Most electric cars do not have good resale value at the moment. They don’t hold their values well as they age. This is due to the lower life expectancy and quality of the batteries. EVs are recouping much less than 60% of their value after three years. Most average 40%.
Fortunately, this is likely to change as electric cars become more mainstream. More manufacturers are phasing out gas-powered vehicles to concentrate on the production of EVs. In addition, the continuous improvement in battery technology will eventually improve the performance and lifespan of used EV batteries.
What Impacts the Resale Value of Electric Cars?
The factors that impact EV resale values include the battery life, range, depreciation, infrastructure and charging stations, government incentives like tax credits and rebates, among others.
Lithium batteries degrade continuously from the moment they are first used. This is no different when it comes to electric car batteries. Used EVs have a lower charge capacity compared to when they were new.
They do not hold as much charge as they used to. However, they last a long time before needing a replacement. On average, electric car batteries can last 10 -20 years or hundreds of thousands of miles.
Continuous improvements in battery technology might make it possible for them to last longer. Car manufacturers are already working on solid-state batteries which have a higher energy density. This will greatly improve the resale value of electric cars in the used car market.
It’s good to note that with a degraded battery, a used electric car will offer less range. It will not be able to hold as much charge, hence offering fewer miles than it did. If the car’s range limit was originally low, it can have a very low resale value.
A few years ago, most EVs sold poorly after a few years of use due to their limited range. Some could only provide 60 miles before needing a full charge. This is while considering charging to full capacity could take up to 12 hours.
Things are different today. There are plenty of models on the market that provide more than 200 miles of range. The Lucid Air, in particular, offers 500 miles with several others offering more than 400 miles.
This has greatly helped to reduce range anxiety among drivers. It has made it easier for consumers to switch to used electric vehicles, hence improving their resale value on the market.
Read more: Electric Cars That Can Power Your House
Many buyers are concerned about the availability of charging stations. Research shows that charging infrastructure must increase by 400 percent in the next five years to meet the demand from electric vehicles.
According to CNBC, there are about 136,400 gas stations in America and only 43,800 charging stations for EVs. It takes less than 10 minutes to fill up a gas tank but an average of 45 minutes to charge an EV to full capacity.
This can be discouraging when it comes to buying a used electric vehicle. Studies show that many people still prefer gas-powered cars over EV due to this reason. It’s still a factor that’s negatively affecting the resale values.
According to Forbes, EVs typically lose about $5,700 of their original value every year. This translates to about $28,500 after 5 years, compared to $16,000 for traditional gas-powered vehicles.
Like all vehicles, electric cars depreciate mainly due to mileage and age. The older the car the less it’s worth in the end. Other factors that affect depreciation include damage and lack of proper maintenance.
If the interior isn’t kept clean or the car has scratches and dents, it will definitely attract a lower price. What makes EVs special when it comes to depreciation is their lower charging capacity and reduced range due to a depreciated battery.
As mentioned earlier, this is bound to change as the industry continues to work to solve the shortcomings. Electric cars are predicted to hold their values better than gas-powered cars in the future.
Government incentives such as reduced taxes and rebates tend to have a negative impact on the resale value of electric cars. They reduce the cost of the car on the front end making the car cheaper to buy.
This means that in the long run, the electric car will have a lower residual value. The removal of tax credits should typically have a positive impact on the resale of an EV. However, the incentives help to support the policy-driven adoption of electric vehicles.
They also encourage both private and corporate customers to shift to EVs. Approaches to government incentives vary from country to country. They can either be tax-based, finance-based or put in regulation. Governments may seize to provide incentives in the long run, helping to improve the resale values.
Are people buying used electric cars?
China has the biggest market for electric cars. In 2018 alone, over 788,000 vehicles were registered. This is followed by the United States with about 240,000. Up to 60% of consumers prefer getting an EV for their next purchase in China.
This drops to 60% in Europe and 30% in the U.S. It is predicted that the lower operational costs are making it easier for people to move from traditional vehicles to EVs. Electric cars have the lowest fuel and maintenance costs.
They also experience less wear and tear. This is thanks to fewer moving parts and fewer fluids that need to be changed or refilled. Even when gas prices drop, the reduced operating and maintenance costs for EVs are overwhelming.
Top 5 electric cars that retain their value
Below is a list of electric cars with the highest resale value after three years of use or after 36,000 miles. The value retained from the original cost is put in brackets.
- Porsche Taycan (62.90%)
- Tesla Model 3 (59.60%)
- Tesla Model X (58.70%)
- Polestar 2 (58.20%)
- Tesla Model S (57%)
The fastest depreciating EVs are the smaller cars with lower range. They tend to depreciate quicker and do not hold their values well. This includes vehicles like the Smart Fortwo Coupe and Fiat 500. These retain less than 40 percent of their original value after three years of use.
For now, it’s not clear if electric cars are a good financial investment due to their low resale value. However, the transition from gas-powered vehicles is likely to change that in the next 5 to 10 years. The uncertainty surrounding future resale values is likely to wane off thanks to an increase in demand for used electric cars.