Fast depreciation: Used EVs are seeing dramatic price drops and it is putting consumers underwater
Deep discounts on new models by Tesla and other EV makers have sent the price of second hand electrics plummeting
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Second-hand electric vehicles are plunging to bargain prices as dealerships clog up with unwanted models, according to reports.
The Wall Street Journal reported on Monday that the average selling price of a three-year-old EV had dropped by 25 percent since the start of 2023, making them cheaper than gas-drinking vehicles of the same vintage.
The reason, experts said, lies with EV builders offering deep discounts and low-interest financing deals on new cars as they struggle to shift their inventory in the face of flagging consumer demand.
"The biggest competition for one- or two-year-old used [electric] vehicles is across the lot. It is the brand-new version," Ivan Drury, director of insights at the car-shopping website Edmunds, told the Journal.
The low cost of a new one has consumers turning to those models instead of trying to save a few bucks on used models. That, in turn, is driving down the cost. It’s leaving dealers with inventory that is hard to move, and people try to trade in a used model, with less money than they thought they’d be getting.
It is a sharp contrast to the situation several years ago, when the price of used cars and car parts soared due to the global microchip shortage and the end of Covid-19 lockdowns.
For gas vehicles, the average second hand price has remained more or less stable at around $30,000 since 2023, according to Edmunds data – whereas EVs have gone from nearly $40,000 to about $28,4000.
That is good for buyers but bad for people who previously bought EVs on credit. According to Quartz, 46 percent of such owners are now underwater on their loans, meaning they owe more money than their car is worth.
Tesla in particular has continually cut its prices in order to keep sales numbers high, infuriating those who bought a brand-new Tesla at the old price only months or weeks earlier.
The Journal also cited a decision by the car rental giant Hertz to sell around a third of its global EV fleet this July and use the proceeds to buy replacement gas cars, despite previously spinning itself as an EV leader.
At the time, Hertz told federal regulators that it had seen weaker demand for EVs among its customers and that they cost more to operate than traditional vehicles.
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