Colorado drivers considering an electric vehicle might not want to mull over the decision for too much longer.
That’s because the state’s nation-leading EV tax credit is set to shrink from $5,000 to $3,500 at the end of the year. The cut will make it harder for dealers to keep offering eye-popping leases on low-cost EV models, which have helped put thousands of new battery-powered cars on Colorado roads over the last few months and drive the state to No. 2 in the nation for EV adoption.
On top of the scheduled reduction, the transition team for President-elect Donald Trump has signaled its planning to kill a federal EV tax credit worth up to $7,500 as part of a planned tax reform package. If the incoming Republican-led Congress goes along with the idea, it could further limit the total incentives available to Colorado EV buyers.
“This is the best deal you’re ever going to get,” said Matt Groves, the president and CEO of the Colorado Auto Dealers Association. “We don’t know how much money is coming off the table next year, but it’s going to be more than zero.”
A suite of generous incentives has helped make Colorado a bright spot for EV adoption nationwide. Under current policies, a resident can theoretically qualify for up to $26,500 in discounts by combining state and federal incentives with additional rebates offered by Xcel Energy, Colorado’s largest electricity provider.
It appears those steep discounts have helped convince drivers to ditch traditional vehicles. A recent report from the Colorado Auto Dealer Association found that 23 percent of new cars registered in the state during the first three quarters of 2024 were either battery-electric or plug-in hybrid models. Only California had a higher EV market share over the same period, the report shows.
One factor driving the trend is rock-bottom leases on some EV models. Boulder Nissan, for example, currently offers an entry-level Nissan Leaf for $5 per month after a Colorado resident pays roughly $3,000 in dealer fees and sales taxes. Other local Nissan dealers offer higher monthly prices for a smaller upfront cost.
Ed Olsen, the general sales manager at Boulder Nissan, expects the eye-popping lease arrangements to slow in 2025. He said the deals only make sense due to Colorado’s EV tax credit, which offers additional cash for affordable models with a recommended sales price under $35,000, plus an extra incentive if auto dealers handle all the related paperwork.
Once the overall benefit shrinks, Olsen would guess the monthly lease price for a Nissan Leaf would jump to about $70 per month.
Those expectations also depend on President-elect Trump's failure to eliminate the federal tax credit. If he moves ahead with the plan, Olsen said Nissan will likely shift the finances behind the current lease deals, forcing auto dealers to further increase prices.
But not everyone thinks Colorado’s EV momentum depends on the federal tax credit
Groves, the president of the auto dealer association, said the federal discount was always confusing since it only applied to drivers meeting specific income qualifications and vehicles meeting domestic manufacturing requirements. If the federal tax credit disappears, he’s not convinced EV demand will dry up in Colorado.
At this point, he’s hopeful the EV market is mature enough to keep growing despite a drop in federal and state support. While incentives might decline, Colorado has built out its public charging network in the last few years and manufacturers offer far more options to potential buyers.
“As these cars become more prevalent, people are just becoming more comfortable with the concept,” Groves said.
The auto dealers association also isn’t planning to lobby for a larger state EV tax credit when the upcoming legislative session starts in January, Groves said.
Gov. Jared Polis, however, doesn’t want to see Colorado buyers lose access to the federal discount. In an email to CPR News, Eric Maruyama, a spokesperson for the governor’s office, said President-elect Trump’s plans to eliminate the tax credit and impose tariffs will hurt consumers and kill jobs.
“We hope the incoming administration reconsiders putting American workers, our pocketbooks and the strength of our economy first," Maruyama said.
