Used car prices will reach record high in Q3 2025
With used car prices exceeding $31,000 in Q3 2025, EVs are emerging as a budget-friendly option.
america today
- California plans to offer an instant rebate of $3,500 on the purchase of a new electric vehicle.
- The state is creating the program after the federal government ended the $7,500 tax credit.
- The rebates will be funded by state funds and subsidies provided by automakers.
With the average price of a new electric vehicle reaching nearly $55,000 and the federal government eliminating the $7,500 tax credit for plug-in vehicles, California will offer an instant rebate of $3,500 to new EV buyers in the state.
California officials said the new EV discounts will be funded in part by $135 million in state funds included in a recently announced budget agreement between California Gov. Gavin Newsom (D) and the state’s legislative leaders. Additional funding for the EV rebate program will come from grants funded by automakers, California officials said.
California’s plan comes nearly two years after Newsom promised shortly after President Donald Trump’s 2024 victory that he would step in to provide consumers with an electric vehicle tax credit if Trump follows through on a campaign promise and eliminates the common $7,500 federal tax credit. President Trump made sure to follow through on these promises when he passed legislation through Congress that would end the federal tax credit on September 30, 2025.
EV advocates praised California for stepping in to prosecute at least some of the violations.
“The $135 million for first-time EV buyers, combined with every dollar given by automakers, is more than $270 million in welcome assistance to new EV buyers,” said Mike Murphy, CEO of the American EV Jobs Alliance, an advocacy group that works with automakers to push U.S. and state legislators to adopt EV-friendly policies. “This bill would provide $3,500 cash-on-the-food credits to tens of thousands of first-time EV buyers in the Golden State.”
Why is California offering an EV tax rebate?
California has the highest percentage of car buyers choosing electric vehicles.
According to the Automotive Innovation Alliance, which lobbies most major automakers in Washington, D.C., EVs and hybrids will account for nearly 24% of new light-duty vehicle registrations in California in 2025, the latest data released by the group. California was the only state with a market share above 20% in 2025.
Automakers have lamented the loss of federal incentives for electric vehicles, and some have cut back on plans to make future electric models in light of changes in federal support for the technology.
California Air Resources Board Chair Lauren Sanchez said in an exclusive interview with USA TODAY in January that the state is stepping up to offer at least some rebates to domestic EV buyers as “the rest of the global market moves toward zero-emission vehicles,” even as federal aid levels have receded under the Trump administration.
Sanchez said in an interview that embracing EVs is “California pride” because “one-third of EV sales happen in California.”
Under California’s previous EV tax credit program, which ran from 2013 to 2024, the state spent $1.49 billion on tax credits for 586,000 vehicles, according to the California Air Resources Board.
Are used EVs eligible for tax deduction?
Under California’s budget agreement, rebates will also be applied to used EVs, but the amount has not yet been made public.
Under the old federal tax credit, used EVs could receive up to $4,000 in tax credits. The used EV tax credit was first added in 2022 by former President Joe Biden’s administration. Previously, only new EVs were eligible for the tax credit.
So what happened after the federal EV tax credit ran out?
Some of the most popular electric vehicle models saw sales decline significantly in the fourth quarter of 2025 after setting records in the third quarter as car buyers rushed to take advantage of the $7,500 federal tax credit before it expires at the end of September 2025.
According to AutoAlliance, EV sales ended up accounting for 9.6% of the market, down 0.6% compared to 2024.
Can I purchase an EV from outside of California and receive a rebate?
Previous EV rebates in California were limited to residents of the state, and this discount is expected to be limited to residents of the state as well.
EV shoppers in other states often copy California’s auto emissions regulations, and some may decide to copy the state’s plans to offer rebates to shoppers. Seventeen states have adopted at least part of California’s clean car regulations in recent years, according to the California Air Resources Board.
