The resale prices of electric vehicles (EVs) compared to internal combustion engine (ICE) vehicles, including SUVs, reveal significant trends and differences in the automotive market.
Highlight: Currently, EVs are generally depreciating faster than ICE vehicles, with some studies indicating that they can lose up to 50% of their value within the first year of ownership.
Resale Value Trends
- Depreciation Rates: Research indicates that electric vehicles are losing an average of 49.1% of their value over five years, which is notably higher than the typical depreciation rates for ICE vehicles, which usually retain about 60% of their value after three years. This rapid depreciation can be attributed to several factors, including technological advancements, battery life concerns, and market demand fluctuations.
- Market Dynamics: The average price of used EVs was reported to be around $40,714 in July 2022, which is significantly above the proposed $25,000 tax credit limit for used EVs. However, the market for used EVs is evolving, with a notable increase in sales and inventory. For instance, by August 2022, the inventory of used EVs had risen sharply, indicating growing consumer interest despite the depreciation concerns.
- Comparison with ICE Vehicles: The price gap between used EVs and ICE vehicles has been narrowing. In Q1 2024, the average sale price difference between used EVs and ICE vehicles decreased from $13,000 to $7,000 year-over-year. This trend suggests that as the market matures, used EVs may become more competitive in terms of pricing relative to ICE vehicles.
Factors Influencing Resale Values
- Range and Technology: The resale value of EVs is heavily influenced by their range. Vehicles with a range of less than 250 miles tend to depreciate more quickly than those with greater range capabilities. This is particularly relevant as consumers increasingly prioritize range when considering EV purchases.
- Consumer Preferences: The demand for used EVs is on the rise, driven by a combination of environmental concerns and the increasing availability of charging infrastructure. As more consumers become familiar with EV technology, the market dynamics may shift, potentially stabilizing resale values in the future.
- Economic Factors: Broader economic conditions, such as fuel prices and government incentives, also play a crucial role in determining the resale values of both EVs and ICE vehicles. For instance, the cost of ownership for EVs, including lower fuel and maintenance costs, can make them more appealing despite their initial depreciation.
Conclusion
In summary, while electric vehicles currently face challenges with resale value compared to internal combustion engine vehicles, the market is evolving. Factors such as technological advancements, consumer preferences, and economic conditions will continue to shape the landscape of EV resale prices. As the market matures and consumer acceptance grows, the depreciation rates of EVs may stabilize, making them a more viable option for buyers in the long term.