The prices of used electric vehicles (EVs) have experienced a sharp decline, leaving both owners and dealerships facing significant challenges, the Wall Street Journal reports.
This dramatic fall in the value of preowned EVs stands in stark contrast to the broader used-car market, where values have remained relatively stable.
Just two years ago, some used electric cars were selling at prices higher than new models due to a supply-chain crisis that had driven up demand. Now, the market dynamics have reversed, with dealer lots filling up with unsold EVs and car manufacturers—led by Tesla—offering substantial discounts on new models to stimulate sales. These markdowns have contributed to a significant drop in the prices of used EVs, which have become some of the biggest bargains in the used-car market.
In September, the average selling price of a three-year-old electric vehicle was around $28,400, a 25% drop from the beginning of the year, according to data from car-shopping site Edmunds. This price is now lower than that of comparable gas-engine cars, a trend that diverges from the broader used-car market, where values have held steady.
Tesla, the top seller of EVs worldwide, has played a key role in driving down prices by slashing up to one-third off the cost of some new models in the US Other automakers have followed suit, further depressing the value of used EVs. Additionally, rental-car giant Hertz flooded the market with a large number of used Teslas earlier this year, contributing to the price drop.
As a result, many current EV owners find themselves owing more on their loans than their vehicles are worth, with some reporting losses of up to $10,000 in vehicle value. The influx of price cuts and new incentives has also caused a shift in buyer interest, as automakers aggressively promote financing deals for new EVs. Leasing has become the most popular way to acquire a new electric car, with nearly 80% of EVs at dealerships now being leased, up from 16% last year.
While the falling prices may attract budget-conscious buyers, they pose long-term risks for the market. Industry analysts warn that the recent surge in electric car leases could lead to a flood of gently used EVs returning to the market in two to three years, potentially driving prices down even further. Automakers and lenders may face significant losses if resale values continue to plummet.
The federal government’s $4,000 tax credit for used EV purchases, which applies to vehicles selling for under $25,000, has also added pressure, encouraging some dealers to lower prices further to meet the credit’s eligibility requirements. This, combined with a growing inventory of unsold EVs, has prompted automakers to reconsider their production and expansion plans, with some pulling back to avoid oversupplying the market.
