Used Electric Vehicle Prices Dropping Faster Than Gas Cars
By Aaron Crowe
Buyers of electric vehicles have always paid a premium when compared to their gas counterparts, often due to the high costs of technology and the batteries needed to run them.
That premium for new cars — sometimes as much as $20,000 before a federal tax incentive is taken into account — disappears in three years, with used electric vehicles, or EVs, costing up to $3,000 less than their gas sister models or at least coming close.
Used cars are usually cheaper than new cars. New data from Black Book, a vehicle pricing service, along with data from Kelley Blue Book, show that used EV prices are dropping a lot faster than their gasoline counterparts and that EVs are retaining a lot less of their original value.
EV Leaf retains 26% of original value
For example, a new 2012 Nissan Leaf SV hatchback sells for an MSRP of $36,380, which drops to $28,880 after federal tax incentives for buying a new EV. Its gas counterpart, a new 2012 Nissan Versa SL hatchback, sells for an MSRP of $19,320, or $9,560 less than the EV.
But the EV Leaf sells for $900 less than the gas Versa three years later, for $7,400 for the Leaf vs. $8,300 for the Versa, according to Black Book data from July 15, 2015. That equates to a 26 percent retention rate for the Leaf from its $28,880 price after the tax incentive, while the gas-powered Versa has a better 43 percent retention rate in value after three years.
Here are some other examples of used car prices for 2012 EVs and their gasoline counterparts in July 2015. EVs are listed first, followed by their used price and three-year retention rate. The cheaper car is in bold.
Mitsubishi i-Miev ES 4D hatchback: $5,350, 25%.
Mitsubishi Lancer ES 4D hatchback: $8,450, 43%.
The EV is $3,100 cheaper.
Ford Focus Electric 4D hatchback: $10,250, 31%.
Ford Focus SE 4D hatchback: $9,100, 44%.
The gas car is $1,150 less.
Chevrolet Volt 4D hatchback: $10,500, 32%.
Chevrolet Cruze LT 4D sedan: $9,850, 49%.
The gas car is $650 less. The Volt, it should be noted, is a hybrid that runs on electric and gas power.
EV and hybrid prices dropping
“This premium really doesn’t stick around when you’re selling in the used market,” says Anil Goyal, vice president of automotive valuation and analytics at Black Book.
Not only are pure elective vehicle prices dropping for used cars, but so are hybrids that use gas and electricity, says Sean Foyil, a supervisor for the vehicle evaluations team at Kelley Blue Book, or KBB, another car valuation website.
For 2012-14 cars, the average price drop for an EV so far this year was 28 percent, which is “astronomical,” Foyil says. Hybrid alternative energy vehicles dropped 17.5 percent during the same time, he says.
That compares to gas-only vehicle price drops of 8.7 percent for compact cars, 7.4 percent for midsize gas cars, and a 3.6 percent drop for fullsize vehicles, according to KBB.
How used EV prices drop so low
Why the big drop in used EV prices? Demand is low for a variety of reasons, including:
Low gas prices. New EVs cost an average of $17,000 more than new gas cars, Goyal says. Gasoline prices have dropped since mid-2014 to a national average low of $2.02 a gallon in January 2015, and are now around $2.36 per gallon nationally.
Paying $17,000 more for a new car when gas prices are low would require a steep increase in gas prices to make up for that extra expense, Goyal says.
“Gas prices certainly aren’t helping,” he says. “That’s a primary driving factor.”
Gas-only cars are getting more efficient every year, Foyil says. Even as more types of hybrids come out, gas-only cars still sell more.
“They’re actually taking market share from the hybrids,” he says.
Battery life. “Range anxiety” is a new phrase for EVs. It’s when an EV driver worries that the battery will run out of power before they get to their destination or a charging station.
Range anxiety is becoming less of an issue as better battery technology is introduced. The 2016 Nissan Leaf gets 107 miles on a full charge, compared with about 80 miles on its first model in 2011.
The charge on an EV battery deteriorates over time, Goyal says, as much as 20 percent in five years, which could be enough to turn off used EV buyers.
The higher range still “doesn’t cut it” for many commuters, Foyil says, even though their car may be parked at an office most of the day, where they can recharge and still have plenty of juice to get home.
Until EVs get a range that most people can get comfortable with, range anxiety will exist and there won’t be a strong secondary market for them, he says.
However, range anxiety may be more of a mental roadblock to potential EV buyers, especially if the range fits their needs and driving habits. The average American drives less than 40 miles per day, less than half the range of EVs like the Leaf. With most U.S. households having two or more vehicles, an EV would leave a gas-powered alternative for longer drives.
Short trips are just what Michael Saltzman of Los Angeles has in mind while shopping for an EV, mainly because an electric car now fits in with his driving needs. Saltzman says he’s considering leasing a 2016 Kia Soul EV because he can get about 100 miles on a charge, and it’s enough to get him to his nearby office and to client meetings. He expects to lease because, as he says, “I think a lot will change in the next three years.”
His two children have left for college and his wife has a gas car that they’ll use for long trips. On the rare days when Saltzman needs a car to go further, he’ll exchange cars with her.
Only early adopters want EVs. There isn’t much of a used car market for EVs because the people who most want EVs are early adopters who want their cars new and are willing to pay a premium for them, Foyil says. They don’t want “old” technology, even if it’s only three years old, and don’t want a used EV, he says.
“The people who are willing to buy an electric car are early adopters,” Foyil says, who would rather have a new car than one with 50,000 miles on it.
“People who are paying these premiums are paying these premiums to get a new car,” he says.
For some of these buyers, saying that they’re helping keep the air clean with a zero emission car is enough of an incentive to buy an EV, Foyil says.
“I see EVs as more of a lifestyle factor where it’s not going to affect them,” he says.
This is similar to the “Apple effect,” where each new model is reputed to be so much better and advanced that old ones must be worth less than nothing, says Mike Arman, 69, a car enthusiast for more than 50 years who has owned more than 150 cars and is the director of business development for the city of Oak Hill, Fla. Arman is shopping for a used 2011 or 2012 EV, and says he’s leaning toward buying a used Volt.
Last year’s electric car model may be deemed obsolete by people who want the newest and “best,” he says, though last year’s model still runs just fine.
Lower leasing prices and oversupply. Leasing a new EV can be cheaper than buying, and an oversupply of leased EVs two to three years later can result in lower used EV prices, Goyal says.
The lease price is based on the residual value three years later, Foyil says. With used EV prices dropping so much, Nissan, for example, needs to raise the Leaf lease price enough to make up for that depreciation, he says.
Little choice. Even though there’s an oversupply of used EVs, some consumers may be waiting for more of a choice among electric models. There hasn’t been a major upgrade in less expensive EVs, but one is coming next year, says Joseph Nagle, director of marketing at EverCharge, a builder of EV charging stations.
Other than Tesla, there hasn’t been a major release in the EV market, Nagle says. In 2016 “the mid-range EV market is going to get crowded,” he says. This includes the Leaf and the Volt, and the Chevy Bolt and Tesla Model 3 are set to release in the next few years with 200-mile ranges and a $35,000 price, he says: “This is what most people are waiting to pounce on.”
Of the choices they do have, consumers may be waiting for Tesla to come down in price and are “impressed and intrigued” with its vehicles, Nagle says. The “Tesla effect” creates high demand for Tesla while slowing down the competition, he says.
“People want the brand with the appeal behind it and that happens to be Tesla,” Nagle says.
No tax rebate for used EVs. Used EVs aren’t eligible for the $7,500 federal tax rebate, which quickly gives them less of a pull in that market, Arman says.
“This rebate is only available to the first purchaser, so if an electric car’s list price is $40,000 before the rebate, it is $32,500 after the rebate,” Arman says. “If you were to find a current year used electric car with one mile on it, since it isn’t eligible for the rebate, it is automatically worth $7,500 less than a factory new one.
“That is a very expensive mile, but it works in favor of a used car buyer.”
EVs don’t feel new. Despite the uniqueness of being electric, many EVs aren’t “brand new cars but electrified versions of existing models,” Nagle says.
“Unfortunately this makes them feel slapped together, throw-in type vehicles designed to meet government standards rather than genuine attempts to make great vehicles,” he says. “People have noticed and are steering clear, so to speak, and finding their way toward something designed to be electric from the bottom up.”
