Over the last few years, many drivers have started to reduce their carbon footprint by purchasing more environmentally friendly vehicles, namely electric and hybrid cars. After all, not only does it reduce the amount of greenhouse emissions in the air, there are a number of financial benefits involved, such as federal and provincial tax rebates.
The only problem is that a lot of zero-emission vehicles (ZEV) can be pricey compared to ordinary gas guzzlers, which might have you wondering whether those tax rebates are actually worth the extra money you would be investing. Keep reading to find out.
What Is The Tax Rebate For Hybrid and Electric Cars?
According to the Federal Government, transportation emissions account for about 25% of Canada’s country’s greenhouse gas production. At the moment, zero-emission models only make up 2% of the consumer vehicles in the country. Unfortunately, many drivers still don’t want to get a ZEV because of how few public charging stations there are country-wide, they prefer their current vehicle or they simply can’t afford one.
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So, in an effort to push back climate change, the Federal Government is now offering various tax incentives to individuals and businesses who buy or lease certain types of battery-electric, plug-in hybrid electric, and hydrogen fuel-cell vehicles. There are even some provincial incentives available in British Columbia and Quebec that you can combine with your federal rebate(s) with the right qualifications.
Essentially, if your vehicle is eligible for one of the federal or provincial ZEV incentive programs, you can use your rebate(s) to reduce the amount of tax you have to pay on your taxable income (a tax rebate is also commonly known as a tax credit).
How Much Are Canada’s ZEV Tax Rebates?
Currently, there are two levels of federal tax rebates offered by Transport Canada, that you can qualify for if you buy or lease the right ZEV:
- Short Range – Plug-in hybrid electric vehicles made for short distance drives can qualify for a $2,500 tax rebate.
- Long Range – Hydrogen fuel-cell, battery-electric, plug-in hybrids that are meant for longer drives are eligible for a $5,000 tax rebate.
As mentioned, you can also apply for separate provincial tax rebates in British Columbia and Quebec (for now, these are the only two provinces that offer these incentives):
- Through the “Clean BC” and “Go Electric BC” programs in British Columbia, you can qualify for up to:
- $4,000 if you buy or lease a new short range ZEV
- $6,500 if you buy or lease a new medium range ZEV
- $8,000 if you buy or lease a new long range ZEV
- $350 if you purchase a Level 2 charging station for a single-family home
- $2,000 per charging station purchased for your business, apartment or condominium (plus 5 hours of free support services)
- Through the “Roulez Vert” program of the Government of Quebec, you can qualify for up to:
- $4,000 if you buy or lease a used ZEV
- $8,000 if you buy or lease a new ZEV
- $600 if you buy a charging station for your home
- $5,000 (per connector) if you buy a charging station for your business or multi-unit apartment/condominium
There used to be a $14,000 electric vehicle rebate in Ontario. However, the provincial government cancelled the program. However, that does not mean that Ontarians cannot look to the federal government for EV rebates.
Which Cars Are Eligible For The ZEV Tax Rebates?
Before you apply for the federal ZEV tax rebates, keep in mind that you must own or lease specific types of cars in order to qualify. Here are some of the main requirements:
- You must have bought or started leasing a new ZEV on or after May 1st, 2019 (your car cannot be preowned for a federal rebate).
- If the car contains 6 or fewer seats, it’s base model’s Manufacturer’s Suggested Retail Price (MSRP) must be less than $45,000.
- A more expensive vehicle with 6 or fewer seats and an MSRP of less than $55,000 can still be eligible but only for purchase rebates (no leases).
- If the car contains 7 or more seats, it’s base model’s MSRP must be less than $55,000.
- A pricier vehicle with 7 seats or more and an MSRP less than $60,000 can also be eligible for purchase rebates.
Although the exact conditions of Canada’s federal ZEV tax rebate program can change from year to year, here are some of the popular vehicles that are eligible:
Hybrid Vehicle Plug-Ins
- Audi A3 e-Tron
- Chevrolet Volt
- Ford Fusion Energi
- Honda Clarity PHEV
- Hyundai Ioniq PHEV
- Kia Niro PHEV
- Toyota Prius Prime
- Chevrolet Bolt
- Ford Focus Electric
- Hyundai Konda Electric
- Kia Soul Electric
- Nissan Leaf
- Tesla Model 3 (Standard Range)
- Volkswagen e-Golf
These are just some of the zero-emissions vehicles that became eligible for the Federal iZEV Tax Incentive Program as of May 1st, 2019. Since then, there have been other additions to the list, so be sure to consult the Government of Canada webpage to find out if your hybrid or electric car qualifies.
Additionally, the British Columbia and Quebec provincial tax rebate requirements and eligible vehicles may be slightly different than those of the federal program.
For example, you can qualify for a rebate of up to $4,000 if you buy or lease a pre-owned vehicle in QC, which may not be an option in BC. On the other hand, BC offers the SCRAP-IT Program, where you can qualify for up to $6,000 in rebates by trading in your used fossil-fuel car for an electric or hybrid vehicle.
How Can I Get My ZEV Tax Rebate?
Fortunately, the process for getting your ZEV tax rebate is relatively easy. In fact, your vehicle dealer or other point-of-sale is responsible for filling out the appropriate paperwork, which will be done on-site soon after your contract is signed. Although you might receive some form of confirmation in the mail or by email, you simply have to wait until tax season to see any federal or provincial tax rebates take effect.
All this said, know that if you’re leasing a vehicle, your federal tax rebate could be divided according to the conditions of your contract and payment term. For instance, if you lease a ZEV for 2 years, you may only be eligible for half the standard federal rebate ($2,500) that you would if you had signed a 4-year lease ($5,000).
Rebate Limits for Individual Drivers, Government Entities & Businesses
It’s also important to know that there are limits to the amount of electric or plug-in hybrid vehicles you can buy or lease. Individual drivers are only eligible for one federal tax rebate per calendar year. Provincial and municipal government fleets, as well as most businesses, can receive up to 10 federal tax incentives a year.
Luckily, if your business needs one or more ZEVs for commercial usage (deliveries, etc.), you may qualify for a 100% tax write-off for the lease or purchase of a plug-in hybrid, fully electric, or hydrogen-powered vehicle. In this case, the write-off would apply to cars that cost $55,000 or less, including any federal or provincial sales tax you pay (more expensive vehicles can only get write-offs for the first $55,000).
Everything you need to know about the GST/HST tax credit.
Are The Federal Or Provincial ZEV Tax Rebates Worth It?
Now for the ultimate question; are federal and/or provincial tax rebates from electric or hybrid vehicles worth the high initial costs? As with any vehicle-related dilemma, the answer depends on your particular lifestyle and driving habits.
Prior to buying or leasing a new or used ZEV with the hopes of obtaining a tax rebate, don’t forget to take these kinds of factors into consideration:
Some ZEVs can save you money on gas, especially if you go fully electric and consistently make short trips to the city, work or the grocery store. However, electric cars may not be the greatest option for long-distance travelling because there are so few public charging stations in Canada. If you’re worried about that, you may want to go with a hybrid instead.
New or Used ZEV
Remember, if you live anywhere other than Quebec, you must buy or lease a new ZEV in order to qualify for a federal or provincial tax rebate, which may not be affordable for the everyday driver. Even then, only specific second-hand vehicles are eligible in QC. Some brands, like Kia or Mitsubishi, may not qualify if they were produced in the US after January 1, 2020.
Simply put, zero-emissions vehicles are expensive and a lot of drivers’ motivations revolve around the overall costs. When it comes to determining if the cost of a ZEV vehicle is worth it, you should take into consideration the initial price tag, any tax rebates you’ll be eligible for, the yearly cost of fuel or the yearly charge cost (experts say roughly $400).
Type of ZEV
The potential costs and tax rebates of a ZEV can also vary depending on which car you buy/lease. For instance, hybrids may cost more to fuel than electric models if you use gas from time to time. While a regular car can be cheaper initially, fuelling is more expensive in the long run. Plus, only plug-in hybrids are eligible for federal or provincial tax rebates.
At the moment, zero-emissions vehicles are more valuable and pricier than regular gas-powered cars. As such, your monthly or yearly insurance premium will probably be higher if you buy or lease a hybrid or electric car. Your premium can also increase if you are below or above a certain age, you buy/lease a newer or more expensive model or you have a poor driver’s history.
As of 2019, there are around 5,800 – 6,000 public charging stations across Canada, which is relatively low compared to the number of traditional gas stations you’ll find. So, unless you’re planning to buy a long-range vehicle or install a private charger at your home or business, a ZEV may not be the most convenient or worthwhile choice.
Tax Rebate Limits
Currently, most federal and provincial tax rebates last up to 3 years. So, if you bought your ZEV in May 2019, you will be eligible to receive incentives until May 2022. That said, the Government of Canada has been seeing an increased demand for both ZEV and the tax rebates that come with them, so it’s possible that rebate programs will be longer in the future.
Features, Repairs & Environmental Impact
The more features you want in your ZEV, the higher its price and insurance costs can be. A fully electric car will usually cost more than a base model hybrid. Plus, maintenance costs for ZEVs can be higher, because fewer mechanics are experienced with them. However, the fact that you’re leaving a smaller carbon footprint can be worth the extra cost.
Looking For Your Next Vehicle?
In the market to purchase a zero-emission vehicle but aren’t sure where to find the right financing? Loans Canada can make the process quick and easy by helping you compare lenders and loan offers.
|Add-Ons||Any features or services that are applied on top of the base price of a car are considered add-ons. These can include things such as tinted windows, heated seats, leather seats, alarms, and wheel locks, to name a few.|
|Base Price||The base price of a car is the cost of the vehicle without any upgrades or added features that can be added after the car is ordered from a dealership. Only standard equipment and the manufacturer’s warranty are included in the base price, but any other fees will be added afterward.|
|Certified Pre-Owned (CPO)||CPO cars refer to used cars that have been certified, either by the dealership selling the car or the manufacturer of the vehicle. This gives consumers confidence knowing they are buying a used vehicle that is in good condition. When a used car is obtained by a dealership, it is inspected by a certified mechanic. The car is then repaired if it meets the required standards and is then ready to be sold as a CPO vehicle.|
|Clear Title||A clear title means that the owner of the car has a free and clear title and no longer carries a balance owing on a car loan. There are no liens of the title or levies from creditors.|
|Dealership||Auto dealerships are businesses that are authorized to sell new or used automobiles to consumers and serve as a direct dealer for automakers|
|Dealership Financing||Consumers can obtain dealer financing to help fund the purchase of a vehicle. A contract is signed with a dealership that requires a consumer to pay for a specific amount plus interest and funding fees over a certain period of time. Dealers will send the details of the consumer’s financials to various lenders to find one that will approve the loan.|
|Depreciation||Depreciation refers to the decline in the value of a vehicle. Immediately after purchase, a vehicle will become less valuable as soon as it is used. Put another way, depreciation is the rate at which an automobile loses its value over time|
|Extended Warranty||Vehicles come with a manufacturer’s warranty when purchased, but buyers can choose to purchase an extended warranty. This serves as a form of insurance policy on the vehicle to cover the cost of potential repairs in the future. An extended warranty is usually good for a certain period of time and/or mileage.|
|Lease||A contract that allows an individual the right to use or occupy a property for a specified period of time in exchange for a monthly payment. Leases are common for a property like apartments and vehicles. The individual on the lease does not own the asset at the end of the lease’s term, it is strictly for rental purposes.|
|MSRP (Manufacturer’s Suggested Retail Price)||Car manufacturers will offer recommendations on how much a car should be priced at the retail level, known as the manufacturer’s suggested retail price, or MSRP. The purpose of the MSRP is to standardize pricing in the automobile industry so that there is not a lot of fluctuation in price from one dealership to another.|
|Title Loan||A title loan uses the vehicle title as a form of collateral to secure a loan. Borrowers must own their vehicles free and clear and no longer owe any amount on a car loan. A lender will place a lien on the car title in exchange for funds. If the borrower defaults on the loan, the lender can take possession of the vehicle and sell it to cover any losses.|
|Trade-in Allowance||A trade-in allowance is the amount that a car dealer will reduce the cost of a new car purchase by after the consumer’s old vehicle has been traded in. It is somewhat like being given credit from the sale of an existing vehicle that is then applied to the purchase of a new vehicle.|
|Trade-in Value||A trade-in value is the amount that dealerships offer consumers for their vehicle and is typically applied toward the purchase price of another vehicle. Dealerships will assess the value of the vehicle and will base the amount that can be applied to a new car purchase. The consumer will then trade in the old vehicle and the assessed value amount will be deducted from the price of another vehicle. Trade-in value is often different than what the vehicle may be worth when sold in the open market.|
|Vehicle Identification Number (VIN)||Every vehicle will have its own unique vehicle identification number, which is used to identify a specific vehicle. No two vehicles will have the same VIN, making them easily identifiable with this unique 17-character code.|