- Used EV prices fell 20.5% year-over-year last quarter.
- Companies have had to cut new EV prices this year, which has pushed down pre-owned values.
- The good news is that if you want an affordable EV, the used market finally looks good.
It's a brutal time to sell and a helluva time to buy. The used EV market is in freefall, and it's current owners that are holding the bag. But if you've been looking for the time to get into a modern, long-range EV, it may be now.
New data from Edmunds shows that EV values have fallen 20.5% year over year. That's a seismic shift. The overall used car market, for reference, has cooled by 6.8% over the same time period. That's a big swing for the market as a whole, but the EV swing is gargantuan. Compared to average used vehicle values during the second quarter of 2022, EV values in Q2 2024 are down a whopping 38.5%.
That's for a couple of reasons. Reaching back to 2022, some of the drop can be explained by the fact that there weren't many good used EVs on the market in 2022. Most automakers either weren't making attainable long-range EVs or had just started production, and pickings were slim on the used-car market. The majority of Teslas ever sold were sold in the last four years.
But that push for higher EV volumes is also driving the bigger factor in this data. Manufacturers have been aggressively cutting prices and incentivizing new EVs to compete for slices of a pie that isn't growing as quickly as they expected it too. Combined with heavy tax credits for new car leases and extraordinarily high interest rates for used-vehicle loans, it often makes more sense to buy or lease a new EV rather than a used one, even if the used car is thousands less. I'm an example: After a year of searching for a sub-$30,000 used deal with decent financing, I caved and grabbed a crazy lease deal on a Chevy Blazer EV.
That's putting downward pressure on used EVs, per Edmunds.
"This news shouldn't surprise anyone in the automotive industry, as we’ve seen automakers utilize virtually every incentive under the sun to move stale new-EV inventory," Edmunds' Ivan Drury wrote in the report. "With those new-EV price cuts occurring directly as a result of cash incentives and MSRP reductions, as well as heavily subsidized leases that also allow the use of the Inflation Reduction Act tax credit, the trickle-down effect on the used vehicle market has been pronounced."
The used vehicle tax credit is pushing down prices, too. The $4,000 tax credit only applies to vehicles sold for under $25,000. So if you're a dealer and have a vehicle priced at $26,000, discounting it by $1,000 will lower the effective price by $5,000. A dealer will have an order of magnitude more interested buyers at $21,000 effective vs. $26,000, which puts a weird wrench into pricing strategy.
Finally, there's a large proportion of the market that just isn't interested in an EV yet. Many people are worried about reliability, charging and range, and they'll walk right past any EV on the lot. The only way to get them to seriously consider one is by offering a far better deal than they can get on any internal combustion product. That's why my Blazer, the Toyota bZ4X, the Hyundai Ioniq 5 and Volkswagen ID.4 have all offered cheaper lease pricing this year than you can get on a Honda Civic. People want a deal.
It's a good time to get one. If you're looking for a sub-$30,000 EV, there have never been so many compelling options. Tesla Model 3s, Hyundai Ioniq 5s, Polestar 2s and more are all on the table. If you currently own one of those cars, though, I hope you like it. You probably won't want to trade out of it any time soon.
