This Labor Day is a good time to save money on an electric vehicle, Edmunds says

Labor Day is traditionally a cue for car dealers to roll out promotions as new model year vehicles arrive on the lot. And this year, some of the best deals are to be had on electric vehicle leases ahead of a $7,500 federal tax credit expiring on Sept. 30, according to auto research firm Edmunds. 

Data from Kelley Blue Book shows EV prices have dropped steadily amid soft demand for electric cars. In July, the average sales price for a new EV was $55,689, down more than 4% from a year ago. 

The tax credit saves EV leaseholders an average of $208 a month spread across a 36-month lease, Edmund found in analyzing dealership transactions. Leasing has become the most common way consumers enter the EV market, according to the auto industry data provider, which found that leases made up 70% of all EV transactions in July.

A $4,000 tax credit for used EVs also ends on Sept. 30. 

For most consumers, leasing an EV is a better bet than buying, according to Ivan Drury, director of insights at Edmunds. 

“If you’ve never tried this tech and want to dip your toe in the water instead of getting married to it,” he said, noting that EVs tend to depreciate faster than gas-powered cars. “That’s because we know the tech will get better, and what you buy today won’t be as good as what you get next year.” 

The IRS is also giving consumers more wiggle room to claim the EV tax credit before it ends. Previously, eligibility was tied to a vehicle’s delivery date. But the agency this month issued a notice clarifying that consumers are eligible for the credit if they sign a contract for a vehicle prior to Sept. 30 and make a payment, which can include putting money down or trading in a car — even if the vehicle isn’t delivered until after that date. 

“EVs fundamentally face an awareness issue, and if dealers and automakers don’t get the word out, they risk disappointing customers who show up after September 30 only to find that the opportunity has passed,”  Jessica Caldwell, Edmunds’ assistant vice president of insights, said in a statement. 

According to the U.S. Department of Energy, drivers of fully electric vehicles can save up to $2,200 per year on fuel.