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Tesla Raised Model Y Prices. Why a Used One May Still Cost More.

The company that invented the car vending machine, Carvana, needs to adjust pricing of used Tesla vehicles.

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Joe Raedle/Getty Images

just raised the price of its Model Y, but used car buyers looking for an electric vehicle in 2023 could end up paying more than the price of a new EV if they are not careful. Fluctuating pricing and new tax credits are why.

Online used car seller
(ticker: CVNA), for instance, looks like it is having some problems adjusting pricing quickly enough to keep up with changes from Tesla (TSLA).

A low-mileage 2022 Tesla Model Y performance edition on the site is listed for $63,990. Brand new, the same vehicle costs $59,490. What’s more, the new Tesla qualifies for a purchase tax credit of up to $7,500 from the Federal government.
didn’t immediately respond to a request for comment about used vehicle pricing.

The performance version of the Y started the year out at about almost $70,000. Tesla dramatically cut prices in the U.S. on Jan. 12, lowering a performance Y base-price to about $57,000. That still wasn’t low enough to qualify for the government’s purchase tax credit that was passed as part of the Inflation Reduction Act.

When the IRS, the Treasury Department responsible for implementing the tax credit, listed cars that qualified for the credit, it considered the Model Y more like a car than an SUV which capped the price for a new Y to qualify at $55,000. The IRS reconsidered this past week and now considers the Y an SUV, meaning it can cost up to $80,000 and still qualify for the new tax credit.

After the IRS bumped up the price cap, Tesla upped the base-price of a Model Y $1,000 to about $58,000.

There is a lot going on. The result is that a Black Y, like the one listed on Carvana’s site for about $64,000, costs a new Tesla buyer about $52,000 after the credit, but before paying for any delivery fees.

It’s a big gap and another sign that this is an odd year for the car business. The economy is slowing and interest rates are rising, but sales still might rise because car production has been constrained for years by a lack of semiconductors. What’s more, the new tax incentives should result in more EVs sold.

Battery-electric cars account for a little less than 6% of all new cars sold in the U.S. in 2022.

There is a tax credit for buying a used EV, but that is for EVs priced below $25,000. It can be 30% of the purchase price up to $4,000.

Despite any pricing confusion, Carvana stock is off to an incredible start in 2023. Shares are up about 205% year to date. Still, they are down about 90% over the past 12 months. Some stocks can bounce at the beginning of any year after the end of tax-related selling. Carvana stock fell about 98% in 2022.

Tesla stock didn’t have a year like Carvana, but shares did drop about 65% in 2022. Shares are up about 54% year to date. The
S&P 500
Nasdaq Composite
are up about 8% and 15% year to date, respectively.

Write to Al Root at


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