fb-pixel Skip to main content

Tax breaks won’t do much for used electric-car shoppers, because of supply shortage

Guy Bedau, the electric vehicle ambassador at Milford Nissan in Milford, with a pre-owned Chevrolet Bolt on Dec. 8, 2022.Barry Chin/Globe Staff

Starting next year, consumers will be eligible for thousands of dollars in federal and state incentives when they purchase used electric cars. Auto dealer Guy Bedau is eager to cash in on the bounty.

All he needs is some used EVs to sell. But right now, he’s only got two.

“It doesn’t matter what the incentives are if the machines aren’t there to be bought,” said Bedau, electric vehicle ambassador at Milford Nissan in Milford. So far this year, his dealership has sold just 11 used EVs, not due to lack of demand, but lack of supply.

Pandemic-induced damage to global supply chains led to shortages of new vehicles and have forced consumers to hold on to their older cars, electric as well as gas. That means there are few used EVs to be had, at any price. And Bedau thinks the government incentives, at least in the short run, will make the problem worse.

“The real problem is lack of cars,” said Bedau. “The incentive, in practice, will increase demand that’s already greater than supply.”


The federal tax credit was part of the Inflation Reduction Act signed into law by President Biden last summer. The bill expanded tax breaks for the purchase of new EVs, and for the first time, offered a federal benefit for those buying used electric cars.

The cars must be at least two years old, and must be purchased from a dealer in order to qualify. The tax credit applies only once to each vehicle. In addition, there’s an income cap for those who apply for the tax credit — $75,000 for single filers, $112,500 for heads of households, and $150,000 for joint filers.

Meanwhile, Massachusetts passed legislation that lets used EV purchases qualify for the state’s electric car rebate program. Details of how the plan will apply to used cars have not been finalized. But the state will pay purchasers anywhere from $3,500 to $5,000.


Guy Bedau, the electric vehicle ambassador at Milford Nissan in Milford, on Dec. 8, 2022.Barry Chin/Globe Staff

However, most used EVs are too expensive to qualify for the federal tax break, which applies only to cars priced below $25,000. That rules out the most desirable vehicles.

“It’s going to be extremely difficult to find an electric car under $25,000,” said Ernie Boch Jr., businessman, philanthropist, and former chief executive of Boch Automotive. “Even the crappiest Tesla isn’t $25,000.”

Recurrent, a company that tracks the used electric-vehicle market, estimates that only about 17 percent of used EVs sold in the third quarter of 2022 were priced so low. These are mainly older, less appealing cars with limited battery range, as well as some plug-in hybrid cars that use both batteries and internal combustion power.

Scott Case, chief executive of Recurrent, estimates that US consumers will buy about 300,000 used EVs this year — not even a rounding error compared to total US used-car sales of 40 million vehicles. He predicts 2023 used EV sales will tick up to 350,000 units, partly driven by an expected spike in sales of used Tesla Model 3s. The most popular EV in the US, the Model 3 made its debut in 2018, when it sold 140,000 units. “Now, four years later, all those Model 3s are pouring into the used EV market,” Case said.

Robert O’Koniewski, executive vice president of the Massachusetts State Automobile Dealers Association, noted that the state EV incentives are cash payments to car buyers. The federal program uses tax credits, effectively a reduction in the car buyer’s federal income tax bill. But consumers who owe little or no federal tax won’t benefit very much. The Tax Policy Center estimates that about 40 percent of US households will owe no taxes this year. “The tax credit means nothing to them,” O’Koniewski said.


O’Koniewski, Case, and Bedau all agree that it’s just a matter of time before a robust used EV market develops. They just don’t expect it to happen right away, despite the government incentives.

“The assistance will be felt when more cars are available,” said Bedau, “and that’s six months to a year away.”

Hiawatha Bray can be reached at hiawatha.bray@globe.com. Follow him on Twitter @GlobeTechLab.