Electric-Car Prices: Tesla, Nissan, Chevy Should Be Ashamed--Here's Why

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Always read the fine print. That's a lesson every car buyer should take to heart.

Especially since Nissan, Chevrolet, Tesla, and Mitsubishi all now engage in a pricing practice of which they should be ashamed.

It's so-called "net pricing" of their electric cars, in which the price appearing in their marketing and on their websites is $7,500 lower than the actual list price.

While electric-car advocates and fans may understand the practice, the broader public doesn't.

And the sticker shock at dealers can be substantial when a buyer, prepared to spend $27,700 for a brand-new 2012 Nissan Leaf suddenly learns that in fact the price is $35,200.

What's the difference? It's the $7,500 Federal income-tax credit for purchase of an electric car (with a battery pack of 16 kilowatt-hours or more).

First, it can take up to 16 months to realize the savings: A Leaf owner who bought her car this past January won't realize the $7,500 savings until she gets her 2012 tax refund--sometime in April or May 2013.

The credit can be realized immediately by leasing the electric car rather than buying--the lease issuer claims the credit and reduces the monthly cost accordingly--but not everyone wants to lease.

Second, not every buyer will qualify for the tax credit (though most people with the means to buy a $35,000 to $85,000 electric car probably will).

And third, buyers incur an extra $900 in financing costs over a typical 60-month loan term to finance that extra $7,500.

Showing how the lower-than-list price is prominently featured, here are pages with the four companies' electric-car prices in large, distinct type:

  • 2012 Tesla Model S: "$49,900" (it's actually $57,400, or 15 percent higher--though we give Tesla a bit of credit for noting "After $7,500 Federal Tax Credit" in tiny silver type at the side)
  • 2012 Chevrolet Volt: "MSRP As Low As $31,695" with two separate footnotes (it's actually $39,195 before delivery, or 24 percent higher)
  • 2012 Nissan Leaf: "Starting at $27,700" plus an asterisk (it's actually $35,200, or 27 percent higher)
  • 2012 Mitsubishi i: "As low as $21,625 net value, after tax saving" with a footnote (it's actually $29,125, or fully 35 percent higher--though its pricing detail page spells it out nicely with the credit deducted at the bottom)

Yes, they all have asterisks or daggers that indicate there's fine print to be read.

Yes, even gasoline cars have mandatory delivery charges (usually $600 to $1,000) that aren't included in the base price.

Sleazy Car Salesman

Sleazy Car Salesman

Enlarge Photo

And, yes, we get that it's "effective pricing after Federal incentives."

We still think net pricing of electric cars is deceptive, duplicitous ... and, frankly, counterproductive.

And electric-car advocate Chelsea Sexton goes even further.

"While tempting, the practice of net price quoting is misleading," she says, "and all but guarantees sticker shock when buyers are asked to hand over or finance the full amount at time of purchase"

Rather than this bit of pricing trickery, "it would be far more useful for automakers to engage in the third-rail conversation of actually reforming the tax credit," Sexton suggests.

"There are a handful of ways that would make all of their vehicles more affordable, and support increased plug-in sales, while also saving taxpayer money."

Sexton is referring, among other ideas, to converting the Federal tax credit into a purchase rebate.

Barack Obama

Barack Obama

Enlarge Photo

Under that plan, rather than waiting up to 16 months, buyers would get a rebate check in the mail within weeks--as is now the case for the $2,500 California incentive for buying all four cars.

President Barack Obama said more than a year ago that he's in favor of that change, and proposed in his 2012 budget to raise the incentive to $10,000.

Neither change has happened, and we suspect that all of Washington will stay as far away as possible from electric-car incentives until after the November election.

The outcome of that election will likely affect those incentives--for good or for bad.

Meanwhile, we urge automakers to post the actual list price for their plug-in models, not some hypothetical "effective net price" that differs radically from the check buyers must write.

It's simply called honesty and transparency.


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Comments (53)
  1. Although I agree there should be a clear disclosure of the nature of of the net price, seems the concern here is a little overblown.
    You can be sure that if I am in the position that I purchased any of these models the first thing I would do is change my tax with holdings so that I recover the full amount of the tax credit so that I am not "out of pocket" the tax credit amount (assuming my accountant confirms there are no issues in doing so).
    Am I missing something?

  2. yes, as was mentioned in the article, honesty of advertising.

  3. Yes, I think you are missing the point that car buyers should not have to jump through hoops (change their holdings). It's tough enough for the average car buyer, dealing with sleazy salespeople, and being rushed, pushed and bullied into purchasing the salespersons choice of car.

  4. Tax Help.
    I don't think that changing your withholding will impact your ability to recover or not-recover the $7500.

    On the other hand, it might be a cleaver way to not have to wait the 16 months, assuming you do qualify.

    Just remember, we have a quarterly tax system here in the USA and you need to meet your tax obligations each quarter (not just at the end of the year). Failure to do so can result in fines.

  5. The real problem is not the price advertised but the battery price itself. Considering the EV, battery graveyard not to mention Federal giveaways to many of these failed companies, it is time to call a spade a shovel. The batteries should be the property of utilities who are the beneficiary of increased off peak electrical sales. If the Utilities took ownership of the battery, depreciating it over the useful economic life, th price of the car could drop by 40%. Government guarantees could apply to residual value of the battery on the balance sheet of the utility.

  6. Way to jump into a completely different conversation.

  7. Also, there is no battery graveyard, they get recycled.

  8. I don't think any of the four companies listed have failed...yet anyway.

    Personally, I would prefer to own my own battery since my car is useless without it.

  9. There are more comments in this thread
  10. It is very deceptive and right down two-faced and crooked. When the automaker prices their vehicles, that price should have nothing to do with the incentive the gov., or the dealership, gives to the person who purchases the vehicle. There is just something illegal about the automaker adding that incentive onto the price of their vehicle and they should be fined the price of the vehicle. How many automakers do you think can afford to pay 10,000 - $50,000.00 fines for adding that gov incentive onto the price of the vehicle?

  11. There is nothing illegal about the practice.

  12. Since the $7500 rebate was announce before the pricing of these vehicles was set, I think there is a good argument to be made that the $7500 goes to the manufacturer, not the consumer.

  13. "When the automaker prices their vehicles, that price should have nothing to do with the incentive the gov., or the dealership, gives to the person who purchases the vehicle." - Wow you really are looking for a powerful "invisible hand" to pull that off.

  14. Went to look at and drive a Mitsubishi i. Price had an additional $1,000 Dealer Mark up on top of the MSRP. No way to I pay a markup. Nissan and others should actually be DISCOUNTING all EVs since they get a major credit for emissions on their gas cars.

  15. Wish that were the case but if the dealer has a limited supply of any vehicle n the public wants that vehicle greatly...then the dealer is likely going to charge above sticker. The problem is that many big company manufacturers are only producing as many EVs as they must right now so the supply is low with ten years of pent up demand from potential EV consumers awaiting them. Stay clear of the Miev the first year n perhaps the second

  16. all car dealers put all the info into the pricing and yes a very close read of the fine print (fine print usually advises you to get specifics from your dealer) is required just to get a basic understanding of what you true price is.

    it can be VERY confusing. as a car salesman who is new to the profession, its a complicated mess of rebates, holdbacks, etc that is partially controlled by the Credit app of the buyer. ya, people with 800+ get better deals. that is all there is to it so specifics in an ad is impossible. crap like "up to $XXX" only allows the "have nots" to know what they aint getting that others are. its a "dont go there" for any dealership

  17. @ John Voelcker: "And third, buyers incur an extra $900 in financing costs over a typical 60-month loan term to finance that extra $7,500"... really John, 60 month finance to cover part of a loan needed for 16 months tops? Again I notice this bitter tone versus the plug-in industry but is it really based on correct arguments and do the arguments that are correct really warrant it? Seems to me 99% of EV buyers know the drill when it comes to EV pricing, will get their rebate and with little loss in terms of interest. When they are handing out free money it's not completely unfair they make you jump through a few hoops first I suppose.

  18. @Chris: The point is that buyers must finance an amount $7,500 higher than the "price" and pay interest on that amount. If they then take the $7,500 they don't otherwise pay on their taxes and use all of it to pay down the principle on their car loan, great, but I suspect many buyers may not do that.

    Beyond that, what you call a "bitter tone versus the plug-in industry," I would consider to be consumer education. If plug-in vehicles are to emerge from the EV-fan ghetto and enter the mass market over time, new buyers won't bring as much knowledge to the table.

    The notion that, "Oh, everyone knows that, who cares?" feels insular, borderline arrogant, to me. My 2 cents.

  19. Didn't say everyone knows that, said *EV buyers* know that, hardly everyone unfortunately, still a select group of people who probably know a few more things than the average Joe about the ins and outs of EVs. Anyway everybody who ever read a car ad knows there is always the fine print to be considered when the price sounds too good to be true. It's the nature of advertising I'm afraid

    The argument that people finance first and subsequently use the tax credit money for somethings else is frankly just grasping at straws from your part; too bad you won't admit your mistake in this argument. Which along with qualifications like "trickery" "deceptive", "duplicitous" and now "borderline arrogant", brings us to the bitter tone again I'm afraid.

  20. For what it is worth, I think the "bitter tone" is against this advertising practice. I think Voelcker has the same "bitter tone" for mandatory destination charges.

    It is all about being "up front" with people.

  21. Yes, but is this tone warranted? People will actually end up paying as advertised, they just have to wait to get their tax credit a for a while. That's an inconvenience for sure but hardly warrants language like "trickery" and "deceptive" IMHO. Hence bitter....

  22. Chris, plus one for pointing out that 60 months of financing $7,500 would not be required for anyone that gets the full credits. But it's no slam dunk. There are many that would get partial or no credit (working folks that already have a lot of credits and deductions or retirees).

    Plus one for mentioning the financing issue John, but you go from a minimum of 6 months, then claim 60 months of rough seas. Can't have it all sir. I would posit if the recipient did not use the $7,500 to pay down the loan, that is another issue altogether. Hence whatever the money is used for, is now being financed, at the recipients choice. And $7,500 of actual vehicle financing stopped when the check was received.

  23. Indeed, I love how you get charged a destination fee for a car that's sitting in front of you. smh

  24. Nice check on John...thank you. He needs a dose of reality shot into him at times n u did it.

  25. One word, education. With Tesla at least this is easily accomplished as they control the information that goes out from every one of their dealerships.

    If the credit can be changed to a rebate, that will solve the whole thing. In the mean time, I think the problem is overblown for the vast majority of EV buyers (who are educated on the credit).

  26. "First, it can take up to 16 months to realize the savings: A Leaf owner who bought her car this past January won't realize the $7,500 savings until she gets her 2012 tax refund--sometime in April or May 2013."

    Here is what I did when I bought my Volt.

    1. Put an extra $7500 down when I bought the car above and beyond my down payment. I'm loaning myself $7500, this removes any extra interest I would have to pay on the refund.
    2. Adjust my withholdings at work for the remainder of my paychecks for this year. I changed to S-9. Between now and the end of the year I will get about an extra $4,000 in my paychecks to start paying that $7500 back.
    3. File the forms for the tax credit next year. Get the remainder of my tax credit back.

  27. I have seen similar situations in the past.

    Once one EV manufacturer is advertising pricing in this (questionable) way, there is a lot of pressure for the others to follow suit. This makes the prices more comparable.

    We had this situation in tape drives years ago. A competitor started advertising the "compressed capacity" of the tape rather than the actual capacity. We had to do the same thing or suffer a market disadvantage of 2:1 in apparent capacity. We did it but felt it was dishonest.

  28. Good point. Goes to show EV makers haven't really got much choice but going along in this practice and the public will soon enough pick up on how EV pricing works. And again: in this case it's not actually a particularly dishonest practice; generally people will end up paying as advertised.

  29. this is a huge problem with people - they allow other's actions to dictate their own actions.

    same thing occurs when people vote.

  30. Uhhh no...quite different scenario here actually. Voting is private and this a public exchange between two parties. And, these "people" are companies competing with each other all including the likely incentives included w/ the overall price. This is not a big issue in the real world n the actual final price is always shown.

  31. I agree it is dishonest and deceptive. I'll bet they will be asked to stop doing it by the government.

    No bitter tone here, just one dude's opinion. I am pro EV. I have a Leaf.

  32. Nissan Leaf, Chevry Volt and Mitsubishi i dealers are all doing this on cars.com. I have reported this to cars.com and they have stated it is aginst their policy to post the price with this tax credit. They wanted me to tell them which dealers, I replied with just go run the query for those cars, maximum distance any price then sort by price. No reply.

  33. The "After $7,500 Federal Tax Credit" qualification should be in a readable font close to the price. That should be enough to keep it from being "misleading", especially if there is also an explanation of what "tax credit" means.

    Otherwise, anyone interested in the price needs to know that there are tax credits, and what the price is *after* tax credit. Otherwise it wouldn't make sense for the government to spend that money, and I think it does make sense. Even if a point-of-sale rebate would be even better. The reduced price is what most people really pay, once the dust settles.

    Also think that this issue is overblown here. This is not a sufficient reason to overthrow the political two-party system. ;)

  34. Misleading car advertising is nothing new. This is just another version of companies listing the attributes of the top of the line model while giving you the price of the base model. Buyer beware and do your online research before going to purchase any vehicle.

  35. At least Tesla adds some sexy styling and performance with the 300KW motor and all important real world mileage range of 160 miles to the base Model S all for just $10,000 more than the average 75 mile agreed upon driving range of the major auto manufacturers EV's such as the rather unimpressive Ford Focus EV at 76 miles and still $40,000 or just $10,000 less than the much more capable interstate ready Tesla Model S.

  36. Wow, the California incentive is $2500 for each of these. Wow, I think I need to go buy a cahhh! Thought when the Volt went to AT-PZEV that went to $1,500?

  37. I just bought a used Think City and can't use the rebate on a used electric.

  38. The tax credit should reduce the price you pay for a used car.

  39. Actually that's an interesting point, as this article is about the difficulty of financing the $7.5k at the point of sale. But since most people eventually get the credit, it will reduce the market price for 2nd hand EVs, however, in this case, at the point of sale, immediately.

    Which is important especially for those who have difficulties with the sticker price, since they are more likely to buy 2nd hand.

  40. This credit will probably be going away so this issue will also disapear. We can't afford to pay wealthy folks to buy these vehicles no matter how much we might want to do so. The answer is to reduce the costs of the components and for the makers to have a very small profit, or none.

  41. That isn't how business works. Every angle of automotive manufacturing relies on subsidies of some form or another. I would challenge you to come up with even one that doesn't rely on "taxpayers" (which is a ruse anyway) footing the bill to some degree, whether by war, infrastructure or inflation.

  42. Manufacturers do this to create public perception that EVs are cheaper than they are. Not just buyers' perceptions, but anyone who glances across an ad that states "40MPG!" or "Only $27K". It is about manufacturing reality- the same way that their so-called "news" propagandists do it. Their marketing agencies and focus groups have determined that most people will see an advert and what will stick with them is the price posted in bold. Why? Because they have been trained for decades to do just that with ever-shorter attention spans and less critical thinking. The point is to get you into the dealership where trained professionals can employ a slurry of various psychological ploys to steer you away from an otherwise rational decision.

  43. John Please check your sources for your story! You are killing people like myself trying to sell these cars. Mid-Toronto Mitsubishi hands off the gov;t rebate directly to the customer at time of sale! very generous. And I am certain other dealerships are following suit. Please try and help and dont kill us....

  44. @Michael: I should probably have clarified in the story that this applies solely to U.S. practices. I don't have sufficient knowledge about incentives in other countries to make this a universal article.

    Instead, because the majority of our readers (and of our advertisers) are in the U.S., this article applies to U.S. pricing, Federal rebates, and buyers.

  45. Unless you were born yesterday and are completely ignorant of the fine print involved in any purchase (whatever it is) or advertising medium, this article might make someone mad. However I'll say EV buyers are a notch savvier and more educated than most car shoppers. Let's talk about facts: A quick glance at any newspaper automotive classifieds ad section in America you'll see most ads loaded with NET offers on any brand, EV or not. On the NissanUSA website, when one scrolls over the ELECTRIC CAR navigation tab, you see ** as low as $27,700 net value after tax savings, MSRP $35,200. EV sales, constituting such a low number of total car sales, perhaps your argument about NET pricing should be applied to the entire auto advertising universe?

  46. @Chris: From your previous comments (several today!), it appears you sell cars for Nissan for a living. That gives you an interest in car prices appearing to be as low as possible.

    The car ads in MY local papers have the MSRP for specific vehicles in obvious and large type, regardless of whatever other offers are applied. That is not the case with the Nissan screen at the top of this article. The ONLY visible price is "$27,700" which is $7,500 less than the amount that the buyer must pay (or finance).

    Today's EV buyers may be "a notch savvier and more educated," but Nissan's very ambitious goals for Leaf sales mean you & your counterparts need to move beyond early adopters--and quickly.

  47. @John: Agreed, But I've sold 3 Nissan Leafs so far and every buyer qualified for the $7,500 tax credit.(no trickery complaints). Those who do choose to lease the Leaf, will get the tax credit guaranteed, regardless of their income. Therefore the price as stated seems to be accurate! Since I started selling cars online in 1999, my goal is never to make the price appear to be lower than it is. Why? Because of the 2,000 internet sales I've made, of which 75% are leases, the average down payment (total cash out of pocket) has been from $150-$1000, not $2,999 +++. My experience shows me people like to move beyond the teaser price quickly to discover the REAL payment, for the car they really want with the money down they really have.

  48. @Chris: It's a sorta-fair point for leasing. It is NOT a fair point for buying, because the purchaser must pay for or finance the entire amount including the $7,500. Not sure what you're seeing for buy vs lease, but I consider it deceptive to list a "price" that is $7,500 lower than the check I would have to write--whether or not I get some of it back up to 16 months later.

    As noted before, you and I may come at this from slightly different points of view. Appreciate your contributions to the discussion.

  49. Your point is well taken and I truly appreciate your argument; but please... let's give the potential EV buyer also some credit in that they possess the intelligence the understand the financial responsibilities when taking a tax credit for an EV. I always like to look at the positive side, and if you deduct the interest you might pay on the $7500 tax credit, you still did pretty good. Right? But here's what I would tell you as a customer, if your question was raised in my office: John, how about if I just deduct the $800 in extra interest you'll be paying, by discounting the car $800? Would that make you happy? Then I'd do it, and all your worries would suddenly evaporate! if there's a will, there's a way! Thanks John for the great article

  50. .. and John, we can agree that it would be better to have the list price in big letters, but let's not kid ourselves: Buyers are VERY interested in what the net price is. Case in point: TrueCar

  51. buy a Clean Diesel, its sad that our government has been lobbied to go along with such a scam.

  52. These low practices are the result of one fact: All those cars include the price of the battery
    i drive the Fluence ZE, a 100% electric plug in which costs, in Israel, where the taxes are high and no refund is ever given, 30K dollars. If it were not for taxes it would be a 23K$ car. Battery included, but i don't pay for it, because its price is calculated into my mile charges. i pay 20 cents per mile which includes everything: battery, swapping, home and away charging and 24/7 service. Thats's because at 15 cents a KwH, and 4 miles per KwH, the mile actually costs 4 cents, leaving 16 cents per mile for Better Place to run its service and make a profit. Good deal all round cosidering 8 dollar a gallon gas.

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