Do Tax Rebates on Electric & Hybrid Cars Really Save Money?

The primary intent behind offering tax rebates on electric and hybrid cars is to eventually reduce greenhouse gas emissions. By offering tax deductions under the Zero-Emission Vehicles Incentive Program, the government aims to encourage consumers to choose electric and hybrid vehicles, with the goal of achieving zero emissions by 2035. 

The transition to zero-emission vehicles is inevitable and will happen sooner or later. However, you can decide whether you want to opt for electric or hybrid cars now or wait until a few more years. Sure, there are incentives offered by the government, and it does seem tempting. But is it really saving you money? 

Let’s first understand what is the zero-emission vehicles incentive program.

 

The Zero-Emission Vehicles Incentive Program

To promote the adoption of ZEVs among Canadians and businesses, the Government of Canada introduced two programs: the Incentives for Zero-Emission Vehicles (iZEV) Program in May 2019 and the Incentives for Medium- and Heavy-Duty Zero-Emission Vehicles (iMHZEV) Program on July 11th, 2022.

Under the iZEV Program, there is a wide range of eligible zero-emission vehicles available for purchase or lease, offering consumers incentives of up to $5,000. These incentives aim to encourage the adoption of ZEVs across the country.

Similarly, the iMHZEV Program targets Canadian businesses and promotes the adoption of medium- and heavy-duty ZEVs. Eligible organizations can access incentives of up to $200,000 when purchasing or leasing qualifying zero-emission vehicles.

Both programs contribute to the government's efforts in driving the transition towards cleaner transportation options and reducing greenhouse gas emissions.

 

Vehicles Eligible for a Tax Rebate

If you are considering leasing or buying a new zero-emission vehicle and want to confirm its eligibility for the ZEV Program incentive, please refer to the List of eligible vehicles provided by the Canadian government.

 

Factors to Consider Before Buying/Leasing a New or Used ZEV for Tax Rebate

 

1. How you travel - short-distance or long distance 

Some ZEVs can save you money on gas, especially if you primarily take short trips within the city, to work, or to the grocery store. However, if you plan on doing a lot of long-distance travel, electric cars may not be the best option because there are not many public charging stations in Canada. In that case, you might want to consider a hybrid instead.

 

2. Type of ZEV

The costs and tax rebates for ZEVs can vary depending on the car you choose. For example, hybrids may cost more to fuel than electric models if you occasionally use gasoline. While a regular car may be cheaper initially, fuel costs can add up in the long run. Furthermore, federal or provincial tax rebates are exclusively applicable to plug-in hybrids.

Read: 6 Different Types of Electric Vehicles

 

3. New or used ZEV

Keep in mind that if you live anywhere except Quebec, you need to buy or lease a new ZEV to qualify for a federal or provincial tax rebate, which may not be affordable for everyday drivers. Even in Quebec, only specific second-hand vehicles are eligible. Some brands, like Kia or Mitsubishi, may not qualify if they were made in the US after January 1, 2020.

 

4. Charging stations

As of March 1, 2023, EV drivers have access to at least 20,478 charging ports located at 8,732 charging station locations across the country. In all, 16,579 ports (7,549 stations) are Level 2 chargers, while 3,899 ports (1,483 stations) are DC fast chargers. Consider your traveling route and the charging stations along the way before you plan to buy a ZEV, or you might have to install a private charger at your home or buy a ZEV with long-range capabilities.

 

5. Insurance

Currently, zero-emissions vehicles are more valuable and expensive than regular gas-powered cars. This means your monthly or yearly insurance premiums will likely be higher if you buy or lease a hybrid or electric car. Your premium may also increase based on factors like age, the model's newness or price, or your driving history.

Read: Everything you need to know about Ontario Car Insurance

 

6. Your budget

Simply put, zero-emissions vehicles are expensive, and many drivers' decisions revolve around the overall costs. When deciding if a ZEV is worth it, consider the initial price, any tax rebates you may qualify for, and the yearly cost of fuel or charging.

 

7. Tax rebate duration

The Canadian government provides rebates of up to $5,000 when purchasing or leasing qualifying vehicles. This program started in 2019 and is set to continue until March 31, 2025, or until the allocated funds are depleted.

Read: Electric vs. Hybrid Cars: Which One is Right for You?

 

How can I claim my tax rebate for my ZEV?

When you sign the contract for your vehicle, your dealer or point of sale will handle the necessary paperwork on-site. While you may receive a confirmation by mail or email, you will need to wait until tax season to see the federal or provincial tax rebates reflected. It's important to note that if you are leasing a ZEV, your federal tax rebate may be divided based on the terms and duration of your lease agreement.

 

Do the tax rebates and incentives really help you save money?

The tax rebates and incentives provided by the Canadian government make electric vehicles more affordable and help customers save money in the long run through reduced upfront costs, lower operating expenses, and potential additional incentives at the provincial level.