Some dealers reportedly are claiming the maximum $7,500 federal income tax credit available for the Chevrolet Volt, rather than passing the incentive on to consumers.According to a recent report by Mark Modica, published by the nonprofit National Legal and Policy Center, some Chevrolet dealers are selling Volts to other dealers and claiming the maximum $7,500 green-vehicle federal tax credit for themselves.
As second-hand owners, the dealers who bought the Volts then sell them used to private buyers, who no longer qualify for the credit. The credit is offered as an incentive to purchasers of alternative-powertrain vehicles like the purely electric Nissan Leaf and the Volt, a plug-in hybrid.
In a telephone interview, Robert Peterson, a General Motors spokesman, said he knew of 10 dealer-to-dealer Volt sales, all of them taking place among Chevrolet dealers. Five of them were to dealers within the introductory markets of Michigan, New Jersey, Connecticut, California, Texas, New York and Washington, D.C., who used the Volts as showroom draws, while the others were to dealerships ineligible to sell new Volts.
“The insinuation that there’s gaming going on” is inaccurate, he said. “Dealer-to-dealer sales is minimal, at best.”
In the National Legal and Policy Center report, Mr. Modica said that he had found two dealerships that bought Volts from Chevrolet stores and then offered the vehicles for sale as used, and that one of the dealerships, a Chevrolet franchise in Chicago, intended to claim the tax incentive for itself. That dealership is not authorized to sell new Volts because Illinois is not one of the Volt’s introductory markets. The other store, a California Kia dealership, is not allowed to sell new Volts.
“It’s not something that we’re encouraging,” Mr. Peterson said of the dealer-to-dealer sales. “We’ve asked for dealers’ patience as we roll out nationwide.”
It is unclear whether dealers are selling used Volts and claiming tax credits for themselves, as Mr. Modica’s report stated. But if they are, Mr. Peterson said potential customers deserved to be informed by dealers before any sale occurred.
“We’re encouraging them to be open and honest with consumers and let them know they they’d not be eligible for credit,” Mr. Peterson said. He added that he had not received any complaints from consumers who had bought Volts but did not receive a tax credit.
In contrast to dealer swaps, a common industry practice in which dealers trade cars, Volts bought by other dealers may not be sold as new, Mr. Peterson added. Such cars are also exempt from consumer tax credits since the incentive is meant for original owners, according to tax-law language provided by the Internal Revenue Service.
The tax code also indicates that while dealers are technically eligible for the credit insofar as they would be original owners, they appear to disqualify themselves because cars eligible for the green-vehicle credit are not meant for resale.
This “not for resale” clause in the tax code would call into question the legitimacy of dealer claims, said Philip Reed, senior consumer advice editor for Edmunds.com. “But dealer intent is one of those difficult areas,” he explained. “How can you prove that they purchased it for resale?”
Mark Frost, general manager of Jim Ellis Chevrolet in Atlanta, said in a telephone interview that his dealership, which lies outside the Volt’s launch markets, is using two Volts as demonstration models until Georgia dealers can sell the car. Posing as private consumers, two Jim Ellis employees were sent to a Long Island, N.Y., dealership to buy the new Volts. The employees applied for the tax credit and kept the cars in their names for three months. The cars were then bought by the dealership at full price, Mr Frost said, and they will eventually be sold as used.
“And when we sell them we’ll tell them that they won’t get the credit,” he said. “It’d be wrong not to do that.” Mr. Frost added that he had deposits from customers on 32 new Volts.
Mr. Reed, however, said that the purpose of the tax credit was to stimulate consumer demand and to foment interest in fuel efficiency. “And even then you won’t get the credit until the next year,” he said. “If that’s already taken by some dealer shenanigans, you’re going to feel ripped off.”
Some consumers may not even understand that they’re buying a used Volt, particularly if the car has zero or little mileage, said Mr. Reed, adding that a car is designated as used if it has been sold once and registered.
Glendale Hyundai in Glendale, Calif., lists four used Volts for sale for $39,995, just below the $41,000 sticker price for new Volts. Two of them have zero miles and the two others have very low mileage. Tony Mohandessi, general manager at Glendale Hyundai, said that consumers buying one of his Volts would not receive a credit and that anyone seeking a tax benefit would have to buy a new Volt. Mr. Mohandessi, who said he had recently sold a used Volt with 130 miles on it, would not disclose whether his dealership had applied for the credit.
Because the suggested retail price of the Volt is $10,000 above that of the Leaf, it does not make financial sense to buy a used Volt with low mileage without the tax credit, Mr. Reed said.
Sales of new Volts dropped to 481 in May, from 493 in April and 608 in March. Leaf sales reached 1,142 units in May for a total of 2,167 deliveries this year, according to Edmunds.com. So far, Chevrolet has sold 2,184 Volts. Once G.M. builds more Volts, those numbers will rise, Mr. Peterson said.
“Most of what we have on hand is already sold,” he said. “We’re significantly impacted by production right now.”
At day’s end, Mr. Reed said, consumers need to know what they’re buying.
“This is all unfortunate because this happens to be a car that is innovative, although it costs too much,” he said. “Yet these are franchised entities, these dealerships. So to put all the blame on Chevy for what some dealers do, that’s not really fair.”