Due to the drop in resale prices of electric cars, this once considered “luxury” product has now become one of the most budget-friendly options available in the market.
In 2024, an interesting shift occurred in the used car market: previously higher-priced second-hand electric cars have gradually become cheaper than gas engine and hybrid cars. Just two years ago, due to supply chain crises leading to widespread car shortages, some used electric cars were even priced higher than new vehicles.
According to the automotive buying website iSeeCars, in August, the average price of a used electric car was $26,839, which is 11.4% lower than the average price of $30,292 for a used gasoline-powered car and 9.8% lower than the average price of $29,759 for a used hybrid car. Over the past year, prices of used electric cars have dropped by 25%, a boon for electric car buyers but a significant blow to sellers.
The prices of gas engine cars, hybrid cars, and electric cars were relatively similar in February. As early as September 2023, used electric cars cost around 12% more than used gas engine cars and 10% more than used hybrid cars.
However, an oversupply of new cars – including a slowdown in electric car sales (partly due to concerns about range and charging infrastructure) – has changed the game.
“Over the past year, the surge in new cars has been a catalyst supported by discounts and inventory clearance. With new car prices on the decline, the value of newer used cars has correspondingly decreased,” according to a report released last month by the automotive shopping website “Edmunds.” Therefore, used electric cars are now more “affordable” than ever.
Reported by The Wall Street Journal, prices in the used market have also been affected by new federal tax incentives for purchasing used electric cars. This $4,000 incentive, introduced in early last year, applies only to electric cars priced below $25,000. Analysts suggest this requirement has led some dealers to lower prices to meet this threshold.
Edmunds reported that currently, most used electric cars being sold are priced between $20,000 and $30,000. With prices decreasing, the sales velocity of used electric cars is picking up. iSeeCars data shows that in September 2023, it took on average 55.3 days to sell a used electric car, but now the sales time has decreased to 38.6 days, similar to used gas and hybrid cars.
Dave Katarski, Chief Operating Officer of Michigan-based Feldman Automotive Group, stated that his dealership is selling over two hundred used electric cars per month, a significant increase from a year ago.
Analysts mentioned by The Huari suggest that the substantial drop in prices of used electric cars may enhance their appeal to buyers who prioritize affordability. Meanwhile, many current car owners who initially paid a high price for their new cars are now facing upside-down loans, owing more than the value of their vehicles.
Car owner Christian Lange shared his experience, having purchased a brand-new 2018 Tesla Model 3. In early 2023, the car was valued at around $35,000, roughly equivalent to his loan. However, by early this year, the value of Lange’s Tesla sharply declined, leaving him with a $10,000 deficit compared to his loan amount.
With waning interest from buyers this year in electric cars, car manufacturers are more aggressively promoting new models through leasing, offering affordable electric cars and dampening demand in the used market.
Some brands are directly applying a $7,500 new electric car purchase tax credit to lease agreements to reduce the cost of acquiring new electric cars.
According to data from Edmunds, the average monthly payment for leasing an electric car has decreased from $950 in early last year to $582 in August. Ivan Drury, Director of Insights at the company, stated that this figure is roughly in line with monthly payments for purchasing a used electric car costing $28,000.
Leasing is rapidly becoming the most popular way to acquire a new electric car. Edmunds data shows that at the beginning of last year, around 16% of electric car sales by dealers were lease agreements, a number which has now risen to nearly 80%.
Kevin Roberts, Industry Insights Director at CarGurus, mentioned that the sudden increase in electric car leasing could have long-term implications.
While currently helping alleviate inventory backlog, in two to three years, a large number of lightly used electric cars may re-enter the market. Roberts pointed out that this potential wave could exert greater downward pressure on prices. Car manufacturers and lending institutions holding these lease vehicles will bear any losses from significant drops in resale value.
Drury noted that 77% of dealer-owned electric cars are leased. “The question is when these cars will reappear.”