Nearly 50% of EV Buyers Say the Tax Credit Was a Deciding Factor — How Will Ending It Affect Sales?

The U.S. is ending the federal tax credit that made electric vehicles (EVs) more affordable for eligible buyers. The incentive, which will now expire at the start of October, grants up to $7,500 to drivers buying a new, qualified plug-in EV or fuel cell electric vehicle (FCV).

Policymakers initially designed the credit to persuade Americans to consider renewable alternatives over gas-powered vehicles. The introduction of the credit coincided with a significant increase in EV sales, which rose from about 813,000 in 2022 to 1.3 million in 2024.^[1] [2] But the U.S. will eliminate the incentive as part of the One Big Beautiful Bill Act, which President Donald Trump signed into law on July 4. Those supporting the move say the free market, rather than government subsidies, should decide whether EVs will become more popular.

To better understand how eliminating the tax credit will affect EV sales, Insurify surveyed 751 Americans who own and drive an EV. Insurify found that just under half of EV owners (45%) say they wouldn’t have purchased an EV without the tax credit. Seven in 10 EV owners (71%) said in January that they were concerned the credit would be eliminated in the next four years.

Although ending the credit will likely lead to a loss in EV sales across the board, it won't affect all EV makers equally. Tesla is the only profitable EV maker today, so declining sales would make Tesla less profitable but could increase losses more for other EV manufacturers.^[3]

Key Findings

• Nearly half of EV owners (45%) wouldn’t have purchased their EVs had it not been for the tax credit. When broken down by car manufacturer, that ranges from 54% for Toyota EV owners to 36% for Tesla owners, Insurify found. 

• About half the EV owners Insurify surveyed (49%) say buying an EV has strained their finances. This figure rose to 58% among Gen Z respondents. This group also has the highest car insurance costs.

• One in three EV owners (32%) wouldn’t be able to purchase an EV at full price today without the tax credit. That share rises to 46% for rural respondents and 45% for those with a household income of $80,000 or less.

• More than one-quarter of EV owners (27%) eligible for the clean vehicle tax credit didn’t claim it, leaving up to $7,500 on the table. The most common reasons for not claiming the credit were not realizing they were eligible at the time (30%) and not knowing the credit was available (30%).

EV tax credit’s impact on automakers — and why Tesla might be less affected

The federal government enacted the tax credit for clean vehicles in 2008, and the 2022 Inflation Reduction Act expanded its eligibility. Since 2022, EV sales are up 60%. 

Cutting the EV credit is likely to put a dent in that trend, according to Insurify’s survey. Insurify found 45% of EV owners said they wouldn’t have purchased their EV without the tax credit. Tesla drivers appear to be the least affected, with roughly one-third of Tesla owners (36%) saying they wouldn’t have bought an EV without the credit — compared to 54% for Toyota and 53% for Audi.

Tesla leads EV sales — by a lot

Tesla has dominated the domestic EV market in recent years, accounting for about half of U.S. EV sales in 2023 and 2024. However, Tesla saw declining sales (-6%) in 2024, while leading competitors like Kia (+87%) and Ford (+35%) saw substantial increases.

Tesla’s competitors are likely to suffer from the elimination of clean vehicle credits. Other brands selling comparable electric vehicles tend to charge higher purchase prices, making the tax credit more necessary. Without the tax credit, some customers set on buying EVs may move into a lower price range, which could lead them to purchase Tesla’s more affordable models.

EV Sales Volume by Automaker

EV Maker	2024 U.S. EV Sales Volume	Year-Over-Year Change in U.S. EV Sales (2023 to 2024)
Tesla	633,762	-6%
Ford	97,865	35%
Chevrolet	68,044	8%
Hyundai	61,727	7%
Kia	56,099	87%
Rivian	51,579	4%
BMW	50,980	12%

Tesla’s popularity makes it less reliant on tax credits

Insurify’s survey found 84% of EV owners considered buying a Tesla, including 75% of those who ultimately went with another brand. Half of those who considered buying a Tesla (50%) said they trust the company’s leadership. Younger EV owners and those in high-income households were more likely to say they trust the automaker’s leadership compared to older and lower-income respondents.

Despite sales growth, competitors have hit roadblocks as they try to catch up to Tesla in sales volume, in part because Tesla has an edge in charging infrastructure. The lack of charging stations available to competitor vehicles can cause range anxiety among EV drivers, particularly in sparsely populated rural areas, where pickup trucks are more popular. That range anxiety might have resulted in lower demand, with Ford pausing production of its F-150 Lightning in late 2024.

Although sales dipped for Tesla in 2024, the company retains a firm grip on the U.S. EV market — the two bestselling EVs in the country in 2024 were the Model Y and Model 3.

10 Bestselling EV Models in 2024

Model	2024 Sales	Year-Over-Year Change in Sale Volume	Annual Insurance Cost
Tesla Model Y	372,613	-7%	$3,939
Tesla Model 3	189,903	-17%	$4,362
Ford Mustang Mach-E	51,745	27%	$3,595
Hyundai Ioniq 5	44,400	31%	$3,621
Tesla Cybertruck	38,965	N/A	$3,813
Ford F-150 Lightning	33,510	39%	$2,591
Honda Prologue	33,017	N/A	$3,170
Chevrolet Equinox	28,874	N/A	N/A
Cadillac Lyriq	28,402	210%	$3,717
Rivian R1S	26,934	23%	N/A

Even with the credit, 49% of EV owners said buying an EV strained their finances

The typical full-electric vehicle has an MSRP 42% higher than the typical gas vehicle, at about $53,000.^[4] Given the high sticker price, it’s no surprise that nearly half of EV drivers (49%) said buying an EV has strained their finances, according to Insurify’s survey. EV owners who claimed the tax credit were less likely to say buying an EV strained their finances (44%) than those who didn’t claim the credit (56%).

Certain groups feel more squeezed than others. Insurify found that nearly three in five Gen Z respondents (58%) said buying an EV strained their finances. More EV owners in the Northeast, where the cost of living is generally higher, said buying an EV hurt their finances (55%), compared to owners in the West and Midwest (both at 46%).

Additionally, 37% of EV owners, including 44% of Gen X respondents, put off other financial goals to buy an EV.

Many EV owners viewed the clean vehicle tax credit as a motivator for their purchase, with 38% saying the credit influenced them. 

The most common reasons for buying include:

• Fuel savings (67%)

• Preferring their model over gas-powered options (50%)

• A sense of social responsibility (49%)

• Getting a good deal (47%)

• Taking advantage of the tax credit (38%)

• Owning the vehicle as a status symbol (21%)

Eliminating the credit will change the financial calculus for many potential buyers. One in three EV owners (32%) said they wouldn’t be able to purchase one at full price today without the tax credit, including 46% of rural respondents and 45% of those with a household income of $80,000 or lower.

Insurance costs already make EVs more expensive

Insurance costs are an obstacle for the EV industry. Insurify data shows popular EVs cost 23% more to insure than similar gas models, with a year of full-coverage car insurance averaging $3,430.

One-third of drivers (32%) have had an insurance claim on their EVs. Gen Z (39%) and millennials (34%) are more than twice as likely as baby boomers (14%) to say they’ve had claims on their EVs. This exacerbates ownership costs for younger drivers, who already tend to pay more for auto insurance, according to Insurify’s analysis.

Of those who’ve filed a claim, the most common reasons are collision-related damage (70%), weather-related damage (66%), and theft or vandalism-related damage (32%), Insurify’s survey found.

Nearly two-thirds of EV drivers (64%) say the vehicles are more expensive to repair, which is consistent with a Kelley Blue Book analysis that also found EV repairs take nearly twice as long.

One-quarter of EV owners eligible for the clean vehicle tax credit didn’t claim it

Although the EV tax credit has made clean vehicles more affordable, eligibility restrictions mean not all buyers can take advantage. Regulators have imposed manufacturing requirements, caps on vehicle purchase prices, and income limits ranging from $150,000 for singles to $300,000 for married couples.^[5]

Policy nuances have caused some confusion among consumers, with 27% of EV owners eligible for the tax credit saying they didn’t claim it, leaving up to $7,500 on the table. About three in 10 eligible Gen Z buyers didn’t claim the credit (30%), the most of any generation, followed by millennials (20%), Gen X (19%), and baby boomers (5%), according to Insurify’s survey.

“I think most of us find taxes generally confusing, and, from my perspective, EV incentives are particularly hard to follow,” said Thomas Vance, an associate professor of accounting at Colorado State University who co-authored a 2024 study on EV tax credits.

The most common reasons for not claiming the credit were drivers not realizing they were eligible at the time (30%) and not knowing the credit was available (30%).

Vance’s research has shown that people were more inclined to buy EVs if they learned about the tax credit from government agencies rather than dealerships.

“The government position on EVs and incentives is, of course, shifting with the new administration,” Vance said. “So reading widely to keep up with any changes, likely through the popular press and outlets like Insurify, is going to help.”

Even with the credit, not all EV owners planned to stick with EVs in the long run. About one-fourth of the EV owners surveyed (24%) said they plan to switch back to gas-powered vehicles eventually, according to Insurify’s survey.

The Internal Revenue Service website provides additional information on clean vehicle credits.

Methodology

The proprietary data featured in this study comes from an online survey that Insurify commissioned. The survey’s respondents consisted of 751 U.S. residents between 22 and 70 years old who own and drive an EV. Respondents were asked up to 15 questions about their vehicle, their purchase, and their opinions on the federal tax credit for clean vehicles, among other topics. The survey fieldwork took place from Jan. 21 to Jan. 24, 2025.

For media inquiries or questions about our study, please contact the author here.