EV Tax Credit Expiration Reshapes Auto Lending

The federal electric vehicle (EV) rebate that once knocked $7,500 off new EVs (and $4,000 off used EVs) officially expired on September 30, 2025 (Kiplinger). This abrupt end to incentives is sending shockwaves through the auto market. EV sticker prices effectively jumped overnight now that buyers can no longer count on a big tax break. Lenders – especially credit unions and banks involved in direct and indirect auto loans – are grappling with what this means for affordability and risk. Early signs show a surge of buyers racing to beat the deadline followed by an expected sales slump (Reuters). For auto financiers, the loss of upfront incentives isn’t just a sales story; it’s a risk story. Higher vehicle prices and uncertain resale values are colliding with stretched buyer budgets, challenging traditional underwriting models. In this post, we’ll explore how the EV tax credit’s end is affecting prices, payment-to-income ratios, and default exposure, and why real-time income verification (like Verify4) is emerging as a critical tool for lenders in this volatile environment.

Federal EV Rebate Sunset: Sticker Shock and Slumping Demand

The EV tax credit had been a cornerstone of EV affordability for 17 years, helping blunt the higher upfront cost of electric cars. Its expiration on Sept. 30, 2025 was earlier than initially planned (2032) due to new legislation (HR Block). In the rush before the deadline, EV sales spiked – August 2025 saw EV market share hit an all-time high of 11.5% as consumers hurried to lock in credits (InsideEVs). But with the credit gone, demand is expected to fall sharply, effectively making EVs more expensive in real terms. Analysts predict a tumble in EV sales for the final quarter of 2025 now that buyers can no longer count on a rebate (Chase Auto Finance). Automakers are bracing for the fallout: many may respond by cutting prices or offering discounts to stimulate sales, or by throttling back production to prevent oversupply.

Affordability Challenges: Bigger Loans, Longer Terms, Higher Payments

Even before the credit’s demise, EVs came with a premium price tag. In mid-2025 the average transaction price for a new EV was about $57,245, significantly higher than the ~$48,799 average for all new vehicles (Cox Automotive). Now, without a federal rebate to shave off thousands, the affordability gap has widened further. Many buyers will need to either bring more cash up front or, more likely, finance a larger amount. This is pushing borrowers to stretch loan terms and budgets to make monthly payments feasible. In fact, industry data shows that in early 2025 about 1 in 5 new-car buyers committed to a monthly payment of $1,000 or more, up sharply from ~16% a year earlier (Edmunds).

Lenders are already witnessing trends of longer loan terms and shrinking down payments as consumers grapple with high vehicle prices. As of Q2 2025, the average new-car down payment fell to about 13% of the purchase price – well below the traditional 20% recommendation. Meanwhile, seven-year car loans have become increasingly common (over 22% of new loans in 2025, vs 16% the year prior). These strategies help keep monthly payments manageable, but they also mean borrowers stay indebted longer and build equity more slowly. This is especially risky for EVs, which have seen steeper depreciation curves and uncertain resale values compared to conventional cars (Kelley Blue Book).

Crucially, higher PTI ratios signal that borrowers are devoting a larger share of income to their car payment – a key predictor of financial strain. Auto loan delinquencies have been rising in 2025, with nearly 5% of auto loans 90+ days past due according to some measures (Federal Reserve Bank of New York). In April 2025, the auto loan default rate hit an annualized 3.49%, the highest in over a decade (S&P Global).

Loss of Incentives Increases Lender Risk Exposure

Without the rebate, loan-to-value (LTV) ratios on EV loans are rising unless buyers compensate with more cash down. Automakers like GM have already begun tapping the brakes on EV production due to high costs and slower consumer uptake, signaling that long-term EV resale values are in question. The risk of default is compounded by the risk of collateral devaluation: repossessed EVs may fetch far less at auction if values plunge.

Traditional underwriting models are being tested. EVs introduce new uncertainties: battery longevity, software updates, charging infrastructure, and tech obsolescence. Some lenders have already imposed stricter requirements for EV loans, including tighter LTV limits and higher credit score cutoffs (Experian Automotive).

Experts recommend lenders monitor factors like LTV ratios, battery warranties, inventory levels, and regional infrastructure adoption.

Underwriting in the Unknown: Why Real-Time Verification Matters

Auto lending fraud exposure in 2025 is estimated at $9.2 billion, with nearly 69% of that tied to first-party misrepresentation (fake or inflated income and employment claims) (Point Predictive). Up to 30% of applicants exaggerate or falsify income in the loan process.

This is where real-time employment and income verification comes in. Platforms like Verify4 deliver income confirmation in seconds straight from trusted sources, eliminating slow manual checks.

• Speed: Approvals can move from application to funding in near real time, keeping dealers and borrowers engaged.

• Fraud prevention: By cross-checking actual wage data, lenders can stop income inflation before the loan is booked.

• Better underwriting: Fresh, accurate data sharpens PTI and DTI assessments, catching risks that stale documents might miss.

Navigating the EV Lending Shift with Verify4’s Help

The expiration of the EV rebate has raised the stakes for lenders. Bigger loans, uncertain collateral values, and fraud risks mean more precision is needed in underwriting. Real-time verification with Verify4 lets lenders approve faster, with more confidence, and with stronger fraud defenses.

Contact Verify4 to learn how real-time income and employment verification can protect your auto loan portfolio while helping you compete in today’s EV market.