(MENAFN- ValueWalk) Gov. Gretchen Whitmer has proposed a new plan that will offer a tax rebate to help residents save some money on the purchase of a new car. Specifically, the Michigan tax rebate on new cars aims to reduce the price of vehicles and boost sales throughout the state.

Michigan tax rebate on new cars: what is it?

On Wednesday, Governor Gretchen Whitmer announced the new“MI Vehicle Rebate” plan. The objective of the rebate plan is to boost the sales of new electric, hybrid and traditional combustion vehicles in the state. The state recently reached a new contract agreement with the United Auto Workers (UAW) and the Big Three.

“MI Vehicle Rebate will save you money on your new car as you walk out of the dealership with your keys,” Governor Whitmer said in a statement.

During the upcoming State of the State address, Gov. Whitmer plans to ask lawmakers to set aside $25 million to fund the MI Vehicle Rebate. The state will continue to offer rebates until the full $25 million is utilized.

Whitmer's MI Vehicle Rebate plan is slightly different from the plan the governor introduced in last year's State of the State address. Last year's plan, which failed to win funding in the annual budget, limited the rebate to $2,500 on electric vehicles and charging equipment.

Whitmer's announcement comes after recent reports of slowdowns and layoffs in Michigan's auto industry. For instance, the Ford Motor Co., earlier this week, decided to reduce production of its all-electric F-150 Lightning pickup truck.

MI Vehicle Rebate plan: how does it work?

If approved, the Michigan tax rebate on new cars will lower the cost of vehicles (electric, hybrid or traditional vehicles) between $1,000 and $2,500. When combined with federal incentives, the rebate could help residents save up to $10,000.

The following four categories of new vehicles qualify for the rebate:

• $2,500 rebate on a new battery electric or hybrid vehicle, which are manufactured in a facility where workers are represented by an automotive union.
• $2,000 rebate on a new battery electric or hybrid vehicle.
• $1,500 rebate on a new internal combustion vehicle, which are manufactured in a facility where workers are represented by an automotive union.
• Rebate of $1,000 on all other new internal combustion vehicles.

Specifically, the governor is proposing a tax rebate of $2,500 for a union-made electric or hybrid vehicle and $2,000 for a nonunion-made electric or hybrid vehicle. The Michigan tax rebate won't apply to used vehicles.

The rebate will be applied to the final price of the vehicle at the time of purchase. When a buyer decides to purchase the vehicle, the seller will contact the Department of Treasury to get the tax rebate voucher. Once approved, the seller will subtract the rebate amount from the final price of the vehicle, depending on the vehicle's category.

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