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Tax credits / incentives for hybrids?
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I try to stick to dealers in the Hudson Valley area. I don't care what they say, you get better service from the dealer you buy from. ... I can't say that I blame them. The Honda Dealer in Poughkeepsie already said they give a 20% discount for purchasers on service.
The 2005 stuff is a just a deduction, meaning you only get to take a "percentage" of the amount off your taxes, based on your tax bracket.
see this page:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2005/08/18/BUG9EE9ANG1.DTL
"For most people, the credit, which reduces taxes dollar for dollar, will be more valuable than the existing $2,000 deduction, which reduces income before taxes.
A $2,000 deduction reduces most people's tax bill by about $500 to $700.
A $2,000 tax credit will cut most people's tax bill by $2,000, with a big exception.
Unlike the deduction, the new tax credit will also apply to cars that are leased, although you will probably have to sign a five-year lease to get the full credit, says George Jones, managing editor in the Washington of CCH, which publishes tax information."
Yes that is correct. What you said before is the credit is a deduction from your adjusted gross income. It is a deduction from the taxes you pay.
A credit is a REduction (dollar for dollar) to your taxes. A deduction reduces taxable income by the deducted amount. The net benefit of the deduction is your marginal tax rate times your deduction.
In any event, here's an interesting website that lists what the expected 2006 tax credits will be by vehicle:
http://www.ucsusa.org/hybridcenter/incentives.cfm
HEV Model Emissions Rating Tax Credit
2005 Toyota Prius Bin 3 $3,150
2005 Honda Insight (automatic) Bin 5 $1,450
2005 Honda Insight (manual) Bin 9 $0
2005 Honda Civic Hybrid (automatic) Bin 2 $1,700
2005 Honda Civic Hybrid (manual 5-speed) Bin 2 $1,700
2005 Honda Civic Hybrid (lean burn, automatic) Bin 9 $0
2005 Honda Civic Hybrid (lean burn, manual 5-speed) Bin 9 $0
2006 Honda Civic Hybrid TBD* $2,100-$2,350*
2005 Honda Accord Hybrid Bin 5 $650
2005 Ford Escape Hybrid (front wheel drive) Bin 4 $2,600
2005 Ford Escape Hybrid (four wheel drive) Bin 4 $1,950
2006 Mercury Mariner Hybrid (four wheel drive) Bin 5 $1,950
2006 Toyota Highlander Hybrid (front wheel drive) Bin 3 $1,950
2006 Toyota Highlander Hybrid (four wheel drive) Bin 3 $2,200
2006 Lexus RX-400h (four wheel drive) Bin 3 $2,200
I'm a new member, and am currently looking at the Honda Insight and the Toyota Prius.
I was told by a local Toyota dealer that the tax incentive for a Prius purchased before the end of 2005 was $2000.00. He said that the 2006 incentive will only be $500.00. Judging by the previous posts, that doesn't appear to be the case. Was he misinformed?
The person that you spoke with at your local Toyota dealer was WORSE than misinformed. He was just totally ignorant of the subject, or deliberately attempting to mislead you. Actually, he was probably trying to get you to commit NOW (which would be in his best interest), instead of waiting for delivery after January 1, 2006 (which, taxwise, would be in your best interest).
I've done some homework and delved further back in this thread.
I'm old enough to remember the gas crisis of the 70's. I recall sitting in long lines, waiting on odd or even days for my 'gas ration'. At the time I was driving a volkswagon beetle, so I was better off than some. I remember the devastating effect on the economy, the massive inflation, out of control interest rates, and general decline in economic outlook that lasted into the 80's, when Reagan spent our way out of it.
Through all the ensuing years, I've wondered about the rationale of Detroit, the government, and people in general, who recovered and quickly forgot the impact of that glitch in the oil supply. The initial flurry of fuel efficient imports was quickly drowned out by bigger and thirstier American cars, and that trend has never stopped.
I recently decided to buy a new car. I had no idea there even were tax incentives. I looked at a Scion Xa and a few other small, fuel efficient cars, as well as the Prius and Insight. I will buy a fuel efficient car, regardless of incentives. Even with incentives, the hybrid cars are more expensive to own, but recent events have shown that gas prices can skyrocket overnight, and if that is a continuing trend, and I believe it will be, those statistics could change and hybrids will begin to look better and better.
At the time, I wasn't aware there were any incentives. It occurs to me that he was probably fishing for an easy sale. He had two new Prius on the lot and was probably hoping I'd buy one on the spot. As it turns out, I was undecided and wanted to do a little more research before making a commitment..
Have you sat in an Insight? You may find that you would have to make too many compromises in comfort, useability and driveability. You might want to look at the Civic Hybrid too.
No, I haven't tested an Insight yet. Frankly, the only thing I really like about it is it's fuel economy. I'm not impressed by it's design (hate that lack of rear wheel well), but I am willing to make some compromises. This will be the first new vehicle I've ever purchased that I will select for intellectual, and not emotional reasons. I've already decided to go back to a manual transmission (recently rebuilt my Dodge automatic trans for the 2nd time), regardless of what I buy, and I'm willing to accept that the 'get up and go' factor may be lacking in some situations. I can get by with limited seating, but would prefer to be able to carry more than one passenger. Between the honda and the toyota, I do prefer the Prius, and since both are overpriced to about the same degree, it's difficult to make a decision based on the sticker.
I did research the Civic. I'm equall unimpressed with the design of that car, however, there may be significant differences in comfort and driveabililty, between the that and an Insight.
I've read some customer reviews that expressed disappointment in the Prius mpg, which seems to fall somewhere far below what's advertised, so I have reservations about that car too.
I guess that's why I came to this forum. I'd like to find out what owners of the respective cars think about what they're driving, and hopefully get the benefit of the research that others have done. I thank you for your comments. That's one more thing to consider, before making a purchase.
That will limit you considerably buying a hybrid. Your only real choice is the Civic hybrid with manual shift. The Insight manual transmission car is very difficult to find. And it appears that the 2006 Civic hybrid will only be offered with an auto transmission. All the other hybrids are Auto, including the Prius. Good luck with your purchase.
Thanks for your comment. Let me elaborate on what I posted earlier. I looked at several non-hybrid cars, including the Scion Xa, which boasts 38 mpg. All of the non-hybrid cars appear to gain a few mpg with manual transmission. My point is that I'm willing to drive a manual transmission, but not determined to do so. I'd be more than happy to find a reliable vehicle that gets great mpg with automatic transmission. The fact that manual transmissions are less likely to break down and easier to repair is just an additional benefit.
My dilemma, at the moment, is that since I tend to keep my new vehicles for 7 to 10 years, I have some reservations about new technologies and the possibility of huge repair bills down the line, or simple obsolescence as new, and improved technologies appear on the market. I'm torn between purchasing a lower priced(significantly) conventional vehicle with good fuel economy or a far pricier hybrid vehicle that gets great mileage, that may be outdated, 3 or 5 years down the line, and may be a mechanical nightmare if something goes wrong.
As you can tell, I don't purchase new cars as often as some do, so I'm less likely to make a snap decision, based on the fact that if things don't work out, I'm bailing out in 3 to 5 years.
Aside from the fact that the hybrids are more eco-friendly, the data seems to show that mile for mile, the hybrids are still more expensive to drive, despite the price of fuel, so I'm torn between buying a conventional car, for far less, and waiting a few years to see what happens, and jumping on the hybrid bandwagon and taking my chances.
Let's get back on topic here. We've got the following discussions that are more appropriate for this conversation:
Hybrids: Toyota Prius vs. Honda Civic Hybrid v. Honda Insight v. ?
Any downside to buying a hybrid?
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I drive the accord hybrid. It is not a sci-fi car. It looks and drives like a conventional car but gives you a higher mileage. These cars can be found below invoice if you do your homework so you wont be paying much premium over a gas only car. It is a nice, powerful car with lots of high end features. In the worst case scenario, even if the hybrid portion fails, you are still left with a regular 240hp V6 to drive you around.
Just wondering? Some people above are talking about not getting the advertised mileage. I though even with the advertised mileage the payout was still 5-7 years. Maybe closer to 5 years now with higher gas prices.
MidCow
My point is that if hybirds were truly economical , then there would be no need for
any tax incentive: credit or deduction. By they are not, so therefore the incentive to entice people to buy hybrids.
No for voodoo economics. Let's say youpurchase gas every 3 weeks at $33. For simplicity that is $44 per month. Let's say you trade fro a Prius and now only pay half of $22 per month. That is a gas savings of $22 per month. You trade in you current car, assuming it is paid for, and get a great trade-in and you buy the Prius at a great price with a net monhtly payment of say $222. Total economics is that you are paying $222(car payment)-($22 gas savings)= $200 more. But wait you get a tax creadit of $3000 and save 38% = $1,140 on next years taxes. Did you come out ahead no.
But the example people really like to use is they have the Gas guzzler SUV now and spend $300 per month on gas and a SUV payment of $500. Now they trade in their SUV ( hopefully the finacing is not upside down) and buy a Prius with a net payment of $250 and a monhtly gas bill of only $100. Previous monhtly outlay was $800 per month and new outlay is only $350 per month for a savings of $450 per month. "My hybrid saves me $450 per month" Wow if that is true why the tax incnetive one asks. Becuase that is voodoo economics, becuase you are comparing apples to oranges. Assuming a ICE only Prius existed; compare it to a hybrid Prius If the real goal is bottom line and TCO then you pick an inexpensive economy car (the Prius is an expensive car with good gas mileage) with gas mileage not quite as good as a Prius. Let's say you car payment is now only $175 and your gas cost is $125 for a total monthly cost of $300. Then the Prius would end up costing you $50 a month instead of saving you any money; hence the tax incentive.
Keep you current car! Better economics!
YMMV,
27 mpg in a 6-speed performance vehicle MidCow
link:
http://www.nytimes.com/2005/09/07/business/worldbusiness/07hybrid.html?adxnnl=1&adxnnlx=11- 26105246-uyVkdWrgafkQLpxHy9MQpg
Exact language:
"At the same time, the energy bill signed by President Bush on Aug. 8 effectively gave a break to American manufacturers by extending what could be a tax credit of as much as $3,400 per car to purchasers of the first 60,000 hybrids sold by a company. The credit phases out after that. Toyota sold more than 60,000 hybrids in the first six months of this year, so the tax law seems intended to help General Motors and Ford."
Is the 60,000 limit retroactive to the first hybrid sold by a manufacturer, ever? Or does the 60,000 limit begin with the first sale in 2006?
You've got that backward. A credit is a dollar-for-dollar reduction in tax liability. (Ex: a $3,000 credit yields a $3,000 REduction in tax liability.)
Also, the highest marginal tax rate is 35%, not 38%.
I guess "YMMV" means Your Math May Vary.
This thread discusses the new tax credit available after December 31 of this year for certain vehicles, including hybrids, contained in the recently passed energy bill. As you can tell by this thread, the new legal verbage is ambiguous, confusing and subject to interpretation. We can "what if" about it until we run out of gas but the only interpretation that matters is the one finally made by the IRS and nobody knows when that will happen. And, if its interpretation is fair, logical and easy to understand I'll be in shock and awe...
Thanks for both corrections you are right on both accounts. Max tax rate = 35% and I was trying to clarify deduction versus credit and wrote it too quick; the point was the savings is not as great as people think.
Cheers,
MidCow
"Toyota sold more than 60,000 hybrids in the first six months of this year, so the tax law seems intended to help General Motors and Ford." ...Huh???
This is very poor and shallow writing by the NYT reporter. It leaves the impression that the incentives are mainly directed to the domestic industry and away from Toyota and Honda. However just reading the summary of the legislation it's clear that the limit for the credit is 60000 vehicles thereafter declining in subsequent quarters.
60000 is 60000 it doesnt matter when the incentives are taken. There is no advantage intended to one manufacturer over another. It's just that Toyota and Honda buyers will be able to take their incentives NOW in today's dollars rather than waiting several years for GM/DC and the others to get up to speed.
It's true that Toyota would love to have the limit be 200K or even 1 Million units but thats not feasible.
That being said.. there is a HUGE difference in the actual incentive due to a new buyer beginning next year depending on whether the vehicle is a full hybrid with significant gas savings like the Prius or whether it is a 'mild' hybrid like the Accord or eventually the Avalanche where the gas savings are minimal. In this case the Toyota buyer makes out much much better.
FWIW
kdhspyder
The new Energy bill is MUCH better for the potential hybrid buyer in 2006. The incentive is a direct tax reduction by as much as $3000 depending on the calculated gas saving in the vehicle class. Full hybrids will probably be subject to much larger incentives than mild hybrids; for example $2800 vs $800. This tax reduction is direct money in the pocket of the buyer. Thus a potential Prius buyer would get 4-5 times as much in his/her pocket next year as opposed to this year.
This tax saving brings a $24000 mid-range Prius down into the same price level as a 4c Camry or Accord with Auto trans. A top-of-the-line Prius would be several thousand less expensive than a top of the line 4c AT Camry or Accord.
FWIW
kdhspyder
Based on estimates I've seen, the AWD Escape will qualify for a 1950 federal tax credit. On top of that, Colorado offers a 2797 state tax credit bringing my tax credits to 4747.
When I factor that in with the ford xplan pricing, I get a car payment of about 450.00/mth. Currently I'm driving a 2002 WRX with a monthly payment of 307/mth and getting about 21mpg. So, doing the math that means that if I spread the effects of the credits over the life of the loan (6yrs) equals 66/mth in rebates, 80/mth in gas savings, and 30/mth in insurance savings. So effectively I come out with a net savings of about 20/mth over thos 6yrs.
That being said, it all depends on what your goal is and what your replacing. As has been said, if you're trading in a moderate to low fuel mileage car and have a car payment, it makes financial sense. If you don't have a car payment, or have a high fuel economy car, it might not make financial sense, but might make sense from a ecological consciousness stand point.
All I can say is I can't wait, the next 14wks are going to be hard to bear.
Ryan
Out here in CA, the Hybrid is not in the plan pricing. Or is this the employee discount rather than the family plan?
Has anyone found a link from the government that says the tax credit amount each hybrid will be entitled to? They have the figures on the old incentive. I have only seen speculation at this point. Maybe the NYT writer got some inside information. Is it spelled out in the Energy bill that past sales are not included? I would not count my money till I see it in the tax code.
Cost On,
MidCow
Yep, people often forget in the "cost analysis" that you have to figure in the amount of the loan you have already paid on your current vehicle, plus the loss on the trade, etc.
Buying hybrids (or any car) only make sense if you are really in the market for a new car anyway. It seldom works out to the $$ advantage is you are still paying on your current car.