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Why Do Electric Cars Lose So Much Value So Fast?

Good news, readers of Oversteer: It’s time for a new installment of Ask Doug, which involves you asking Doug a question and Doug skipping over your question to get to a better question from someone with more sense.

If you’d like to participate in Ask Doug, you surely can. Just email me at OversteerDoug@gmail.com, and I will happily read your question with serious concern, or at least scoff at it when I see it appear on my screen.

This week’s question comes to us from a reader I’ve named Dieter, who writes:

Doug,

Why do you think electric cars depreciate so violently? BMW i3’s that sold new for 40-60K a couple years ago can be found for 14-20, while Nissan Leafs can be found for under *six*.

The cheap answer would be to say that people don’t have faith in the batteries, but at the opposite of the depreciation spectrum is the Tesla S and X, which have Wrangler like abilities to hold on to their value, despite being A) Electric and B) Luxury Sedans (which also depreciate like a used bed sheet).

 Thoughts?

Dieter

Dieter’s question is about something most car enthusiasts have noticed, assuming you’ve paid attention to the used-vehicle market for more than 47 minutes over the last decade. Namely, used electric cars are really cheap. Insanely cheap. So why is that?

First, let’s get some numbers. The average price of a used 2012 Nissan Leaf on Autotrader right now is $8,600. Eighty-six hundred bucks. For a 5-year-old car that started at something like $35,000 back then! For comparison purposes, the average price of a used 2012 Nissan Altima is $13,500 — and while some Altima models are more expensive than some Leaf models, most aren’t.

Dieter also mentioned the BMW i3. I had no idea they’ve gotten so cheap, but he’s right — they have. The average asking price for a 2014 BMW i3 is just $22,500, which is a far cry from the original starting price of $42,500 — before options. That means the average i3 has lost around half its value in just three years. For comparison purposes, the average 2014 328i is listed for $24,200 — with a starting price of just $38,300.

So why are these things losing value so quickly? It’s all about the subsidies.

Here’s the deal. The current MSRP of the Nissan Leaf is $31,700, including shipping. But that’s before a federal government tax rebate of $7,500, which effectively lowers that figure to $24,200. Then there are other incentives in addition to the federal tax rebate. Many states are offering tax rebates, for instance, and Nissan itself is offering some huge incentives on the Leaf — including 0 percent interest for up to 72 months, or up to $4,000 cash back. Those figures bring the prices down even further.

In fact, they bring the prices down so far that I would suggest this: Electric vehicles don’t actually depreciate all that much. Here’s my thinking: The Leaf’s starting price is around $30,000, sure, but all the incentives mean you actually buy the thing for closer to $20,000 — and suddenly it’s not so crazy that it’s available for $8,600 five years later. It’s the same story with the i3, the Volt and every other fast-depreciating electric vehicle.

I think Tesla’s higher residuals, interestingly, are proof of what I’m saying. Yes, it’s true that Tesla models qualify for the $7,500 federal income tax rebate, like all electric vehicles. But unlike most other electric vehicles, Tesla doesn’t have major incentives on its cars to get them to sell. Instead, it’s quite the opposite: They have waiting lists. Therefore, Tesla transaction prices (as a percentage of MSRP) are higher — and, thus, their resale values are a lot higher, too. If we had some sort of chart that showed actual transaction prices rather than MSRP, I think my theory would be proven right.

Of course, as Dieter mentions, there’s a little more at play here — namely, the fact that EVs were always going to depreciate a little faster than regular cars because they feature "unproven" technology that’ll be a little more worrisome to a second or third owner, out of warranty, than to an eager new-car-buyer early adopter. But I don’t think that’s the primary reason EVs depreciate so fast. Instead, I think it’s because they just don’t sell for as much money as automakers wish they did. Find an electric car for sale

Doug DeMuro is an automotive journalist who has written for many online and magazine publications. He once owned a Nissan Cube and a Ferrari 360 Modena. At the same time.

MORE FROM OVERSTEER:
What Ever Happened to the Ford F-150 Harley-Davidson?
A Look Back at all the Chevy Corvette Indy 500 Pace Cars
There’s a Red Bull MINI Cooper Pickup Truck For Sale on Autotrader

 

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12 COMMENTS

  1. I’ll be honest, for under $6k, a leaf would be tempting as a commuter.  

    My daily drive is ten miles round trip, including a stop to drop off my kid at daycare.  I have a 110V plug in my garage and at the office.  I’ve taken my car out of town three times in the past year; for any road trips we take my wife’s SUV.  So the potentially short range on a used EV doesn’t really affect me too much.  
  2. I bet many buyers of these cars are not homeowners, or don’t have a good place to plug, and this becomes a challenge for ownership.

    My two friends with EVs love them, but they both own their own homes and the $2k installation of an EV charger wasn’t a major financial concern.
    For most folks, filling up a Corolla/Civic or Prius makes for a way less painful ownership experience.
    • If they paid $2k to install a charger they overpaid. I just installed one for my Volt and, granted, I installed and wired it myself, but the charger was under $400. My neighbor had the same charger installed of his volt and paid an electrician $300 to install it.

  3. Agree with the range comments, plus the subsequent improvements to the newer models over time.  The original i3’s had a usable range just at the range anxiety tipping point – about 70-80 miles per charge.  The new i3 has a bigger battery with a significant increase in range – close to 120 miles – speeding up the obsolescence of the older ones.  Most Teslas had full charge range > 100 miles (I think some of the cheaper models dipped below that), so range anxiety was always less of an issue with those.

  4. Range. A nissan leaf in Arizona or some other hot climate is wearing out it’s battery pretty quickly, and is reducing it’s range below a comfortable level for most people (50 miles or less under the right conditions). Most electric only vehicles are also “second cars”, due to range limitations even when new. People who own 2 cars typically tend to have more disposable income, as such a used electric vehicle doesn’t really rate at the top of the list. Much like used luxury vehicles. 

     That being said, I think they’re a fantastic value, especially for something like a Volt that eliminates the range anxiety, has a proven durable battery pack, and whose battery packs are around $3,000 anyways, it’s not that big of a deal if it does go kaput. Even a leaf with reduced range can make a nice grocery getter at the prices they’re selling for. 

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