The used electric vehicle market is an “if you know, you know” sort of thing. While new EVs still get most of the wider media and public attention, the sheer variety of used EVs out there is rising much more quickly than most people realize—and by virtue of its outsize sales, used Tesla prices have a disproportionate effect on the market.
But that’s about to change, says Recurrent CEO Scott Case. The top executive of the battery health startup said sees the used-EV market maturing rapidly—“and we’re going to see used-EV prices converge toward $25,000.”
Those prices peaked in the third quarter of 2022. At that time, Tesla slashed its prices across the board and other carmakers followed suit. As a result, used EV prices have dropped nearly 10% since January alone.
Recurrent tracks various data around EV usage, sales, and pricing. Case previewed its most recent quarterly Used Electric Car Prices & Market Report a few weeks ago at the Forth Roadmap conference in Detroit. Data in that report, released this week, suggests car dealers largely seek used EVs at prices around $25,000—and ignore those at much higher prices.
It's The Incentives, Stupid
There’s a simple explanation for that number. The $25,000 level is the highest price allowed for a vehicle to qualify for the used EV purchase incentive established by the 2022 Inflation Reduction Act. That incentive differs from those up to $7,500 for leasing or buying a new EV. The used credit maxes out at $4,000, is limited to 30 percent of the purchase price, and comes with lower income limits (from $75,000 to $150,000), to ensure buyers who may only be able to afford used vehicles receive an extra incentive to buy one that’s an EV.
After all, what dealer wouldn’t want to advertise a price of $25,000K for a three-year-old car, and then point out buyers may save up to $4,000 more if they qualify? That money can come right off the purchase price if the buyer signs it over to the dealer.
But before you do so, make sure that the entire amount will come off the purchase price—and, as always, be aware of tactics some dealers may use to boost the sticker price and their profits, from extended warranties to unrequested trim dress-up items like chrome accents or special floor mats or “paint protection.”
Eric Lyman, the Vice President at Black Book—which tracks weekly prices of new and used cars, trucks, and RVs—explains why. “The $25,000 price limit [for the purchase incentive] drew a big line in the sand that many bidders wouldn’t cross," he said. "Once the collective EV reseller market understood where that line was, they flocked to purchase vehicles that toed the line. So there’s high demand [from dealers] up to that price point, but almost none above it.” Black Book tracks weekly prices of new and used cars, trucks, and RVs.
Converging On $25,000
Recurrent data on EV pricing shows prices converging at $25,000 as the market has matured since 2021. That was the first full year of new sales for three mass-priced new EVs: the Ford Mustang Mach-E, Tesla Model Y, and Volkswagen ID.4. Prices for all three have followed similar paths, now converging at $25,000 to $30,000 where, as Recurrent says, “prices meet demand.”
That convergence applies as well to a broader sample of EVs from model year 2022. Looking at 14 different models, many of their prices will approach that same level next year—with pricier models depreciating differently. (We were surprised at the significantly faster depreciation of the Tesla Model S and Model X, perhaps reflecting their lengthy tenure on the market.)
If you’re thinking of buying a used EV, pay particular attention to model year 2023. The IRA defines eligibility for the used-EV credit by model year. But for simplicity, it assumes every vehicle of that model year becomes eligible on Jan. 1 of the calendar year two years later.
That means a 2023 EV built a year ago this month will be far less than two years old when it becomes eligible. But, that newness may not be reflected in its price—which, if you’re lucky, will still approach $25,000.
More Than A Million Used EVs Coming Soon
Better yet, more EVs were sold last year in the U.S. than in any prior year: 1.5 million, almost as many as in 2021 and 2022 combined. On Jan. 1, that huge volume of EVs becomes eligible for the used purchase incentive. In other words, the number of EVs that will be eligible for the credit roughly doubles. You’ll likely have a greater choice of used EVs at dealers than ever. Indeed, Recurrent says it’s already seen growing dealer interest in buying 2023 EVs ahead of their eligibility date.
Data on EV battery degradation gathered by Recurrent and published 18 months ago seemed to suggest that an EV’s calendar age was as significant a factor in capacity loss as the miles it had covered—though the used-car industry still views miles as the main metric for used-car condition.
It’s not a surprise that new cars get more than their share of media coverage. They’re novel, sexy and fresh. But for every new car sold in the U.S. (about 16 million last year), almost two and a half used ones (about 40 million) find buyers. Soon enough, that will likely be the case for EVs too.
Case ended his preview of the latest data by suggesting the prime car sales month might shift for EVs from April to January. Traditionally, many people have used their income-tax refunds to buy vehicles in the springtime. But, he said, with huge numbers of EVs from the latest model year becoming eligible on January 1, perhaps that month becomes the prime month for used EV sales?
It’ll take a few years to see if Case is right. But greater numbers of affordable EVs are a good thing, as Plug In America’s senior policy director Ingrid Malmgren points out: “More affordable used EVs on the market allow more drivers to benefit from the cost and maintenance savings of EVs. We look forward to seeing even more used EVs enter the market and, as drivers coming [out] of EV leases buy or lease new EVs, getting more EVs into the pipeline and on the road.”
John Voelcker covers advanced auto technologies and energy policy as a reporter and analyst, specializing in electric vehicles and the energy ecosystem around them. He edited Green Car Reports for nine years, and his work has appeared in Car and Driver, The Drive, Forbes Wheels, Wired, Popular Science and NPR's "All Things Considered."
