Sales of new electric vehicles have started to slow, but the opposite is happening with used EVs.
A combination of factors has led to increases in both the number of used electric vehicles available to purchase and the number of people looking to buy them. The reasons include tax breaks, price drops and a glut of cheap Tesla models caused by Tesla’s own price cuts on its new cars and SUVs.
The auto site Cars.com, which carries dealer listings for used and new vehicles, said searches for used EVs on its site have increased 45% since last year. On TrueCar, another site that helps car shoppers find new and used vehicles, interest in EVs was up 39% in the first quarter of this year compared to last year. The used car sales website Carvana saw its used EV sales more than double since last year.
One reason is that federal tax credits on used EVs, not just new ones, are finally available, and they’re hitting at just the right time. The $4,000 federal tax credit for pre-owned EVs can be used by the dealership as a price reduction at the time of the sale, rather than the customer having to wait until they file their taxes to get the money. Not all dealerships are willing to do the paperwork, though. Also, there are limitations on the vehicles that qualify as well as limits on the income of the buyer.
One Georgia car dealership executive, who asked to remain anonymous because he wasn’t authorized to discuss sales strategies with the press, said his dealership has seen a huge increase in sales of used EVs since he started advertising that his dealership could apply tax credits at the time of sale, immediately lowering the price by $4,000.
“What it’s doing, in my opinion, is it’s allowing middle income shoppers that really are interested in EVs, but had always thought they were out of their price range to come into the market, become EV owners, and also achieve a car payment that is sustainable,” the dealer said.
Price cuts and supply gluts
A surge in the number of used EVs available has also enabled an economically paradoxical situation: even as demand for used EVs is rising, prices are still falling. According to Cars.com, even as searches for used EVs on the site rose 45% since last year, the supply increased 42% and the average price of a used EV on the site has dropped 20%.
Truecar reported a similar situation. While increases in used EV sales are huge, they still make up a small portion of overall used vehicle sales. Carvana, for instance, reported that used electric vehicles made up 4.3% of its sales in the first quarter of this year, but that was a big jump from 1.8% last year.
“You have people who’ve been sitting on the sidelines who want an easy, risk-free way to adopt new technology,” said Matt Jones, a spokesperson for TrueCar. “And the risk is way reduced when you’re buying something that costs $20,000 versus $80,000.”
Manheim, a company owned by Cox Automotive that sells used cars wholesale to auto dealers, has had to upgrade its operations across the country to deal with the influx of used EVs. The company, which operates a number of large auction sites that each process thousands of used cars, sold 60% more EVs last year than in 2022 and expects the number to triple in 2024.
“We’ve had to add chargers, but it’s not just chargers. It’s chargers and then everything in our shops… were built for [internal combustion] vehicles,” said Grace Huang, President of Cox Automotive Inventory Solutions. “And so we’ve had to add lifts that can handle more weight because the batteries are very heavy.”
A big part of the drop in used EV prices can be attributed to Tesla, which — over the past year or so — has been aggressively cutting prices of its popular Model 3 sedan and Model Y SUV. It’s a simple matter of economics that when an automaker cuts the prices of its new products, the prices of similar used products – in this case, EVs – drop too.
The price of a given used 2021 Tesla Model 3 sedan dropped, on average, about 29% during calendar year 2023, according to data from Edmunds.com. That was more than the average model year 2021 used vehicle which would have lost about 19.5% in value over that same period.
EVs have always had faster depreciation, or loss in value, than gas cars, though, which works in favor of buying used EVs, said Jones.
Used EVs still cost more, on average, than used gas-powered vehicles, but they cost a lot less than new EVs. While prices for new EVs average around $63,000, prices for used ones average around $36,000, according to Cars.com.
And the price gap between electric and gas powered used cars is shrinking rapidly, according to Carvana. Where there was a $13,000 difference, on average, between gas powered used vehicles and used EVs in the early part of 2023, the difference has shrunk to just $7,000 by the first quarter of 2024.
The appeal of what’s available has also increased. EVs have improved over time, so models now hitting the used market now are a lot better than the very early EVs that would have been available as used cars years ago, said Rebecca Lindland, an industry analyst with Cars.com.
“This is a significant change so that people who may have looked at an EV five years ago, It’s worth a revisit because of the improvements in technology, specifically in range and charging,” she said.
Batteries in used EVs are also holding up well, according to Recurrent, a company that tracks EV battery health. The vast majority of used EVs can be expected to go very nearly as far on a charge as they could when they were new.
The fastest-selling used EVs on Cars.com right now are the Chevrolet Bolt models, Rivian trucks and SUVs and the Hyundai Ioniq 5, according to Cars.com. [we may want to move this up higher]
Courtney Vaughn just bought a used Hyundai Kona EV on Carvana that will cost her $16,000 after the $4,000 tax credit, she said. She lives in New York but is having the car delivered in California so it will be waiting for her there when she moves there for a new job.
“I’m really excited and there’s only, like, 66,000 miles on it,” she said.
Concerns about gas prices and having to deal with California’s smog tests interested her in buying an EV, she said.
Besides the federal tax credit, Lindland also recommends people check for local and even municipal tax incentives for new or used electric cars and home EV chargers. Incentives can vary a lot from place to place.
“Really look at your immediate neighborhood,” she said. “This is a zip code level search.”
A good local car dealer should be able to help you find out about all the incentives that are available, she said. She also recommended looking at the US Department of Energy’s Alternative Fuel’s Data Center, which has a guide listing federal and local EV incentives.
