Why used EVs are some of the best deals in the auto industry

Used electric vehicles are now 8.3% cheaper on average than used gas-powered cars, reflecting the impact of price cuts and intensifying competition in the fledgling segment.

Why this matters: Used EVs are now one of the cheapest options for car buyers, with price declines showing little likelihood of stalling. Conversely, ICE vehicle prices have largely stabilized despite the increase in demand, possibly making them a less competitive option in a market where affordability is key.

Data trends

• Used EV prices first hit price parity with used ICE vehicles between January and February, falling 0.9% ($265) below the average preowned gas car before March.

• As spring continued, used EV prices began to fall at an accelerated pace. In May, the average preowned EV ($28,767) cost 8.5% less than the average used ICE car ($31,424), a $2,657 difference.

• The market crash happened relatively fast. This time last year, used EVs were roughly 25% or $8,200 more expensive than their gas-powered counterparts.

What about ICE? Meanwhile, used ICE car prices have also trended downward on a year-over-year basis, falling 6.1% below May 2023’s price last month. But that decline has been much less consistent on a month-to-month basis than in the preowned EV market. In fact, preowned gas car prices have been on the rise for the last two months, jumping forward $376 in April and $33 in May.

Why are used EV prices falling so fast?

Tesla’s strategy of slashing prices to spur demand is likely the primary driver of depreciation in the used EV market. While not alone in this tactic, the brand’s 50%-plus control of the electrified segment magnifies the impact of its decisions.

While it may seem possible that used EV price declines stem from a demand shortfall, that doesn’t make sense given that sales of preowned electric cars have been skyrocketing. In fact, Cox Automotive’s wholesale platform, Manheim, expects to auction off three times the number of EVs it sold in 2023 by the end of this year.

Bottom line: It will be interesting to see whether consumer demand for affordable models will drive used EV prices back up in the coming months. Many dealers are already struggling to stock preowned inventory, and where there are supply shortages, price hikes are sure to follow.  Until then, however, used EVs remain  one of the best option on the market for deal-hungry buyers.

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