Colorado clean energy officials are boosting their cash-for-clunkers offer to $9,000 for turning in an old gasoline car and buying a new EV, up from the previous $6,000, in order to bolster sales after a lucrative federal subsidy ended Tuesday.
The federal EV tax credit of $7,500, taken off at the point of sales, was a victim of the summer’s Big Beautiful Bill Act by Congress, and state and local officials and car dealers worried the cut would slow Colorado’s progress in transforming from a fossil fuel fleet to cleaner transportation. The state’s $3,000 addition to an existing vehicle exchange program for income-qualified buyers doesn’t fill the whole federal gap, but could make a difference for some shoppers who missed the Sept. 30 deadline.
“The federal tax credit has been ended seven years prematurely by the Trump administration, and at the time when we are seeing really significant consumer demand for electric vehicles in Colorado,” said Will Toor, chief of the Colorado Energy Office. “We thought that it was important to step up and do what we can as a state to really help keep that momentum going, and in particular to help to make sure that low- and moderate-income Coloradans can continue to be able to have access to electric vehicles.”
The expansion will be paid for with money left in the vehicle exchange fund for the 2026 fiscal year, officials said. The exchange launched in summer of 2023 and had $25.6 million to operate over the first three years from the Community Access Enterprise of the state budget. The fund accumulates specific transportation fees and is not part of state general fund spending. About 2,600 older vehicles have been retired through the exchange program so far.
Buyers must be turning in a car 12 years or older, or one that’s failed a recent emissions test. Environmental groups like the exchange programs because they take older, higher-emitting gasoline engines off the road permanently while also boosting the EV market.
Buyers can also turn in an old vehicle to buy a used EV, in which case their exchange incentive on Nov. 3 goes from the existing $4,000 up to $6,000. The income qualification is pegged at 80% of the area median income in the buyer’s home county.
The exchange incentive can be layered on top of the still-in-place state tax credit of $3,500, plus an extra $2,500 from the state if buying a new EV priced under $35,000. The state tax credit will drop to $750 on Jan. 1. The $2,500 extra for a cheaper new EV will stay in place during 2026.
To recap, if you have a qualifying old car and are buying a new EV under $35,000, from Nov. 3 through the rest of 2025 your total state discount would be $15,000.
“We appreciate Colorado’s continued commitment to electric vehicles,” said Matthew Groves, CEO of the Colorado Auto Dealers Association. “The sales numbers over the last few years show that consumer interest is stronger than mere tax credits. However, as we face troubling economic times, programs like the (vehicle exchange) are instrumental in turning that interest into reality for everyday Coloradans.”
Clean energy advocates also applauded the state’s move.
“By increasing the Vehicle Exchange Colorado incentive, Gov. Polis and his team are helping families access an important opportunity to save money,” said Travis Madsen, transportation program director at the Southwest Energy Efficiency Project. “That’s the right thing to do. With the federal government abandoning support for clean energy, state leadership is more important now than ever.”