Why Are Electric Vehicles Losing Value Faster Than Other Cars?
When you look at the list of vehicles with high depreciation, you always find luxury sedans losing their value the quickest. In a segment dominated by leases and a latest-and-greatest mentality, that makes sense on several levels.
However, as electric vehicles continue gaining a foothold on the U.S. market, we’ve begun seeing them pop up on the list of cars with the most severe depreciation. An October 8 study by iSeeCars showed one pure EV and two plug-in hybrids in the top five models for depreciation over five years.
While Teslas have held their value well, there are different factors in play on the low end of the market. First, you have to look at the impact of EV incentives. But we also need to consider that five years equals a lifetime for some cars in this fast-changing segment.
On the used market, you subtract EV incentives.
In order to encourage sales of economical EVs, the government has offered a $7,500 tax credit on purchases. On top of that, some states have made rebates of $2,000 to $5,000 available to early adopters. That means used buyers (and sellers) immediately subtract over $8,000 (incentives plus minimum depreciation) before considering how to price a used model.
For the purposes of the iSeeCars study, we’re talking about cars from the 2013 model year. At that time, the Nissan Leaf offered 75 miles of range at a purchase price just under $30,000. Five years later, iSeeCars data showed the ’13 Leaf selling for an average of 72% lower than its sale price.
When you consider the depreciation for the average vehicle over five years (50%) and subtract the EV incentive, you’d get this Leaf down to about $7,500. Indeed, that’s exactly 75% off what a base model would have cost in 2013.
The No. 2 model on the list was the Chevrolet Volt, which in 2013 sold for $39,145 and offered 38 miles of EV range with 380 miles total range. Since the Volt’s large battery qualified it for the full tax credit, you have to consider the impact of incentives here as well.
Assuming average depreciation (50%) on the price of a base ’13 Volt ($40,000) and subtracting the $7,500, you get to $12,500, which is 69% off the original MSRP. That figure is remarkably close to what iSeeCars data showed Volt at (71% depreciation) in 2018.
The technology has passed some EVs by.
While incentives play a starring role in the fast depreciation of the above plug-ins, we can’t ignore how the technology of the current market has lapped early EVs. Tesla and Chevy both have models offering over 235 models, and several more EVs with similar range are coming in 2019.
But going back to the low end of the market, we find even the 2018 Nissan Leaf (151 miles) and Volt (53 miles EV range, 420 miles total range) rendering their predecessors obsolete. These days, you can find a 2016 Leaf (107 miles) available for less than $12,000 used.
You could easily argue that 150 miles is the minimum in 2018, while 200 is preferable. Outside of the Tesla Model S, five-year-old EVs don’t meet those standards.
Meanwhile, you have to consider battery degradation as well. Anyone who’s watched their cell phone become more difficult to keep charged knows that lithium-ion batteries degrade over time. While Volt and Prius have not show significant failings in this department, the Leaf has.
Used EV buyers should know the state of the battery and what kind of warranty coverage (if any) is left on the vehicle. These concerns affect resale price of older models as well.
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