Summary
- The used EV market is growing quickly with prices falling to around $25,000 due to tax credits
- Used Tesla prices heavily influence the market, but that is expected to change soon
- A $25,000 price cap for the used EV purchase incentive is driving prices down
- Prices are converging at $25,000 for many EV models released in 2021 and 2022
- More than a million used EVs sold in the U.S. last year will soon be eligible for the tax credit, providing more options for buyers
Article
The Rapid Growth of the Used EV Market
The used electric vehicle market is expanding rapidly, with prices steadily falling towards a significant threshold due to tax credits. Recurrent CEO Scott Case predicts that used EV prices will converge around $25,000, a number that has been influenced by Tesla’s pricing strategies. Prices peaked in the third quarter of 2022, but have since dropped by nearly 10%, making used EVs more affordable for consumers. This shift is a result of Tesla slashing its prices, which other automakers have followed suit.
Incentives Driving Demand
The $25,000 price point for used EVs has become a significant factor in the market due to the incentives established by the 2022 Inflation Reduction Act. This act offers a tax credit of up to $4,000 for purchasing a used EV, limited to 30% of the purchase price. This incentive is aimed at making EVs more accessible to buyers who may not be able to afford a new vehicle. Dealers are eager to market vehicles at or below $25,000 to take advantage of this credit and attract more buyers.
Market Convergence at $25,000
Data from Recurrent shows that the used EV market is maturing, with prices converging around $25,000. This convergence is attributed to the sales of mass-priced EVs like the Ford Mustang Mach-E, Tesla Model Y, and Volkswagen ID.4. As more EVs become eligible for the tax credit, the market is expected to further expand, offering consumers a wider selection of affordable options. By paying attention to model year eligibility, buyers can take advantage of the credit when purchasing a used EV.
Growing Interest in Used EVs
With over 1.5 million EVs sold in the U.S. last year, the market for used EVs is expected to grow significantly. As more EVs become eligible for the tax credit, dealers are showing increased interest in buying 2023 models ahead of their eligibility date. This influx of used EVs will provide consumers with more options and opportunities to benefit from the cost and maintenance savings of owning an electric vehicle.
Battery Degradation and Market Trends
Data on EV battery degradation suggests that an EV’s calendar age may impact its capacity loss, in addition to the number of miles it has covered. While new cars often receive more attention in the media, the market for used EVs is growing. As more affordable used EVs become available, the demand for electric vehicles is expected to increase. This trend may shift the prime car sales month for EVs from April to January, as consumers seek out more affordable options.
Future Outlook for the Used EV Market
As the market for used EVs continues to expand, there will be greater opportunities for consumers to benefit from the savings and environmental advantages of electric vehicles. More affordable options will allow a wider range of drivers to transition to EVs, reducing their reliance on traditional gas-powered vehicles. With an increase in used EVs entering the market, the shift towards electric vehicles is expected to accelerate, creating a more sustainable transportation ecosystem for the future.
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