The Effects of the Tax Credit on the Used Electric Vehicle Market

Abstract

In the past few years, tax credits have become the fundamental policy instrument to incentivize
the adoption of electric vehicles (EVs) in the United States. However, contemporary research
primarily focuses on new EVs, while the impact of tax credits on the used EV market remains
obscure. This research aims to enhance the knowledge of EV adoption by examining the
potential effects of Used Clean Vehicle Credit, a federal program providing up to $4,000 credit
to eligible consumers. We have collected sales data of used cars from 245 Carmax locations in
the U.S. between 2021 and 2023 to assess the change in prices of EVs before and after
implementing the tax credit. The results suggest eligible EV prices increased by $1,521, about
4.74%, once the policy was implemented. Relative to pre-owned non-EVs, EV prices have
increased by $2,214, indicating that car dealers have captured a more significant portion of the
subsidy amount. We also observe a continually growing trend in EV sale quantities.