Have used EVs found their sweet spot?

After pandemic-driven supply shortages and Tesla’s price cuts threw the market off balance, used EVs are finding their footing. According to the latest Recurrent Price Index, EVs more than two years old now average just under $25,000—compared to $27,850 for all 2+ year-old cars.

What’s happening: Eric Lyman, VP at Black Book (a wholesale vehicle auction company), says the $25,000 federal rebate threshold has become a key pricing floor. “Essentially, the $25K price limit drew a big line in the sand that many bidders wouldn’t cross. That accelerated the decline in values to that break-even point. But then, once the collective EV reseller market understood where that line was, they flocked to purchase vehicles that toed the line. So there’s high demand [from dealers] up to that price point, but almost none above it.”

• That threshold has created an influx of affordable, low-mileage, late-model EVs—many still under warranty—at the $25,000 mark.

On top of that, leasing is becoming the dominant way to access new EVs. Experian reports that nearly 50% of EV transactions in Q2 2024 were leases driven by incentives and subsidized loan rates.

What it means: As these leases mature, another wave of used EVs will hit the market in the next two to three years, potentially driving prices even lower. Automakers and lenders who own the leased vehicles would be liable for any losses from unexpected drops in resale values.

The clock is ticking toward a major supply shift. On January 1, 2025, all 2023 model-year EVs will become eligible for the $4,000 federal rebate.

• Used car sales peak in April with tax refunds. But, the rebate eligibility starting Jan. 1 could pull that demand forward.

• Buyers looking to score a rebate may jump into the market earlier, kicking off 2025 with heightened sales activity.

The bottom line: The influx of affordable models is a win for buyers, but falling values are leaving many current owners stuck with loans worth more than their vehicles. This limits trade-in opportunities, creating challenges for both dealers and consumers. As leases mature and more used EVs enter the market, managing resale values will be crucial to avoid further depreciation and financial strain.

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