A Utah-based electric vehicle (EV) dealer has exposed a potentially widespread scheme where dealerships manipulate federal tax credit rules to mislead customers, drawing significant attention on social media and highlighting broader issues in the used EV market.
Alex Lawrence (@evautoalex), who runs EV Auto Alex and boasts over 163,000 subscribers on TikTok for his insights into EV financing and purchases, recorded a viral video showcasing a concerning phone conversation with a customer encountering what appears to be an illegal practice. The two-minute clip, garnering nearly a million views since June 11, depicts Lawrence interacting live from his dealership office in Utah.
The Alleged Scam Unfolds: Breaking Down the Tax Credit Rules
The customer’s story centers around their attempt to buy a used Tesla Model 3 that qualified for the now-expired federal tax credit of up to $4,000. This credit was available for used EVs priced under $25,000 as of September 30th. However, according to the customer’s account, the dealership he visited showed him a Model 3 priced at $28,500 but claimed they had a workaround.
The salesperson allegedly proposed charging the customer $24,500 for the car itself and an additional $4,000 for a charger, effectively circumventing the IRS requirement that the total price excluding taxes, registration, and fees must be under $25,000. The IRS had explicitly stated that “dealer documentation fees, which are part of the cost of purchasing a vehicle and are not required by federal or state law,” should be included in the sale price for tax credit eligibility.
The Customer Pushes Back, Dealer Doubles Down
Armed with knowledge from Lawrence’s previous videos on EV tax credits, the customer challenged this tactic, referencing the IRS guidelines stating that mandatory add-ons are part of the purchase price and cannot be used to artificially reduce the overall cost to qualify for the credit. The customer showed the dealership staff Lawrence’s TikTok video explaining these rules. However, instead of complying, the salesperson insisted their method was legitimate and a finance manager allegedly dismissed the concerns as “totally fine.”
The situation escalated further when the dealership proposed charging an additional $2,000 through a separate transaction the following day for something called “TIPS,” which Lawrence immediately identified as likely illegal. Such a maneuver could be considered tax fraud by artificially separating charges and avoiding accurate reporting of the total vehicle price to the IRS.
Social Media Spotlight: Industry Professionals Weigh In
The video’s virality sparked a wave of comments from viewers sharing similar experiences with dealerships across the country, suggesting this practice may not be isolated to Utah or even limited to electric vehicles. Some specifically named dealership groups allegedly engaging in these tactics.
EV industry professionals also engaged, expressing gratitude for Lawrence’s educational content and confirming that some dealerships are unaware of proper tax credit guidelines. The video prompted dealership employees to review their own practices, highlighting the potential impact of social media on consumer protection.
A Positive Outcome: The customer ultimately purchased a vehicle from EV Auto Alex after being offered a discount by Lawrence, choosing to avoid potentially fraudulent dealings.
Larger Implications for the EV Market and Consumer Education
This incident underlines several crucial points about navigating the evolving world of electric vehicles:
- Consumer Education is Crucial: The video exemplifies how complex federal incentives can be easily manipulated without informed consumers recognizing the red flags.
- Social Media as a Watchdog: Lawrence’s platform served as a conduit for customers to share experiences and potentially hold dealerships accountable.
- The Need for Transparent Practices: This situation points to a potential need for clearer communication from manufacturers and policymakers about tax credit eligibility and enforcement, minimizing opportunities for abuse.
Lawrence’s proactive approach to addressing the issue through direct dialogue with allegedly offending dealerships, rather than resorting to public shaming, suggests a measured response aimed at industry-wide improvement. While the federal used EV tax credit has expired, similar issues could arise with future incentives or in other automotive sectors as electric vehicle adoption continues to accelerate.
