Are there any incentives to buy a hybrid car?

Yes—there are incentives, but they mostly favor plug-in hybrids (PHEVs) rather than conventional non–plug-in hybrids. In the United States, eligible new PHEVs can qualify for the federal Clean Vehicle Tax Credit (up to $7,500) if they meet assembly and battery sourcing rules, with many buyers able to take the credit instantly at the dealership. Traditional hybrids (HEVs) generally do not qualify for U.S. federal tax credits anymore. Additional rebates, discounts, and perks may be available from states, provinces, cities, and utilities, though some jurisdictions also add extra registration fees for electrified vehicles. Internationally, incentives vary widely and increasingly prioritize zero-emission vehicles (EVs), with more limited support for hybrids and PHEVs.

What counts as a “hybrid” for incentives?

Incentives hinge on the type of hybrid and where you live. A conventional hybrid (HEV) cannot be plugged in and usually no longer receives purchase incentives in major markets. A plug-in hybrid (PHEV) has a larger battery you charge from the grid and is the type most frequently eligible for credits or rebates. Many regions now reserve the largest incentives for fully electric vehicles.

United States: the current incentive landscape

Federal incentives for PHEVs

The principal U.S. incentive is the Clean Vehicle Tax Credit for new plug-in vehicles, which can provide substantial savings if the vehicle and buyer qualify. The rules have tightened since 2023, so it is important to verify eligibility for a specific model and trim before purchase.

• New PHEVs: Up to $7,500 in federal tax credit, subject to final assembly in North America, price caps, buyer income caps, and battery component/mineral sourcing rules. Some PHEVs qualify; many do not, and eligibility can change as supply chains evolve.
• Point-of-sale option: Since 2024, eligible buyers can transfer the credit to a registered dealer for an immediate discount at checkout, rather than waiting for tax filing.
• Used plug-in vehicles: A separate used clean vehicle credit (capped by income and vehicle price) can lower the cost of a qualifying used PHEV purchased from a dealer.
• 2024–2025 sourcing rules: “Foreign entity of concern” restrictions tightened in 2024 for battery components and expand in 2025 for critical minerals, which may reduce the number of qualifying models in 2025.
• Buyer and vehicle caps: Income thresholds apply to buyers; manufacturer suggested retail price (MSRP) caps apply to new vehicles and a sales-price cap applies to used vehicles.

Because the list of eligible models updates frequently, check the IRS and Department of Energy resources or ask the dealer to verify eligibility in the IRS system before you sign.

How to claim a U.S. federal credit

Claiming the credit is straightforward if you follow a few key steps and keep the right documentation.

1. Verify the exact trim’s eligibility using the IRS/DOE lookup and ask the dealer to confirm it in the IRS Energy Credits Online system.
2. Confirm you meet income limits and that the vehicle meets price caps and assembly/battery rules.
3. Choose point-of-sale transfer (if available) to receive the credit as an immediate price reduction, or plan to claim it on your tax return.
4. Keep the seller’s report and purchase documents; if not taken at the dealership, file IRS Form 8936 with your taxes.
5. For used PHEVs, ensure the vehicle and sale meet age, pricing, and dealer requirements; private-party sales don’t qualify.

These steps help you avoid surprises and ensure your discount is honored either at purchase or during tax filing.

State, local, and utility incentives

Beyond federal policy, many states, cities, and utilities offer additional benefits, most of which now target plug-in vehicles. Conventional hybrids rarely receive new purchase rebates, but local perks can still apply.

• Cash rebates or tax credits for PHEVs from states or provinces (amounts and eligibility vary; some programs are income-capped or exclude higher-MSRP vehicles).
• Home charging support, including rebates for Level 2 chargers, installation credits, or discounted off-peak electricity rates from local utilities.
• Access perks such as HOV/carpool lane stickers, discounted tolls, or preferred parking in some jurisdictions (increasingly limited to plug-ins or EVs).
• Sales-tax breaks or reduced registration fees in select locales (though some states impose additional annual fees on hybrids and EVs that can offset savings).

Availability and amounts change frequently; check your state energy office, transportation department, and utility websites before purchasing.

Other economic factors to weigh

Potential savings

Owning a hybrid—especially a PHEV—can produce ongoing savings beyond upfront incentives.

• Fuel costs: PHEVs can cover many daily miles on electricity, significantly reducing gasoline use if you charge regularly.
• Maintenance: Hybrids often have lower brake wear due to regenerative braking; engine load is reduced in city driving.
• Resale value: In markets with high fuel prices or congestion fees, efficient vehicles can retain value better than comparable gas-only models.

The more you drive on electricity and the higher local fuel prices are, the greater your long-term savings can be.

Possible trade-offs

Not all costs move in your favor; some policies and ownership factors can cut into or outweigh incentives.

• Extra fees: Several states levy additional registration fees on electrified vehicles to replace lost gasoline tax revenue.
• Charging access: If you can’t install home or workplace charging, a PHEV’s electric benefits—and thus savings—shrink.
• Model eligibility volatility: Sourcing rules can cause a qualifying model to lose eligibility midyear; always verify at purchase time.

Understanding these trade-offs helps you decide whether a hybrid or PHEV delivers net benefits for your situation.

International snapshot

Incentives for hybrids outside the U.S. are diverse and evolving, with a clear shift toward supporting fully electric vehicles.

• Canada: The federal iZEV program typically offers smaller incentives for qualifying PHEVs than for EVs; several provinces add their own rebates and charger support.
• United Kingdom: Purchase grants for PHEVs have ended; incentives now focus on EVs. Company-car Benefit-in-Kind tax remains favorable for low-CO2 vehicles, strongest for EVs.
• European Union: Many countries prioritize EVs; some still offer reduced company-car taxes or local perks for PHEVs that meet minimum electric range/CO2 thresholds.
• Japan: Longstanding tax breaks for efficient hybrids continue, with additional national and municipal subsidies available for PHEVs and EVs.
• Australia: Federal and state incentives heavily favor EVs; PHEV support is more limited and varies by state.

Because programs change regularly, consult your national transport or energy ministry and local authorities for current eligibility and amounts.

What to watch before you buy

A few checks can ensure the incentive you expect actually applies on delivery day.

• Confirm the exact VIN/trim meets federal and local rules at the time of purchase, including sourcing requirements for U.S. credits.
• Check income and price caps that can nullify a credit even when the vehicle itself is eligible.
• Factor in any additional state registration fees and your ability to charge at home or work.
• Ask the dealer to process the point-of-sale credit (U.S.) so your savings are guaranteed upfront.

These steps reduce the risk of losing an expected incentive due to eligibility nuances or paperwork issues.

Summary

Incentives to buy a hybrid car still exist, but they largely target plug-in hybrids rather than conventional hybrids. In the U.S., qualifying PHEVs may receive a federal credit of up to $7,500—often usable at the dealership—plus possible state, local, and utility benefits. Conventional non–plug-in hybrids rarely get purchase incentives today. Internationally, support increasingly favors fully electric vehicles, with narrower but still meaningful perks for PHEVs in some markets. Always verify the latest eligibility, amounts, and program rules where you live before you buy.

Why are hybrids being discontinued?

Hybrids aren’t being completely discontinued, but rather are seen as a transitional technology, with many automakers focusing on fully electric vehicles (EVs) to meet government mandates and future market demands. Factors like declining battery costs, improving charging infrastructure, and stricter emission regulations are pushing the market toward fully electric models. However, some manufacturers, like Ford and Toyota, are still investing in hybrids as a practical, transitional solution for consumers wary of the complete EV switch. 
Reasons for the Shift from Hybrids

• Future-Focused Regulations: Opens in new tabMany countries, including those in the EU and China, are setting targets to phase out or ban internal combustion engine (ICE) cars, including hybrids, entirely by 2035. 
• Falling EV Costs: Opens in new tabThe cost of EV batteries is projected to fall, potentially bringing EV prices in line with or below hybrids and ICE vehicles. 
• Improved EV Technology: Opens in new tabThe projected range of EVs is expected to increase, with charging times decreasing, making them more practical for the average consumer. 
• Expanding Charging Infrastructure: Opens in new tabThe availability of public charging stations, particularly fast chargers, is growing, addressing a key limitation for EV adoption. 
• Automaker Strategy: Opens in new tabSome automakers, like GM and Volkswagen, prefer to go all-in on EVs rather than investing in both hybrids and EVs, which divides resources and slows the overall transition to electrification. 

The Ongoing Role of Hybrids

• Transitional Technology: Hybrids still serve as a crucial bridge for consumers not yet ready to switch to fully electric vehicles, offering familiarity and range assurance. 
• Consumer Preference: A significant demand for hybrids remains, particularly for drivers who find the current EV market impractical or expensive. 
• Specific Market Needs: Hybrids can still be appealing to consumers with apartments or homes lacking charging capabilities, or those who frequently drive in areas with lagging charging infrastructure. 
• Manufacturer Focus: Some manufacturers, notably Toyota, continue to maintain a strong focus on hybrids due to their established success and consumer trust. 

In essence, while some hybrids are being phased out, the technology is not disappearing entirely. The industry is navigating a complex transition, balancing consumer demand for practical solutions like hybrids with the long-term regulatory and market pressure to achieve a fully electrified future.

How do I claim my $7500 hybrid tax credit?

Use Form 8936 to claim either the Qualified Plug-In Electric Drive Motor Vehicle Credit or the new Clean Vehicle Credit. The Qualified Plug-In Electric Drive Motor Vehicle Credit and the new Clean Vehicle Credit are each worth up to $7,500.

Do I get a tax credit for buying a hybrid car?

Some all-electric and plug-in hybrid vehicles qualify for a $3,700 to $7,500 federal tax credit. Many states also offer additional incentives for purchasing new EVs. Find tax credits and incentives in your state.

Do you actually save money with a hybrid car?

How Much Does a Hybrid Save on Gas? Hybrids truly shine when it comes to fuel economy and lower maintenance costs. Compared to a traditional gasoline car, you can expect to save between 20% and 35% on gas, which can add up to significant savings over time, especially as fuel prices fluctuate.