Electric vehicles have long been promised as the future. But recently, car dealers are seeing used EVs on their lots that they are struggling to sell – and EV owners who are looking to turn in their used vehicles have been met with an unwanted surprise of low valuations. But what is the cause in this massive value drop for used EVs? Let’s explore the financing, production, and market conditions that are leading to this phenomenon in 2024. 

What Value Loss Are We Seeing?

Since the beginning of 2023, the average price of a used, three-year old EV has dropped 25%.¹ This makes them cheaper to buy than their gas-equivalents of the same year. In fact, the vehicles that saw the steepest price drops over the past year are Tesla Model 3, Kia Niro EV, Maserati Levante, Nissan Leaf, Hyundai Kona Electric, and Chevrolet Bolt.² Dealerships are full of unwanted EVs, driving prices down even further. But why is this the case? There are many factors at play. One is that EV companies are offering steep discounts and deals on new vehicles to try to get rid of their inventory. 

But the low costs of new vehicles means customers are even less inclined to opt for the used model which will only save them a marginal amount. As a result, customers looking to trade in their used EV are getting less money for it than they had hoped or expected, and dealers are struggling to move these used vehicles that are, in many cases, sitting on their lots for extended periods.¹

Let’s dive into some additional causes of this trend.  

6 Reasons EVs Are Depreciating 

1. Tesla has been consistently dropping values: Tesla is the EV leader, and they have continued to cut prices to try to keep their sales numbers high – a method that is backfiring. Not only is it angering customers who previously bought the same product for a higher price, but it is driving down the whole market. Plus, customers wait to make a purchase in anticipation of further price drops, making it harder for dealers to navigate pricing.³
2. Other companies are dropping prices to compete: Tesla's aggressive price cuts have affected other companies who have to lower their costs to compete. As we mentioned above, this carries the consequence of lowering prices for the entire market and dealership landscape.⁴
3. Hertz pivoted away from the EV fleet: Car rental leader Hertz reportedly sold nearly one third of its fleet of EVs, using the funding to purchase extra gasoline vehicles instead. Although they previously identified themselves as EV leaders, they claimed they weren’t seeing the popularity expected and noticed increased maintenance costs associated with operating the EV fleet.¹
4. Sales promotions: Automakers have become more aggressive with their sales promotions for new models, offering cheap leases and low-interest-rate financing deals that are sapping demand from the used car lot. Why would a customer choose to save a marginal amount on an older, used car, when they can instead opt for a new vehicle in a similar price range? This discrepancy makes it hard for car dealers to pitch a desirable sale when it comes to the used EVs they’re struggling to move.
5. Leasing EVs is popular: Leasing is usually common with electric vehicles – nearly 80% sold by dealerships are leased. It’s important to note that this doesn’t include brands like Rivian, Lucid, or Tesla that are direct-to-consumer, and with Tesla as the largest brand, this 80% figure is likely much lower when looking at the full market picture.⁵
6. Federal tax credit for EV purchases: A popular federal tax credit also applies when you lease an EV – you don’t have to purchase it. This means customers see a $7,500 incentive for the leasing option and see two ways to save in one purchase. This affects the full market and changes the pricing landscape compared to other vehicles.⁵

Used EVs Are an Affordable Alternative With ​​a Tax Credit

The IRS offers a tax credit for customers who purchase a used electric vehicle – and reminding customers of this advantage is a potential way to generate EV sales. According to the IRS, if a customer buys a qualified used electric vehicle from a licensed dealer for $25,000 or less, they are eligible for a used clean vehicle tax credit equal to 30% of the sale price up to a maximum credit of $4,000.⁶ 

This advantage has been helping dealers across the country garner customer interest in used EVs on their lot. Additionally, cheap Teslas that were previously owned by Hertz before they offloaded their fleet are making a splash with customers, many of whom are rushing to take advantage of the rare opportunity to purchase a used Tesla, with a tax credit. One dealership in Michigan was cited as selling over 200 used EVs in a single month – a distinct surge compared to the same period one year prior.⁷  

Get Reliable Used EV Inventory with ACV

As demand and values for used EVs fluctuates, work with ACV Auctions to acquire or dispose of inventory at your dealership. ACV is the leading online car auction for dealers. With ACV, our team of trained vehicle inspectors come to your lot and inspect inventory before it runs in our auctions. Our vehicle condition inspectors complete every report, including interior and exterior photos, paint meter readings, tire measurements and more.  Sign up your dealership with us today.

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Sources

1. Dodds, Io. October 14, 2024. “Fast depreciation: Used EVs are seeing dramatic price drops and it is putting consumers underwater.” The Independent. Retrieved October 29, 2024.  https://www.the-independent.com/news/world/americas/used-electric-vehicles-cost-decrease-b2629189.html
2. ISEECARS. September 9, 2024. “Tesla Model 3 Leads Ongoing Plunge in Used Electric Vehicle Prices.” iSeeCars. Retrieved October 29, 2024. https://www.iseecars.com/used-car-prices-study
3. Dodds, Io. April 23, 2024. “Turbulent times at Tesla: Mass layoffs, slow sales and suspected arson.” The Independent. Retrieved October 29, 2024. https://www.the-independent.com/news/world/americas/tesla-layoffs-elon-musk-profits-b2533543.html 
4. Lingeman, Jake. March 19, 2024. “Car Companies Cutting EV Prices as They Try To Compete With Tesla.” Newsweek. Retrieved October 29, 2024. https://www.newsweek.com/car-companies-cutting-ev-prices-they-try-compete-tesla-1876703 
5. Levin, Tim. October 16, 2024. “Nearly 80% Of New EVs Are Leased: Dealer Data.” InsideEVs. Retrieved October 29, 2024. https://insideevs.com/news/737672/ev-leasing-edmunds-popularity/ 
6. IRS. “Used clean vehicle credit.” IRS. Retrieved October 31, 2024. https://irs.gov/credits-deductions/used-clean-vehicle-credit 
7. McLain, Sean. October 14, 2024. “Used EVs Sell for Bargain Prices Now, Putting Owners and Dealers in a Bind.” The Wall Street Journal. Retrieved October 31, 2024. https://www.wsj.com/business/autos/used-evs-sell-for-bargain-prices-now-putting-owners-and-dealers-in-a-bind-a44e1718