Electric vehicles, both new and used, remain more expensive than comparable models that are gasoline-powered. But the gap is closing rapidly.
After skyrocketing during the pandemic, used car prices across the board are softening, with the average annual decline running 3.6% in Denver and 5.1% nationally as of October, according to a study from online car shopping site iSeeCars.
For used electric vehicles (EVs), prices are down by about a third nationally in the past year. And if that trend continues, it is only a matter of time until used EVs will not only cost less to power and maintain but also to buy.
“Used electric vehicles are facing a combination of lower prices for new models and consumer reluctance to try a new, more expensive technology when inflation and interest rates are both high,” said Karl Brauer, iSeeCars executive analyst, in an email.
The declines reflect basic economics. Supply has outstripped demand when it comes to EVs, which are now taking three times as long to sell as they did last year. Tesla, the leading maker of electric vehicles, cut the price of its new cars, including a $21,775 decrease for the Model X, $18,596 for the Model S and $14,716 for the Model 3.
That not only deflated the price of used Teslas but forced many other manufacturers to cut their prices.
In Denver, the Chevy Bolt EV suffered the biggest decline, going from an average of $30,169 last October to $20,089 this October. The Nissan Leaf fell from $29,386 to $19,864, while the Tesla Model 3 dropped from $47,958 to $34,167.
Although they have come down sharply, used EV prices remain higher than gasoline-powered alternatives. In October 2022, used EV prices averaged a 60% premium over the rest of the market — $52,821 compared to $32,627. But by this October, the gap was down to 13% — $34,944 versus $30,972.
Brauer suspects that consumers, facing the prospect of job cuts as the economy slows and struggling under the weight of inflation, are less willing to buy EVs than they were just six to 12 months ago.
“These same pressures are also pushing the price of traditional used cars down, but not nearly as much as EVs because gasoline models already cost less than used EVs and consumers are more comfortable with them,” he said.
Brauer said demand for new EVs has hit a plateau at the same time that automakers have been ramping up and pushing out a bunch of new models. Unsold EVs are piling up on dealer lots, which should continue to keep downward pressure on prices.
“It suggests there’s a threshold of market share for EVs that has been hit, making it tough to further increase their sales numbers,” he predicted.
Consumers who have been waiting to buy an EV will find more affordable options, especially with the help of favorable tax credits. Once limited to new car purchases, federal tax credits have expanded to used EVs as well.
New cars and trucks as a whole still command a premium, selling for 8.4% above the MSRP. That premium drops to 7.1% on new EVs. Dealers in Denver have been most willing to bargain on the new Hyundai Ioniq 6, Volkswagen ID.4, and Hyundai Ioniq 5, taking around 9% to 10% off the sticker price.
The big drop in used EV prices shouldn’t be seen as a rejection of cleaner alternatives in general. Of the 10 fastest-selling new cars nationally, seven are hybrids, including the Ford Maverick, Kia Sportage and Toyota Grand Highlander. Used prices in that category are down 9.6%.