Bottom line: Used electric vehicles still account for only a small portion of the market, but their prices are increasingly undercutting those of gasoline models. Rapid improvements in battery range are pushing down values of older EVs, opening the door for more cost-conscious buyers to make the switch.
The market for used electric vehicles is showing signs of rapid growth, creating new affordability for consumers who previously viewed battery-powered cars as out of reach. Many pre-owned electric models are now selling for less than comparable gasoline vehicles, reversing the price dynamics that exist in the new-car market.
Cox Automotive reported that sales of used electric vehicles in July rose 40 percent from the same month last year. The firm noted that while used battery-powered models still make up only about 2 percent of overall used-car sales, more electric cars reach the end of leases or get traded in for newer models, steadily increasing their numbers.
New electric vehicles have historically carried premiums of several thousand dollars above equivalent gasoline counterparts. For used cars, declining values have become a defining trend. Resale prices have been weighed down by the rapid pace of technological improvements, particularly in battery performance.
Just a few years ago, many electric cars offered ranges of less than 200 miles on a single charge. Now, models capable of driving 300 miles are standard, and expectations of 400 miles in the near future are reshaping consumer demand.
The arrival of cheaper new models has also put pressure on the used-vehicle market. Many automakers now sell EVs for under $40,000, driving down the resale value of earlier models. Teslas, which make up a significant share of the used market given the brand's relatively long presence in the US, have seen particularly steep declines as competition intensifies.
Federal incentives are helping make used electric vehicles more affordable. Buyers can claim a tax credit of up to $4,000 for qualifying EVs priced at $25,000 or less. The program, originally established under the Biden administration, is set to expire at the end of September after efforts to extend it through legislation failed. The impending deadline has added urgency to the resale market.
Adding to that appeal is the fact that many of these used EVs are relatively new and still come with warranty coverage, lessening concerns over expensive battery replacements. As a result, shoppers who once hesitated over durability are now finding reasons to make a purchase.
The growing appeal of used EVs may also be affecting demand for new models. Tom Narayan, an auto industry analyst with RBC Capital Markets, told The New York Times that his team's data suggests buyers are being diverted away from showrooms by attractive prices in the pre-owned market.
"The No. 1 thing we see time and time again is that the biggest factor is price," Narayan said. "It's not range anxiety or culture wars, it's price."
Tesla illustrates this trend most clearly. As leases expire, many owners are offloading older models and turning to alternatives, such as those offered by General Motors, Ford, or Hyundai. Some drivers have also been motivated by discomfort with Tesla chief executive Elon Musk's outspoken political stances, choosing to switch brands when upgrading.