New Study Shows EVs Like Leaf, i3, and Volt Have High Depreciation - Here's Why EVs Lose Value
A new study by iSeeCars.com researchers looked at the five-year depreciation and retained value of used cars in America. Among the top-ten vehicles that drop in value the most, four are electric vehicles. Included are the Nissan Leaf (first generation), Chevy Volt, Ford Fusion Energi, and BMW i3. No conventionally-powered vehicles of their same price range and size devalue anywhere nearly as much. So why do EVs devalue so much?
EV Devaluation Reason 1 - Incentives On New EVs
The number one reason that EVs drop dramatically in value the moment they are sold is incentives. The federal government offered tax breaks of up to $7,500 on all of the four EV models listed in the top ten most depreciating vehicles. In addition, many states where EVs are promoted offer thousands more in incentives paid directly to the first owner. Utilities and local governments also offer incentives. We have covered this for years at Torque News and often point out that the MSRP of a new EV has very little to do with the actual cost to the owner. The Nissan Leaf and Chevy Volt have both been available in key EV target states with a cost to the consumer of about half their MSRP. So, obviously, as soon as that vehicle is sold its value is reduced by the total of the incentives. After all, any shopper looking at a used vehicle is smart enough to know that if a new one is going to cost them less, they should buy new.
EV Devaluation Reason 2 - Rapid Evolution
Five years ago a battery-electric vehicle with a range of 100 miles or so was typical. The first-gen Volt EREV had 38 miles of EV range. Today, these low range numbers seem almost ridiculous. Early adopters grabbed some early EVs with these limited ranges and good for them. Today, any range under 225 miles for a BEV is considered rather silly. There are just too many better offerings in all of the price categories. So, the value of many local area-only short-range EV models has dropped like a rock.
And it isn't just range that improved. Safety did as well. Performance did. Amenities were added. Five years ago EVs were cool for their day. Today they seem a bit past their due date by comparison to the options now on the market.
EV Devaluation Reason 3 - Insane Discounts On New EVs
Chevrolet dealers in key EV target states have offered discounts off new-generation BEVs like the Bolt of as much as $14,500. This in addition to the incentives we listed above. Apart from the price supports being offered by the public sector, the private sector is also dumping EVs on the market via massive discounting. This kills the value of used EVs,
EV Devaluation Reason 4 - Few Buyers Want An EV
The green vehicle market in America - of all types including hybrids - is about 3% of the total private vehicle market. That means 97% of Americans don't buy an EV - or any type of green vehicle. We can all wish the truth was different, but Chevy dealers in Mass weren't discounting Bolts this summer by five-figures because customers were lined up to drive them home. EVs are a niche market and so too is the used EV market.
EV Devaluation Market Reason 5 - Batteries
Whether it was fair, based in truth, or a myth, EVs have been pegged with a reputation for having batteries that perform differently over time. The perception is that EV batteries lose meaningful range as they age. Tesla owners discuss this on Tesla forums. Chevy owners do so on Chevy forums. The difference for the EVs on this list is that all of them had pretty limited battery capacity to begin with. Losing any is a cause for concern for some buyers.
The fact that these EVs have low valuations after five years can be looked at two ways. On one hand, it is a problem for EVs to be pegged as vehicles that don't hold their value. Tesla went so far as to offer resale value guarantees on the Model S when it launched to address these concerns. On the other hand, if you are in the market for a used EV, you are about to get a fantastic deal!
In addition to covering green vehicle topics, John Goreham covers safety, technology, and new vehicle news at Torque News. You can follow John on Twitter at @johngoreham.