Tax Credit Changes in new bill [LOCKED DUE TO POLITICS & ARGUING]

[Donald Stanfield]

You’re spot on for many. In reality there’s more thee to unpack for my situation… my wife is very frugal and is generally stressed out these days. The outlay would cause her to crack even though we can do it. Also, it really is a challenge to flip a vehicle that the bank owns — worlds different if you own it outright where you have a title to sell. Another relationship strain for my frivolous purchase!

That all said it’s why I’ve been crunchy about being “schooled” on budgeting in earlier posts. My situation financially and what my wife can handle stress wise are all factored in for me, thus the need for the $7500 credit to make this purchase work!

That's an understandable position in an uncertain market. It's not just budgeting correctly it's worrying about backlash from a down economy that seems almost inevitable at this point in time. The definition of "what you can afford" is certainly fungible and there is no correct way to allocate funds. Unless your income and savings is at a point where you can absorb an 80K dollar loss, which almost no one's is, that credit can make a huge difference.

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[freshpow]

You’re spot on for many. In reality there’s more thee to unpack for my situation… my wife is very frugal and is generally stressed out these days. The outlay would cause her to crack even though we can do it. Also, it really is a challenge to flip a vehicle that the bank owns — worlds different if you own it outright where you have a title to sell. Another relationship strain for my frivolous purchase!

That all said it’s why I’ve been crunchy about being “schooled” on budgeting in earlier posts. My situation financially and what my wife can handle stress wise are all factored in for me, thus the need for the $7500 credit to make this purchase work!

I certainly get that there is no "one size fits all" advice when it comes to personal finance. That's why it's personal. But having said that, you'd still be making the same initial outlay and payments that you would have with the tax credit in place. Depending on when you're lucky enough to be invited to purchase, you'd be looking at a few months minimum to potentially 12 months + before you ever saw that $7,500 credit.

I also get the concern around selling a vehicle with a lien on it, but people successfully do it every day and many buyers are paying cash for these vehicles. To me, it would be worth the added short term stress and annoyance of selling it to record such a profit and effectively reduce the price of the next vehicle I purchase by $20k. Of course, this is all assuming that they continue to transact at today's prices, so worth revisiting the secondary market once your place in line is called.

For my part, I'm considering switching from an R1S to an R1T if this bill passes to see if I can get a vehicle before the end of the year. I greatly prefer the R1S and it better suits my family's needs, but not to the tune of an additional $10k+.

 

[mkg3]

Fascinating... The way people think about the $7.5K and its value. Clearly more than just a monetary value but the notion of its in person's right to get it because its there.

I'm a kid at heart and for me, the $7.5k is a windfall - be nice if I get it but its not necessary (and definitely don't want it if its at the expense for other taxes or costs). So if I really want a PURPLE WIDGET and it may or may not come with a coupon is completely irrelevant to me. If a YELLOW WIDGET comes with, so what. I want a PURPLE one.

Affordability is interesting concept too. If it means A vs B, and B is essentials, that's one thing. But it can also mean relative to other options and how one allocates the resources. Personally, I struggle to spend lot of money on a depreciating asset - however nice - like a vehicle. Others find no problem spending whatever and enjoy it. (excluding buying R1 and flipping it right now due to demand - I get it, if you want to make a quick buck). I rather keep the $80K or thereabout invested than buy a vehicle. So I'll finance the R1S. Yes I can afford it but rather borrow it.

So the whole point is that we all look at the EV incentive from our own value proposition perspective and what makes sense for one, may not make sense for others and vise-versa.

 

[freshpow]

While the current market says you're correct it's still a gamble to buy a truck you can't comfortably afford especially when interest rates are rising. The worst thing that could happen is that you buy the truck with the intent to sell and the used car bubble pops. Then you're sitting on a vehicle you can't comfortably afford in a down economy.

I do agree that at current market conditions it seems like a no brainer to buy the vehicle with the intent to flip it as worst case you'll walk away with over your money back. Even if you sell it for less than it costs to buy it new at the current pricing you still stand to make 20Kish. However with every percentage point the interest rate goes up fewer people can financially justify spending the money on the truck which will reduce demand. Luxury goods are a dangerous category to play for investments.

I wholeheartedly disagree. Buyers looking at purchasing luxury vehicles at a $130k+ price tag are going to be pretty well insulated from any market dynamics. They will continue to pay these outrageous premiums just so they don't have to wait in the dreaded lottery queue or "line" as Rivian likes to call it

 

[Bullitt]

I certainly get that there is no "one size fits all" advice when it comes to personal finance. That's why it's personal. But having said that, you'd still be making the same initial outlay and payments that you would have with the tax credit in place. Depending on when you're lucky enough to be invited to purchase, you'd be looking at a few months minimum to potentially 12 months + before you ever saw that $7,500 credit.

I also get the concern around selling a vehicle with a lien on it, but people successfully do it every day and many buyers are paying cash for these vehicles. To me, it would be worth the added short term stress and annoyance of selling it to record such a profit and effectively reduce the price of the next vehicle I purchase by $20k. Of course, this is all assuming that they continue to transact at today's prices, so worth revisiting the secondary market once your place in line is called.

For my part, I'm considering switching from an R1S to an R1T if this bill passes to see if I can get a vehicle before the end of the year. I greatly prefer the R1S and it better suits my family's needs, but not to the tune of an additional $10k+.

Definitely realizing Im rubbing people wrong today… and its likely me… I agree with you and Im no bothered by flipping a car on a lien, but it is stressful and I need to respect my wife’s state in this… otherwise I’d do it no matter what.

On the $7500, Im ”borrowing” from myself that amount to increase my down payment and decrease monthly payments. So while I could “borrow“ that for a much longer term than 6 months (assuming the tax credit is there) it again comes back to how comfortable my wife is with risk in this current market.

 

[freshpow]

Definitely realizing Im rubbing people wrong today… and its likely me… I agree with you and Im no bothered by flipping a car on a lien, but it is stressful and I need to respect my wife’s state in this… otherwise I’d do it no matter what.

On the $7500, Im ”borrowing” from myself that amount to increase my down payment and decrease monthly payments. So while I could “borrow“ that for a much longer term than 6 months (assuming the tax credit is there) it again comes back to how comfortable my wife is with risk in this current market.

You didn't rub me the wrong way at all. Appreciate the different perspectives here and enjoy trying to figure out if there's something I'm missing in this whole complicated equation.

At the end of the day, these are super 1st world problems as we're all debating the purchase of a freaking awesome luxury vehicle!

 

[Bullitt]

You didn't rub me the wrong way at all. Appreciate the different perspectives here and enjoy trying to figure out if there's something I'm missing in this whole complicated equation.

At the end of the day, these are super 1st world problems as we're all debating the purchase of a freaking awesome luxury vehicle!

No doubt brother, no doubt!

 

[mkg3]

So you think Tesla, GM, et. al. are lobbying the government entirely on behalf of Joe Schmoe consumer? That's pretty naive. If Tesla is selling all of the Model Y's they can make at $60k with no tax incentive, you better believe that as soon as the bill passes they will look to increase the price to $67,500 yielding the same price and demand curve as before. That's simple economics as well, and that is why they lobbied so hard to remove the production cap, same with GM and Ford (who was fast approaching it).

Flipping it around, as you say incentives increase demand, which is correct. And what happens when you increase demand for a given supply? Increasing prices.

The incentives were conceived because collectively it was determined that consumers on average were willing to pay XX for an electric vehicle, and at the present time the cost of building one to deliver the requisite profit margin for the business to undertake the endeavor was X + $7,500. With the stroke of the pen, the government makes a market and everyone seemingly wins (consumers get the product they desire at the price they are willing to pay, producers get to sell it for the profit they need). Looked at another way, the government asks producers, what will it cost for you to produce electric vehicles? The consumer is willing to pay some and the government (public) is coming in to pay the balance. Eventually the consumer and producer should meet each other and the government no longer has a role to play. Or, the government is a bunch of idiots and are just spending money where it's not necessary for them to be involved. That's the $100 billion question.

I thought we were done with this thought - I guess not. So my last response to your statement herein is this:

As a long time TSLA stock (since IPO) and Model 3 owner, I have seen Tesla raise and LOWER prices multiple times. Each time had nothing to do with Tax incentives. It had everything to do with their cost basis and maintaining their margins (I actually read 10K filings). Tesla is on record from the last earnings call that they hope to lower the vehicle prices once the inflation settles down and commodities come down. I believe them, given their track record.

The reason all mfgs want the EV incentive is because it does stimulate demand in general and in case of GM Nissan, Toyota and Tesla to lesser case, wants a level playing field. This is one of the reasons why I believe the government should get out of their way and get rid of incentives at the retail end.

You do have a point. And that is that the legacy mfgs does benefit by incentives on their low end EVs. Unlike Tesla, where the gross margin is above 25%, legacy ICE run in single to low double digits. The low end slim margins are being helped by being able to price Bolt and Leaf and alike at a higher price than they would sell otherwise. This is not the case for Hummer or Mustang EV. Still, their profits are made from ICE vehicle sales, not EVs. So rather than putting EV incentives, government should put Carbon Tax on vehicle buyers, if they are serious about EV transition (never will happen anytime soon).

So if you think not agreeing with your perspective on this is being naive, then fine. Like I said before, we disagree and that's okay.

 

[jjswan33]

Discussions of climate change ARE political and the climate is absolutely used by BOTH sides to push an agenda that has NOTHING to do actual pollution. I would also argue that anyone who believes “the science is clear” doesn’t really understand the science very well.

Thing is now you’re making me discuss politics which DO NOT belong here. As far as Rivian’s mission statement the only thing that needs to be discussed or acknowledged is that EV’s are more efficient and are better for pollution. Climate change does NOT need to be discussed to a greater degree than that and frankly I come here so I don’t have to listen to that shit.

This is a vehicle forum, and the discussions should center on the vehicle and NOTHING ELSE outside of the off topic section and I would argue it shouldn’t even be discussed there. I’m certain your definition and mine as to what the climate is really doing is different and it doesn’t need to be discussed here.

As I said before frankly it’s rude for people to shove that shit down the throats of others who just come here to discuss a car.

I think you need to relax a lot... like seriously.

 

[eggpaul]

Soooo..... what are the chances this bill won't pass until after the new year? Got my truck with the old pricing, but the income limit phases us out.

 

[jollyroger]

7500$ can be a lot of money to take off a vehicle. If you take 7500$ off a 35k vehicle, that is a significant savings. For a Rivian, the 7500$ would be, at most, 10% off for people pre price hike. If getting a 10%-off coupon on your luxury adventure vehicle is what's keeping you from buying it then, again, I would suggest you seriously reconsider your priorities.

I'm not sure I'm thinking in percentages here, it has more to do with the cash and flow. Lets say you are budgeting 78k for a new truck. This R1T with incentive is an 80k purchase minus 7500 you end up with 72.5k out of your pocket. (I'm leaving taxes, registration out for simplicity) Let's say I also wanted to have at least $3250 left over, after buying the truck, then with the incentive leaves me within my limits and I even get $5500 left over. But without the incentive I may be needing to make the choice if I'm willing to budget more for this (find 2k somewhere and take something else away, if I even can), or I have to say, I can't afford this based on my earlier calculations. This is a legitimate way to think about this, at least for me. (I'm actually going to replace two vehicles with this truck, so my calculations are different, but this is just an example).

Now if we were talking about a legitimate need, something like housing or just a commuter vehicle, then saving 10%, especially if it's a recurring or large purchase, could be quite meaningful. Even then, 9 times out of 10, if 10% of the cost is prohibiting you from making a large purchase you should still be seriously rethinking your options(in the case of the commuter car or housing example, that would mean considering cars/apartments/houses with a lower overall cost). This is just budgeting 101, it's really quite sad that I have to explain it in such detail.

We do need a truck, of some sort, otherwise we have a boat and trailer that's a paperweight (I guess you could argue we don't need the boat ). The way I figure things is I decide on a limit. If what I want to buy is below that limit, I can get it. If it's above I don't. To be clear I'm talking about how I budget, when I say I willing to pay 78k for a new truck, that's not what I have in the bank. That is what I'm willing to pay for something be it a Rivian, or something else

If someone is "stretching their budget to be better for the planet" by buying a Rivian then they aren't helping the planet, they're just boosting their own ego under the guise of "I'm doing my part".

I guess I don't agree with this part. My buying one EV for myself doesn't dent climate change, however, being part of a mass group of people switching to EV's that this incentive helps fund, starts a trend among my fellow earthlings to do something similar. It's like beach cleanup. Doing it by myself doesn't really clean a lot, but it seems like when I start that, others (not all of course) will see what I'm doing and be encouraged to do the same in recognition for the greater good. It costs something, either money or time, but it's that investment you want to make and encourage others to make. I guess I follow be the change you want to see mantra.

Budgeting 101… you realize you’re being a jerk in trying to make your point… Kinda like boosting your ego for the planet

I don't think we are all going to agree on everything Nor should we. Otherwise forums would have nothing to talk about.

 

[Donald Stanfield]

I think you need to relax a lot... like seriously.

I’ll relax when people learn to respect the views of others and keep their off topic political opinions to themselves.

 

[TXR1S]

Soooo..... what are the chances this bill won't pass until after the new year? Got my truck with the old pricing, but the income limit phases us out.

if you got your truck already you’re good to go, regardless of this bill.

 

[rohobono]

Ahh, see, here's your problem... You injected the word "afford" into a discussion where most weren't actually talking about affordability. They were talking about a choice they were making.

Most of us in this forum can afford an R1T/S with or without the tax credit. That doesn't mean we'll choose to buy an R1T/S if there's no credit. That 10% price increase does actually matter to people when they make decisions. $7500 does matter to people when making financial decisions, even if they can afford the higher price. Without the tax credit, I will like buy a different EV that qualifies for the credit and save myself the difference in price AND the extra $7500 and go spend that on a really nice vacation or two.

You're either intentionally misrepresenting my argument or completely misunderstanding it. But, taking my use of "afford" in such a limited and literal way makes me lean towards the former. Using that definition people can "afford" all kinds of things. For example, if I have $10k to my name, I could "afford" to buy $10k worth of big league chew but I don't think anyone in that situation would actually claim they could afford that purchase.

Having the purchasing power to buy a Rivian, even without the tax credit, doesn't mean you can actually afford that purchase. And anyone who is complaining that the loss of the tax credit will prevent them from affording that purchase, was never actually able to afford it in the first place, even if they could literally "afford" it.

I originally responded to an affirmation of a comment starting with: "I find it a bit exclusionary to think the tax credit isn’t putting the Rivian within some of our reach." For you, not having the tax credit does not put the Rivian out of reach. Which makes your situation completely irrelevant to the discussion. Sorry, who was it that was injecting things into the discussion that didn't belong? Oh yeah, me apparently ...weird.

If you want to complain that without the tax credit you can't afford BOTH your super fancy luxury Rivian Ev AND and extra vacation or two. Then I just don't know what to say, maybe be less greedy? You could try meditation, that's a neat trick.

 

[Donald Stanfield]

Spot on… In fact people that budget really well take into consideration every incentive and take advantage of every coupon. It’s financially wise and most people with a lot more money than us on this thread followed this rule to get where they are.

I have no idea where my money position is relative to anyone else here nor do I really care but what I can tell you is with my income and assets I’m living pretty well. With that said you’re 100% right to leverage what you make in the most effective manner possible for maximum return. Money is a tool, and learning how to use that tool is what separates the people who have what they want and those who do not

I wholeheartedly disagree. Buyers looking at purchasing luxury vehicles at a $130k+ price tag are going to be pretty well insulated from any market dynamics. They will continue to pay these outrageous premiums just so they don't have to wait in the dreaded lottery queue or "line" as Rivian likes to call it

As one of those buyers I am going to have to disagree with you. If the market turned, and I didn’t have a preorder I would absolutely hold off on buying a luxury good in a down economy. People with the sort of money you’re talking about aren’t driving cobbled together vehicles. They can easily wait a year or two.

When you have the ability to buy more or less whatever you want one or two things happens. You either indulge every whim and quickly go broke or you learn how to use money and only make decisions when advantageous to you. In a down market the only people buying indulgent purchases are the foolish and billionaires.

Everyone wealthy but not billions is biding their time and waiting for things to go on fire sale. Whenever a recession occurs people default left and right and you can build equity really quickly.

Honestly if I didn’t have a preorder and was walking into instant equity I wouldn’t be buying the Rivian this year. I would buy some more property or make some smart investments at the bottom.

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