Electric vehicles are cheaper to maintain than cars with internal combustion engines, but they tend to lose money — fast.
It varies by model, but in general EVs depreciate by 13% more over a five–year period than the overall market, and some plummet in value even more rapidly, according to iSeeCars, which tracks the used car market.
It’s enough to make a new car buyer hesitate if they are worried about how much they will get back when they try to sell the car. In addition, automakers have said they’re trying to broaden the appeal of EVs to more cost-conscious mainstream shoppers. Up until now, the EV market has been heavy on higher priced vehicles aimed at luxury buyers.
“New car shoppers, especially wealthy ones, are less price sensitive,” said Karl Brauer, executive analyst of iSeeCars. “They don’t care about the depreciation. Used car shoppers are not like that. Every used car buyer, by nature of being a used car buyer, is value oriented.”
There are a few big reasons EVs suffer greater depreciation.
Historically they have been more heavily incentivized, which tends to hurt resale values since a used buyer won’t pay as much for a car that did — or even could have — received discounts. Incentives hurt resale values for all kinds of cars, but EVs have received some additional ones, including the now expired federal government rebates.
EVs received about twice the incentives as gas-burning cars — including those from dealers and automakers in August, for example, according to Cox Automotive. Even that was a drop from the record set in July.
There is also the rapidly changing pace of technology. The maximum available EV range for example has more than doubled in the last decade, and the median range has tripled, according to the U.S. Department of Energy. Some evidence has suggested longer-range EVs tend to depreciate more slowly.
Despite all the advances, EVs remain a relatively niche product with a small, albeit growing, share of the market. U.S. sales of EVs, excluding hybrids, hit a market share of 10.5% for the first nine months of the year, according to data provided to CNBC from Motor Intelligence.
But that smaller share limits their marketability.
There are big changes ahead. An explosion of used EVs is inevitably on its way, and the mix of models is likely to be different.
“We have, you know, $30,000 to $35,000 EVs coming from the domestic market — from Ford, from Chevy,” said Alex Yurchenko, managing director of valuation services for J.D. Power. “So you have now a much better mix of vehicles, in terms of affordability.”
Watch the video to learn more.
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