Buyers interested in a Tesla (TSLA) EV, or any EV sold in the US, need to act fast if they want to secure a federal government tax credit.
President Trump’s budget bill sunsets the federal EV tax credit of $7,500 for the purchase of new vehicles and the $4,000 credit for used EVs. The credit is slated to end on Sept. 30.
While smaller state incentives remain, the federal credit was the main impetus for the sale of EVs in the US when it began during the first Obama administration. President Biden expanded the credit during his term, with used and leased vehicles able to take advantage, in addition to point-of-sale deductions, meaning the credit could be used immediately upon purchase.
Bottom line: You have less than two months to act.
The loss of the credit will affect popular vehicles like the Tesla Model Y, Honda (HMC) Prologue, and Kia (000270.KS) EV9. Indeed, Tesla’s Model Y, refreshed just this year, will go from around $37,500 to $45,000 before any state and local incentives.
Auto research firm Cox Automotive estimates EV inventory at around 111 days’ supply in May, significantly higher than the 60-90-day inventory for gas-powered cars. But that may not last.
“We believe 3Q will see a significant EV pre-buy, with sharp declines in the months to follow,” Barclays autos analyst Dan Levy said.
“We may see another wave of EV panic buying in the coming months,” AutoPacific’s Ed Kim said, referring to big EV sales at the start of the year, to Automotive News.
Read more: How to avoid the sticker shock on Tesla car insurance
Plus, the EV tax credit required vehicles to be assembled in the US, had MSRP limits, and excluded higher-earning Americans, ruling out a number of EVs for purchase. But there’s a big loophole.
Any EV sold in the US, from the cheapest Hyundai (HYMTF) IONIQ 5 to Porsche’s (P911.DE) Taycan, qualifies for a lease incentive of $7,500 without any limitations. That $7,500 could be used to reduce the total amount of lease payments, meaning a smaller monthly outlay.
While it might be a great time for consumers over the next month and a half, there is concern over what the loss will mean for the automotive industry, which is facing challenges to EV adoption such as higher prices for consumers, a lack of public EV charging, and concerns over “range anxiety.”
One report suggested EV sales could plunge by 30% when the credits expire. But other analysts believe the blip might be temporary.
Read more: 6 steps to find cheap car insurance in 2025
One sign of hope for the industry: Deepwater Research’s Gene Munster noted there were recent periods — from 2020 to mid-2022 — where Tesla buyers did not have access to the credits due to provisions of the older law, but sales were still robust. During that period, Tesla averaged a 75% increase in deliveries year over year as the Model Y became more available, meaning desirable, and improved EVs can experience higher sales without incentives, Munster said.
Other factors that benefit EV owners and reduce pain points for EV ownership should improve, Munster said, meaning the EV’s death may be nowhere near with the loss of credits.
“Once mainstream buyers internalize that an EV can cost half as much to ‘’fuel,’ and meaningfully less to maintain, adoption should accelerate, especially as charging infrastructure scales and compelling sub-$40k options proliferate,” Munster wrote.
That’s good for industry. But for everyday Americans in the here and now, taking advantage of the $7,500 tax credit is a no-brainer if buyers are looking to purchase in the coming weeks.
Pras Subramanian is the lead auto reporter for Yahoo Finance. You can follow him on X and on Instagram.
Click here for the latest stock market news and in-depth analysis, including events that move stocks
Read the latest financial and business news from Yahoo Finance
