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Chevrolet Volt Tax Credit Scandal

Kirstie_HKirstie_H Posts: 10,914
Article posted below. Are you outraged or indifferent? Should the practice be stopped, and by whom?

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  • seaurchinseaurchin Posts: 57
    Well folks yesterday GM dealer network hit a new low. According to a report GM dealers are selling their Volts to each other in order to claim the $7,500 tax credit for themselves and later on proceed with selling the same car to the end buyer as "used" who will no longer be able to apply for the credit because it was already used for the vehicle.

    This is the full article.

    Are GM Dealerships Gaming Chevy Volt Tax Credit?

    I recently set out to determine how honest General Motors is being when it claims that demand for the Chevy Volt is exceeding supply. It was not hard to discover that this is not the case as retail sales remain dismal. A web search on vehicle locator sites such as Autotrader and Cars.com exhibit sufficient supply of the Volt, one dealership within 70 miles of my location had six new Volts available for sale.

    Even Ebay lists vehicles, many had no bids and one listing in Texas hadn't even met reserve with only one day of bidding time remaining. But I discovered something far more disturbing during my search. Many Volts with practically no miles on them are being sold as "used" vehicles, enabling the dealerships to benefit from the $7,500 credit supplied by the American taxpayers on each car. The process of titling the Volts technically makes the dealerships the first owners of the vehicles, which gives them the ability to claim the subsidies. The cars are then offered to retail customers as "used" vehicles.

    The practice of dealerships purchasing from one another is not uncommon. "Dealer trades" are done all the time in the industry. What is very unusual is for the receiving dealership to be able to maximize profits at the expense of taxpayers by claiming tax credits of $7,500. It is also very rare for dealerships to part with any model that has higher demand than supply, as GM claims is the case with the Volt. In addition to qualifying dealerships for a $7,500 tax subsidy, the titling process also allows GM to record Volt sales even if the cars are sitting on dealership lots.

    While most of the dealerships offering "used" Chevy Volts for sale are Chevy dealers, I also found other manufacturers selling Volts with low mileage as "used" cars. A Kia dealership in California that I contacted seemed to suspect that they were doing something a bit underhanded when I called them to inquire about a "used" Volt for sale with only 30 miles on it. After I identified myself as being an associate with the National Legal and Policy Center, I was placed on hold. I was then told by a sales manager that the Volts offered at that dealership were rental cars with higher mileage on them. I later called the same dealership back posing as a potential customer and confirmed that a "used" Volt with only 30 miles on it was available. This also raises the question of why GM or Chevy dealerships would be selling Volts to other manufacturers' dealerships when they claim that there are not enough of the cars to meet retail demand.

    A Chevy dealer in Chicago was more upfront with the info given on a "used" Chevy Volt with only 10 miles on it. The vehicle was being offered at MSRP. When I asked if I was eligible for the $7500 tax credit, I was told that I probably wasn't since the dealership was applying for the subsidy. This practice is one of the more egregious abuses to date purloined upon taxpayers as a result of the GM bailout. The intent (even if misguided) of the $7500 tax credit offered on the Chevy Volt is to encourage consumers to buy "green" vehicles, not to offer an opportunity for dealerships to game the system and maximize profits at the expense of the taxpayers. I also suspect many purchasers of "used" Volts will attempt to claim the $7500 tax credit for themselves, thus bringing the total tax subsidy on such transactions to $15,000 if not disallowed by the IRS.

    General Motors should act immediately to stop the practice of dealership to dealership sales enabling the pilfering of Chevy Volt tax credits. I would go one step further and say that IRS requirements for taking green vehicle tax credits should be changed to eliminate the credit for businesses. Clarification should also be given on whether companies like General Electric will be allowed to take millions of dollars in taxpayer subsidies when they purchase thousands of Chevy Volts. It certainly would not be unprecedented for Treasury to change IRS code; they have made more complex changes as recently as 2009 to allow GM to benefit from a $45 billion tax loss carry-over credit.

    Dealerships taking tax credits that were designed to benefit consumers is unacceptable. The practice should be stopped immediately, regardless of the desire of GM and the Obama Administration to do everything in their power to support the appearance of strong Chevy Volt sales.
  • gagricegagrice San DiegoPosts: 29,085
    Thank you for posting that informative article. It is amazing what corporations will do to scam the tax payers of the USA. I hope some prosecutions come as a result of this scam. For the skeptics in the crowd, here is the link to the article.

    http://nlpc.org/stories/2011/05/31/gm-admits-dealerships-are-taking-chevy-volt-t- ax-credits
  • fushigifushigi Posts: 1,248
    This is a dealership issue, not a GM issue. I'm not sure what influence GM can leverage to stop the practice as technically nothing illegal is happening and dealerships trade/buy cars off each other even without the subsidies.

    Perhaps the subsidy should be reworded to only allow it for individuals/households or, to allow small businesses to take part should they want to, simply put a limit of 1 subsidy/entity/year. I think that's reasonable.

    I find it interesting, too, as while the buying dealerships may realize the short-term profit from the $7500, they still have to sell the car. They must be operating under the assumption that demand is sufficient that the car will sell at something close to MSRP even without the subsidy. Otherwise, if the car is a true sales dud, they may not make back their investment even after the $7500.
  • Kirstie_HKirstie_H Posts: 10,914
    Well, GM *could* tell them that they'll lose their dealership franchise if they engage in that practice. However, I'm not sure it's their responsibility - except that it could damage their tenuous reputation. "GM took my tax dollars to bail them out of bankruptcy, and now they're taking it AGAIN." Regardless of the facts, it does not look good.

    As with every tax regulation, if lawmakers (inadvertently) leave a loophole, you can guarantee that someone will leap through it.

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  • seaurchinseaurchin Posts: 57
    See I am not sure GM can do anything about it and i am not sure GM can revoke franchise rights. My understanding is that these franchise laws are very favorable to dealers in all states. They are a very powerful group because they employ a lot of people and their businesses generate big tax gains for local governments.

    I would like to see GM at the very least verbally address this issue.
  • Kirstie_HKirstie_H Posts: 10,914
    Yeah, even as I was writing, I wasn't entirely sure that they could do anything. But, if this ends up blowing up and tarnishing GM's reputation, the short-term benefit of the tax credit is going to be wiped away by the loss in sales (and probably dealerships). GM isn't in a position to take a big, negative PR hit right now.

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  • larsblarsb Posts: 8,204
    The worst part is the dealer who took the credit himself, and then did not take $7500 off the price.

    Wouldn't that be construed as "tax fraud" because the tax credit was designed for the CONSUMER of the car. To "steal" the credit then not take that credit off the price seems like straight up TAX FRAUD.
  • imidazol97imidazol97 Crossroads of America: I70 & I75Posts: 18,458
    I suspect the story as written is missing some facts. It seems couched in the omnipresent hatred of GM that ferments in forum after forum without check here and in other places, partly over the bailout money.

    I suspect people would be better served looking at the money spent by the government folks on Fannie Mae and Freddy Mac. But I'll go along for a minute here.

    The hatred here seems to be following up on the number of sales of the Volt. Those sales were limited to certain states and to my knowledge still are limited. I looked in lower Michigan so I could see a Volt when we go visit. None of the dealerships in the area showed a Volt.

    I did find a used one in Columbus, Ohio. It is clearly described by the Chevy dealership as NOT for sale (sorry to bust your bubbles here). They got it from a dealer in California to have one for people locally to see.

    As for a dealer purchasing a Volt solely to claim the $7500 tax credit, has that been documented?

    Are we going to talk about the Prius subsidies from our own government by tax credits to purchasers for years? Even though the auto maker is not a US company? How is that different than the US government giving a tax credit for an electric-based vehicle if it happens to come from GM? Were any Prius' sold to other dealers who took the tax credit? We need a thorough investigation of this now.

    I still suspect the motive behind this is the general attitude toward GM that keeps on going and going like the energizer bunny--which is electric too, just like the Volt.
  • gagricegagrice San DiegoPosts: 29,085
    You may have a point. It seems that the tax credit on hybrids was for individuals. Where this one they made across the board. With GE purchasing a lot of them. If dealer A buys a car from dealer B and claims the tax credit he is buying at a very reasonable price. He can then sell for whatever the market will bear or use it in his business. Seems like it would be reasonable shuttle vehicle. Anyway you cut it there will be people unhappy to see their tax dollars go into the pockets of Corporate leaders.
  • fintailfintail Posts: 34,161
  • Kirstie_HKirstie_H Posts: 10,914
    Good articles, fintail. Thanks for doing the research.

    As I thought about it, I did wonder how such a scheme could sustain itself long-term. I mean, the only consumer who would buy a used Volt, with no tax credit, at close to MSRP would be a part of the "I must have it NOW" crowd - and there can't be an abundant supply of people who are so eager to get the vehicle that they're willing to forgo getting a new car (with full warranty and tax credit) just because they might have to be on a waiting list.

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  • anythngbutgmanythngbutgm Posts: 4,182
    Why would there need to be waiting lists tho? Want one? just go buy one...

    590 available
  • larsblarsb Posts: 8,204
    I don't think the dealers "cared" if it would have been sustainable, really.

    With tough times like today, getting away with 4 or 5 tax credit thefts would probably suit some of them just fine.
  • Kirstie_HKirstie_H Posts: 10,914
    I hadn't checked inventory, but it's nice that there are plenty available. But even *if* there were a shortage, these shortages on new vehicles rarely last long.

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  • gagricegagrice San DiegoPosts: 29,085
    Pretty bad when you are buying your own vehicles you still only sell 481 in the month of May. It could be that dealers in states that did not get them are buying and offering at MSRP to people that think they are a great deal at any price.

    First 5 months of 2011 Chevy has sold a total of 2184. Probably half to other dealers. Time to end the program and give US our $billions spent on R&D for the Volt.
  • anythngbutgmanythngbutgm Posts: 4,182
    Yet, the spin doctor paid shills and their coordinated attack on the internet forums have been plugging the Volt as a compplete success while the Nissan Leaf, which outsold it is supposedly a failure...
  • lemkolemko Posts: 15,197
    Never heard the Leaf being touted as a dismal failure. Just simply never heard anything about it good or bad.
  • anythngbutgmanythngbutgm Posts: 4,182
    2 words, "Range anxiety"... They'll flock to any picture of a Leaf that has run out of juice and flood the forums with it. Then follow it up with some comment about tow trucks or how those owners deserve it for their stupidity of buying one, or how they bought an inferior vehicle all the way up to when Nissan should cancel the thing all together because it's nothing more than a glorified golf cart...

    But, as soon as the all electric Volt arrives, the concept will be raved about by these same people and "range anxiety" will be an just an exaggeration...

    Btw, I am a member of C&G, GMI and a few other GM boards so I read this stuff alot.
  • eliaselias Posts: 1,941
    Sounds to me like FUD from H8Rs.
    Car shoppers know there is a 7500$ tax credit.
    We will subtract it from our offering price or lease-payments no matter whether seller calls the Volt used or new.
    over time, as the cars get more used, the buyers will pro-rate/subtract a lesser portion of the $7500 from their offers.
  • steverstever Viva Las CrucesPosts: 41,564
    Chevy Volt Tax Credit Flap's A Flop

    John O'Dell ferrets out the facts. "The column by a blogger for the National Legal and Policy Center was more about politics than fair play.

    it would be illegal for a dealer who bought and registered a new Volt, collected the credit and then sold the car as a used vehicle to tell the new owner that he or she would get a tax credit. We've combed the Internet looking for complaints about that kind of nefarious behavior and haven't found one example yet. The tax code also says that tax credits for advanced technology cars like the Volt – as well as the Nissan Leaf and Tesla Roadster -- aren't to be claimed if the new-car buyer purchased the car just to resell it."

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  • seaurchinseaurchin Posts: 57
    Steve, but the charge is not that they are selling it and telling the buyer that credit is still there. The charge is that they are abusing the taxpayer who gave the discount to buyers who want to be responsible in terms of energy consumption.

    No laws are broken, but trust between dealerships and buyers has fallen to a new low.
  • steverstever Viva Las CrucesPosts: 41,564
    edited June 2011
    Got a link? The take-away I got was that John O'Dell couldn't find any situations that matched that scenario. Easy charge to make but not so easy to prove. Be real surprised if we read any "rejected Volt tax credits" after the next tax season.

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  • gagricegagrice San DiegoPosts: 29,085
    Be real surprised if we read any "rejected Volt tax credits" after the next tax season.

    There were many on the hybrids. Anyone getting put in the AMT bracket was not allowed the tax credit. Same for the first time home buyer tax credit. So if the dealer takes the tax credit and then sells the car at a price less the credit. He has actually done the buyer a favor. I have hesitated to buy anything with a tax credit as about every other year we end up in that horrible AMT category. 29.3% of households in the $75k to $100k were subject to AMT last year. That is a lot of the people likely to buy a hybrid or EV.

    When considering the economics of buying a hybrid car, a shopper’s first best question has nothing to do with gas consumption, maintenance costs, or resale value. Surprisingly, the most important dollars-and-sense consideration is whether or not you pay the Alternative Minimum Tax (AMT). The answer to that question will determine if you qualify for the federal hybrid tax credit—a few hundred dollars or a couple of thousand dollars, depending on the vehicle purchased and when you buy it.

    Unfortunately, many of the consumers most likely to buy a hybrid—prosperous but not ultra-wealthy families with kids and mortgages—are the most likely to pay the AMT. Therefore, a core group of hybrid shoppers will not receive the well-publicized tax credit. This loophole calls into question the federal government’s ability and commitment to encouraging consumers to conserve energy by purchasing a hybrid.
  • steverstever Viva Las CrucesPosts: 41,564
    That's not the same as the claim that dealers were taxing the credit for themselves and selling nearly new Volts to unsuspecting consumers.

    Still no evidence of that eh?

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  • benrey23benrey23 Posts: 42
    I am a Certified Volt Salesman at a dealership in Indiana. We wanted a Volt sooner than GM was allotting us one. So we found a dealer in NY that was willing to sell one to us. NOw the one we bought was not a dealer trade but is was purchased like such. Meaning the dealer in NY did not want anything in return. Ofcourse we did not purchase it at the regular invoice minus credits. Since it was a dealer to dealer new vehicle transaction it is still a New vehicle and we did not claim any credit. It is sad to hear some of this is going on. All it does is hurt GM. The Volt is a fine vehicle with exceptional technology that far surpasses its competetors. The Leaf is having problems in terms of what they said was the EV range, what the EPA says is the EV range and what the public is actually getting which is lower than the EPA.

    I would not be surprised if GM intervined and delayed some dealers alllocation that are practicing this credit game. As a saleman who is on the right of issues it is hard for me to support them since they were bailed out. I will say however the Volt was being designed well before the current administration. The Cruze is a great small compact car, the 2013 Malibu is sure to set fire, and the Volt is awesome technology. I hope GM does the right thing regarding this issue.
  • benrey23benrey23 Posts: 42
    I agree it seems that way. It is dirty. But the MSRP is what the manufacturer suggests. The dealer is free to suggest a adjusted market price based on demand and availablility.
  • ClairesClaires Chicago areaPosts: 979
    A couple of people cast some serious doubt on the original blog entry here; seems like it may have been a little short on facts.

    http://townhall-talk.edmunds.com/direct/view/.f2315b9/10#MSG10

    http://townhall-talk.edmunds.com/direct/view/.f2315b9/20#MSG20

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  • I sold a Volt in a state that to this day has not recieved one directly from GM. We have people wanting the Volt but cant sell them one. The one I sold was purchased through a dealer to dealer trade system but we had to agree to buy it at MSRP which we did. Now that it is gone and so many people waiting I can understand a dealer buying one and selling it pre owned. The dealer want be able to attain the credit and neither will the customer. However as long as you tell the customer that then there is no issue. Most of them could care less.
  • robr2robr2 BostonPosts: 7,964
    But Chevy has almost 2100 dealers so 1/3 of them would have none in stock if each had one.
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