BMW Clean Diesels Earn Tax Credit

Two BMW diesel vehicles, the 335d sedan and the X5 xDrive35d crossover, are now qualified for the federal “Advanced Lean Burn Technology Motor Vehicle Tax Credit.” Buyers of the 335d will be eligible for up to $900 in tax credits, while those purchasing the X5 can qualify for as much as $1,800 from the IRS.

Federal tax credits were previously granted to clean diesel vehicles from Mercedes and Volkswagen.

The credits will offset some of the premium associated with purchasing the pricey BMW clean diesels, and will alter the economic calculation for buying the diesel rather than the conventional gasoline versions of the vehicles.

BMW 335d

The 335d costs $44,750 and has fuel economy ratings of 23 city/36 highway. Compare that to the gasoline-powered 335i’s $41,125 sticker, and 17 city/26 highway rating. The $3,625 difference is somewhat offset by a $900 tax credit.

BMW X5 xDrive35d

The X5 xDrive35d starts at $52,950 and gives 19 city/26 highway, while the base gas-powered X5 costs $48,325 and has fuel economy ratings of 15 city/21 highway. The $4,625 difference is reduced by a $1,800 tax credit.

When factoring in the tax credit with price, mileage, and cost of fuel, the gas-powered Bimmer beats out the clean diesel on economics—but not by much. Also, as with hybrids, economics are only part of the buying equation. Reduced oil consumption, cleaner tailpipe emissions, and a longer cruising range—up to 40 percent longer—are also factors for a growing number of car buyers.


  • qqRockyBeans

    Why does the X5 get more tax credit when the 335d gets better mpg??

    AAAAAAAAHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHHH

  • I Love My BMW

    Vehicle weight homie.

  • Charles

    What a crock. A tax credit for a 19 MPG city vehicle. Why on earth do we have tax credits for any vehicle that gets under 27.5 MPG (the CAFE standard for cars).

    The 335d is also a crock. 23 city/36 highway. The new 2010 Ford Fusion is rated at 23/34 and is a larger car. When you adjust for the higher CO2 per mile for diesels, the Fusion has better CO2 per mile. Just because a vehicle is a diesel or hybrid, should not make it eligible for a tax credit. The vehicle should get at least good MPGs and be significantly better then the non-diesel and non-hybrid competition.

    Not that it really matters for these BMWs. The total sales will not amount to a lot of cars, the we should fix our stupid tax credit for cars system.

  • AP

    Why do we have incentives for ANY vehicles? Raise the fuel tax and let the market sort it out.

  • simon@aus

    I agree with AP.

  • Charles

    Hello AP;

    You asked why do we have incentives for any vehicles. I am going to try to answer that, but I agree with you that incentives are a bad idea.

    The idea with incentives for hybrids is to encourage the development of systems that will take us to pure EVs. The thinking goes that hybrids are a stepping stone to better batteries, traction motors, regenerative systems and control systems.

    Why there are incentives for any diesels is beyond my ability to comprehend. Clean diesels are only clean when compared to non-clean diesels. There is no advantage to society to have diesels then gas powered vehicles if the CO2 per mile is the same.

    I think that sometime in the not so distant future the typical two car family will have one pure EV and one plug in hybrid. As for how to get there, I think taxes on CO2 so that gas in the USA costs about the same as in most of Europe should do the trick so that there is demand for high MPG cars.

  • Dom

    I for one am glad that diesels get a tax incentive too. The incentive for hybrids was not to encourage a transition to electric vehicles… it was too encourage the purchase of more fuel-efficient vehicles, be it hybrid or diesel. I’m all for alternatives, and I more more than one alternative, and not have the government push just one technology down our throughts. By the way, I believe diesels are typically better on CO2 per mile than a gasoline-based car. The Nox emissions are the bad area for diesels, and that’s the big improvement with “clean diesel” .

  • Boom Boom

    The fact that the bigger, lower MPG vehicle gets a bigger tax break, is the whole problem with these incentives. There will always be loopholes and backwards payments. That said, since no one in congress has the guts to even propose increasing a gas tax and it may never happen, incentives should at least based on the absolute savings that a vehicle gets. Higher absolute MPG should always have higher savings. That way we give incentives to smaller and more efficient cars. (But we’ll always have loopholes until we just tax gas to $4 a gallon.)

  • Lost Prius to wife

    From an economy point of view, gas taxes attach themselves to everyone who uses gas. The increase of gas prices will “push” people to buy more fuel efficient vehicles. This will also promote manufactures to build more fuel efficient vehicles. But from a family budget point of view, this will hurt the poorest people’s budget the most, not the rich. This will create the least “incentive” for the poor to obtain a car that would do them the most good (one does have to eat; it is hard to “eat” a car).

    From an economy point of view, tax credits help everyone to buy a vehicle that has an incentive/credit over the vehicle that does not. If one wants to promote less gas usage and less CO2, then the tax incentives/credits need to be attached to vehicles in any class and/or type that creates less gas usage and less CO2. Obviously, the vehicle that produces the least gas usage and least CO2, no matter what class and/or type, deserves to have the highest tax incentive/credit. Although this method favors both the rich and poor, it favors the poor more that the rich. The poor will have to use a much smaller percentage of their budgets to obtain a car; this will help their budget in the long run with gas cost.

    In my macro economics class, it was indicated that approximately 5% of the people in the United States own 75% of the wealth (the “5% of the people” figure can and has varied from 3% to 15% or more from time to time; the figure given is a “relative” average). That means that 95% of the people “fight” for the other 25% of the wealth. That also means that 95% of us live off our wages and budgets more than our “wealth”. Therefore, tax incentives/credits help to stimulate the economy, and the buying of cars, more than taxes on products (gas).

    For the foreseeable future, it is my opinion that it will require a balance of the two strategies to both stimulate the economy and reduce fuel consumption. In a healthy economy, which we are not in right now, eventually both strategies should be removed. Should the “future healthy” economy need further stimulating and/or fuel consumption need further reducing, then one or the other, or both, strategies should be put back in place.

  • Shines

    I’m sorry Lost Prius to wife, I don’t follow your logic. The statement -tax credits help everyone to buy a new vehicle – this you say after stating high gas hurts the poorest peoples budget the most. The poorest cannot afford a new vehicle. Incentives aren’t offered on used cars. In the above article especially – it is not the lower or lower middle class that is going to buy a $52000 car for $50k because of incentives. Not only that, but as a used vehicle the market will maintain a higher value because of the technology which would be a dis-incentive for a used car buyer.
    As far as the statement that tax incentives/credits help to stimulate the econmy – then the Govt aught to give an incentive to all vehicles that are fuel effiecient especially the inexpensive/small conventional ones. That would help the poor and middle class more than credits for BMWs.

  • MD

    I don’t understand why we don’t put more efforts into what we have an over-supply of, natural gas. it burns much cleaner and is by far cheaper to produce and we have TON’s of it! I was considering converting my 2 cars to it but hell it’s about $750 a pop and NO tax credit.

    None of our energy policies seem to make any sense!

  • Lost Prius to wife

    Shines, it is simpler than you make it. If one has the choice between two similar cars, let’s say a $20,000 regular 33 mpg car and a $27,500 48 mpg 16Kh lithium hybrid, and only $20,000 budgeted, either loan or actual cash, for a new car, which car would one buy? Simple, one chooses the $20,000 regular 33 mpg car. One could wait to earn the extra $7500 for the hybrid. But if one is trying to buy a car now, it is most likely due to the present car will not last the required time for the extra $7500. The difference in mpg may not be a factor when one needs a car now.

    Now we add in a $7500 tax credit or incentive for the 16Kh lithium battery. Now the two similar cars “cost” the same ($27,500 – $7500 = $20,000). But one gets 48 mpg versus 33 mpg. This is a difference of ~$284 per year at $2 per gallon and ~$426 per year at $3 per gallon. Unless this is “pocket change” to you (if it is, please send it to me), one does not have to be a genius to figure out that the hybrid is the “cheaper” car, especially in the long run.

    One has still stimulated the economy by one car sold. But it has also reduced the gas used in a year by 142 gallons. Now, times 100,000 hybrid cars that are expected to be sold by one manufacture equals ~14.2 million gallons of gas. Of course, from your comments, you do not consider this to be a significant reduction in gas usage. And by some standards, it is a small reduction. But it is still a reduction. Maybe we should increase the number of hybrids to the over 1,000,000 hybrids that exist right now? Should we add in the additional 300,000+ hybrids that are still expected to be sold by all other hybrid manufactures world wide this slow economic year?

    Now let us consider the case of, “The 335d costs $44,750 and has fuel economy ratings of 23 city/36 highway. Compare that to the gasoline-powered 335i’s $41,125 sticker, and 17 city/26 highway rating. The $3,625 difference is somewhat offset by a $900 tax credit.” which you have brought up. Based on EPA and DOT estimates and information, the 335i gets 20 mpg and the 335d will get 29 mpg. This translates to a saving of ~233 gallons per year per car. This is a savings of ~$466 at $2 a gallon ($2 this is about average for the Denver area right now).

    Yes, your argument that not as many people will be buying this kind of car is valid. But my statement was, “If one wants to promote less gas usage and less CO2, then the tax incentives/credits need to be attached to vehicles in any class and/or type that creates less gas usage and less CO2.” The 335d is one of those cars that will save gallons per year and save the buyer money in the long run. And if you had read further, you would have read, “Obviously, the vehicle that produces the least gas usage and least CO2, no matter what class and/or type, deserves to have the highest tax incentive/credit.” The Chevy Volt ($34K) will get a $7500 tax credit with its ability to average 48.5 mpg for 340 miles versus the BMW 335d (~$45K) which will get only 29 mpg and a $900 tax credit.

    Now if we include a $4500 incentive of scraping a much lower mpg car (See article “Save the Economy: Crush Your Car!” dated January 29, 2009 on this site) along with a $7500 tax credit, I now have a Chevy Volt ($34K) pricing out at $22K. My idea was to sell cars which would stimulate the economy along with saving the buyer money both short term and long term. I do not always agree with Bryce when he speaks up in this site, but he is right that he, many others, and possible myself would be lining up to get a $34K Chevy Volt for $22K. Even if no tax credits / incentives existed, people will still be buying a Chevy Volt at $34K. But a whole lot more people would be able to buy the Chevy Volt at $22K. And look at the gas savings at 48.5 mpg for both the country and the buyer. And with every crushed car, the used car market would increase in value due to “supply/demand” economics. By the way, where did all these used cars come from anyway? Were they not a new car at one time? Where and how are we to get more used cars if one does not produce more new cars?
    Shines, the BMW buyers switching from a 335i to a 335d will reduce the amount of fuel used by 31%. If we could get everyone in every economic sector to buy a car that reduce the amount of fuel use by 31%, the fuel usage in the US would drop 31%. Now OPEC could drop there production to as low as they want and to try and up the price. And they would find that it would not work very well since they only control 40% of the world oil production.
    Shines, you are right. Not everyone can afford a $50K BMW. Not everyone can afford a $34K Chevy Volt. Not everyone can afford a $23K Toyota Prius. Not everyone can afford a $15K Honda Fit. Not everyone can afford a $5500 Chinese car sold at Costco or Wal-Mart (See article “Coming: Cheap Chinese Cars at Costco?” dated February 7, 2009 on this site). In fact, there are people out there that cannot even afford a used car at $500.
    My statements deal with the people that can afford a car of some sort. And incentives should be in place that will be beneficial for both the country and the buyer. Hybrids tend to do that, hence the reason for this site and its many articles on hybrids and their savings.

  • cleandiesel

    The first development is the venture to achieve cleaner fuel. The second venture, on the other hand, is to promulgate tougher rules on vehicle emissions.

  • altonalvin

    The BMW 7 Series is a line of full-size luxury vehicles produced by the German automaker BMW. Introduced in 1977, it is BMW’s flagship car and is only available as a sedan or extended-length limousine. The 7 Series traditionally introduces technologies and exterior design themes before they trickle down to smaller sedans in BMW’s lineup. liberté

  • arthurarnold

    The true value of small scale fuels could compete with gasoline and diesel in the future, and change the dynamic of automobiles. Here is a tiny scale example of what the fuel source and supply could mean to what consumers prefer in autos. This is really fascinating when you think about what is possible with a dream. art painter