price at the cash register instead of rebated the next time they file taxes. Electrification advocates say upfront price cuts in the form of instant tax credits are the most attractive for shoppers considering EVs. The dealer then claims the payment from the state.
State officials also announced a package of forthcoming energy and climate bills for the current legislative session that could add even more to those incentives. Colorado currently offers a $2,000 state tax credit for new EVs, no trade-in required, and elements of the bill package could increase the state’s credit to $5,000.
Not all the credits and rebates will be stackable, though state officials are at pains to define how they can combine. Not all those decisions have been made. Further confusing the matter is that the existing, about-to-be-expanded state credit for new cars without a trade-in will be refundable, meaning qualified buyers could wipe out all of their state tax obligation and get a cash refund back.
Late Thursday, the Colorado Energy Office said the proposed $5,000 state credit could be expanded by up to another $2,500 if the legislative package passes, for vehicles priced under $30,000. That extra amount is intended to fill gaps for vehicles that don’t qualify yet for the full $7,500 federal credit because not enough of their parts are made in the U.S., a CEO spokesperson said. The state’s gap-filler will boost lower-income buyers while the automakers revamp their assembly systems.
An income qualified customer making the trade-in could theoretically combine the $6,000 state trade-in rebate for a new car, a $5,000 state tax credit, and a $7,500 federal tax credit expanded this year, for a total of nearly $19,000 off a new EV. Xcel Energy and Black Hills offer a $5,500 rebate for income-qualified buyers of new EVs, which are stackable with the trade-in rebate but not stackable with the State EV tax credit— customers may have to choose.
Some customers will be in the sweet spot of combining a number of the rebates and credits for a qualifying car, said Travis Madsen, transportation program director for the Southwest Energy Efficiency Project.
“So the total stackable amount could be in the $20,000-plus range for a purchase that met all eligibility criteria,” he said.
The federal tax credit is “nonrefundable,” meaning it can only offset federal taxes the earner would otherwise pay. Those who are income-qualified for the new state trade-in credit might not pay enough in federal taxes to benefit from the full $7,500 federal credit.
The car being traded in must be a 2011 model or older, or have failed Colorado emissions tests.
The trade-in program, dubbed Vehicle Exchange Colorado, takes on multiple goals of state officials and environmental justice advocates. Taking older, higher-polluting gas vehicles off the road can be one of the quickest ways to reduce ozone-causing emissions from the transportation economy. And significant additional credits for new and used EVs can put electrification in reach for far more households, as Colorado agencies work to transform the collective vehicle fleet to run on cleaner electricity.
The state’s greenhouse gas reduction plan and efforts to come under EPA ozone limits depend on getting 940,000 EVs on Colorado roads by 2030.
“I like the concept,” said Madsen.
“Reaching our climate goals will require a broad, societywide shift in our vehicle fleet to zero-emission technology and fuel. The upfront purchase cost of a vehicle is one of the largest obstacles we face,” he said. The state’s program should help push EVs out to people at different income levels, Madsen said.
The Colorado Energy Office said the exact amounts of the trade-in credits have not been set, but community presentations mention the $6,000 toward a new EV and $4,000 toward a used EV. More details should be set by April, when the Community Access Enterprise board related to the Colorado Energy Office will see a final plan.
Fully electric and plug-in hybrid vehicles would qualify, under current plans. The income criteria involve the household being below 80% of the area median income, or be participating in another income-qualified program such as Medicaid.
As an “area median” example, in Denver a household would qualify for the trade-in EV credit if a single person was making less than $62,600, or a family of four made less than $89,400.
The price of the used EV must be more than the rebate amount, and a new EV cannot be priced higher than $50,000. There are a limited number of lower-priced EVs currently on the market, but the Chevy Bolt sells for about $26,000 to $28,000 before tax credits.
Dozens of new EV models from all the major car manufacturers are expected to hit the market in the next year or two. Some have lowered prices as batteries get cheaper or companies want to get under the price caps to qualify for tax credits.
Expansion of tax credits and rebates at multiple levels makes the annual cost calculation better than ever, Madsen said, noting that transportation costs can eat up to 20% of a lower income family’s budget.
Inflation and the temporary shutdown of the state’s only gas refinery, Suncor Energy, pushed gas prices to $4 a gallon and means the typical Denver metro household is spending about $3,000 a year on gas, Madsen said. Given current off-peak electricity prices, at 16,580 miles driven a year, an EV like the Bolt would save a family $2,400 on fuel, Madsen calculated.
Plus, there are no expensive oil changes and little other maintenance besides tires.
“So if a low- or moderate-income person can get their hands on one, they offer meaningful savings that can help improve their financial position,” Madsen said.