After your child gets their driver’s license, one of the next financial considerations is whether or not you should purchase another car for your household. Some parents will buy their children a brand new Hummer while others will find clunkers that weren’t intended to be two-tone cars even though the hood is black the rest of the car is grey. With advancements in technology, is it possible that getting a brand new electric car is a good idea?
If you’ve read Your Smart Money Moves over the past five years, you know that I’m not a humongous fan of leasing cars. However, in the case of electric cars, it can be quite advantageous, at least within the state of Georgia. Consider what a lease would look like on the electric vehicle Nissan Leaf.
An income tax credit is available for up to 20% of the cost to purchase or lease an electric vehicle, or $5,000, whichever is less. The credit cannot exceed the taxpayer’s income tax liability, but any portion of the credit not used in the year the electric vehicle is purchased or leased may be carried over for up to five additional years (48-7-40.16(b)). The vehicle must also be registered in the state of Georgia. Additionally, there is a tax credit of 10% of the cost of electric vehicle charging equipment, up to a maximum of $2,500 allowed against the tax imposed on a business enterprise.
This tax credit (as long as it stays in existence) can be used every single time you lease a new electric car. The Nissan Leaf SV (the middle priced of the three models) has a leasing deal of roughly $250 a month. Over a three year period that will run you about $9,000 of lease payments. With the $5,000 tax credit, you’ll be down to $4,000 for the vehicle. You will have to spend money on a charger station, but my understanding is that the tax credit will allow you to basically have the charger for free. Georgia Power offers a Plug-in Electric Vehicle (PEV) time-of-use electricity rate for residential customers who own an electric or plug-in hybrid electric vehicle. The PEV rate is optional and does not require a separate meter. This is another added benefit when you calculate the cost of gas vs. the cost of electricity charging the Nissan Leaf.
Once our children start driving, most of us worry about our kids taking some extended road trip or going long distances without our permission. Until charging stations become more popular throughout the state of Georgia, the Nissan Leaf can only go 80 miles on one charge. The beauty about the 80 miles is that your children can only go so far round trip on one charge so perhaps that will help you sleep a little bit better if you are worried about a road trip to the beach. They’ll be lucky if they can make it to the Fox Theater.
After doing the research, it’s evident to me that electric vehicles need to become a more serious consideration primarily because of the federal and state tax credits that exist. It may not be a good idea for your child to wear just a ‘leaf’ to school unless of course it is a Nissan Leaf. That’s your smart money move for the week.
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Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®, is co-CEO of oXYGen Financial and is a top ranked personal finance blogger (www.yoursmartmoneymoves.com). He is a regular contributor to Investment News, The Wall Street Journal, and The Atlanta Journal Constitution. Securities and Investment Advisory Services offered through NFP Advisor Services, LLC (NFPAS), Member FINRA/SIPC. Oxygen Financial is not affiliated with NFPAS.