Right now used electric vehicles are experiencing a colossal loss of market value.
How bad is it? A typical new car has a depreciation of roughly 15% a year. Imagine if you owned a new vehicle that lost over 7% of its value— in one month. That’s what just happened to the Nissan Leaf.
Over the past month, Nissan sent well over 500 off-lease Leafs to wholesale auto auctions throughout the United States. And the resulting prices were shocking.
It took several billions of dollars to make this glut of used electric vehicles a reality. Beyond the $7,500 federal tax credit for electric vehicles, several states and public utilities have offered their own tax credits of between $1,000 to $6,000. On top of this financial frosting, new EV consumers were given a slew of helpful incentives from the installation of free local charging stations, to the use of HOV lanes and a substantial reduction in their annual registration fees.
It was a fun and surprisingly cheap decision for those who could afford to buy or lease a new EV. But outside of Colorado and parts of southern California, there are no similar incentives for buying used EVs — and with oil prices still low, not as much natural demand for alternative-fuel cars as some automakers had expected.
Est. Retail Value 7/2015
Est. Retail Value 7/2016
Forecasted Loss of Value
2013 Nissan LEAF SL
2012 Mitsubishi i-MiEV
2013 Tesla Model S Performance
2013 Chevy Volt
2013 Ford Fusion Energi Titanium
Manheim Auctions, a liquidator of over six million wholesale cars a year, has forecast that the average used 2013 Nissan Leaf will only be worth $7,650 by July 2016 compared to today’s average retail value of $14,900. As you can see above, the Leaf may have plenty of company in its all-electric misery.
There is one surprise in this list that deserve a special note if you’re looking for a car with some of the benefits of a pure electric vehicle.
Hybrid plug-in electric vehicles – those that offer gasoline and electric engines – are not expected to experience near the level of depreciation of their all-electric competition.
These vehicles typically have an electric range between 20 to 40 miles before their gas engines start up and propel the vehicle for anywhere between 300 to 500 additional miles. They also tend to qualify for fewer incentives than pure EVs. The Chevy Volt and Ford Fusion Energi models appear to be well within the typical levels of depreciation of regular cars. The Tesla Model S Performance is in a unique situation given the upcoming release of the Tesla Model X, which will offer the same 85 kwh battery in a more contemporary design.
I always tell folks that the best way to get a deal on a used vehicles is to “hit ‘em where they ain’t.“ Orphan cars from dead brands such as Pontiac, Saturn, Suzuki and Mercury are a few good examples of this. So are vehicles that are a victim of changing tastes; such as minivans and regular-cab pickups (trucks with only one row of seats), and quirky vehicles such as non-sporty cars that are given manual transmissions so that the automaker can have bragging rights on a bargain-basement new-car price.
Will used EVs become the next good deal in the marketplace? I think so. But it will likely take a year or so for that steep depreciation curve to flatten out. In the meantime, buy what makes you happy. There are a lot of good reasons why someone would choose an electric car as their daily commuter, from the potential environmental benefits, to the opportunity to avoid supporting the nastiest dictatorships on this planet. Many EVs are also surprisingly fast and nimble thanks to a low center of gravity and electric motors which maximize their tire-chirping torque at zero rpms.
So you want cheap? Buy something unpopular. If the price of oil continues to decline, used all-electric vehicles such as the Nissan Leaf and Mitsubishi i-MiEV may indeed become the unpopular rolling deals of tomorrow.