Stabilizing prices and tax credits fuel used EV affordability

New research suggests that used EV prices started leveling off in the first half of 2024 and will become even more predictable in the third quarter. 

Driving the news: According to the latest insights from Recurrent (an EV battery monitoring tool and research firm), the most stable price range for used EVs is $20,000 to $25,000 due to support from the $4,000 government-subsidized used EV tax credit.

Why it matters: It looks like now is a good time for dealers to return to or start embracing used EV inventory. “That’s really important for both sides of the market,” said Recurrent CEO Scott Case. “For dealerships, it’s ok to jump back in – you won’t be trying to catch a falling knife anymore. For EV buyers, the fear of crushing depreciation on new EVs won’t be so crushing moving forward.”

Flashback: According to a June report from iSeeCars.com, used EV prices fell below their gas-powered counterparts for the first time this past February. 

Yearly trends: When looking at iSeeCars.com data from May 2023 to May 2024, used EV prices have dropped a mind-boggling 29.5%, landing at $28,767 on average. This is over $11,000 less year-over-year. 

But Reccurent doesn’t expect used EVs to drop meaningfully below the $20,000 to $25,000 “sweet spot” unless the vehicle is a much older model year with a low range. Regardless, the overall drop in used EV prices combined with tax credits fuels affordability. 

• Recurrent's data shows that early 60% of its used EV listings are under $30,000, three times higher than last August. 

• On top of that, the pool of cars under $25,000 (and potentially eligible for the new tax credit) has doubled from last year and now exceeds 30%.

The uptick in new EV leasing will also likely bring an influx of inventory to the used market in a couple of years.

What they’re saying: “Unlike the used ICE market that’ll continue to be volume constrained due to supply chain disruptions from COVID, skyrocketing PHEV and BEV lease rates from 2023 onward will mean that the used EV market really takes off in 2026,” added Case.

By the numbers: Leases accounted for 35.2% of all EV financing in the first quarter, according to Experian’s State of the Automotive Finance Market Report. This is nearly three times the amount recorded a year earlier.

The primary reason? “Starting in 2023, a lot of new EVs lost eligibility for the restructured federal tax credits. But, OEMs were quick to find a workaround in the form of favorable lease terms,” commented Liz Najman, Director of Market Insights at Recurrent. “Lease rates for plug in vehicles have skyrocketed, at the same time that lease rates for gas cars have slowed.”

Bottom line: The used EV market is about to get a whole lot more interesting. With prices stabilizing, government incentives, and an increasing inventory of affordable options, now is an opportune moment for both buyers and dealers to engage with the used EV market.

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