Don’t buy an electric car until 2026, a new report suggests – they’re about to get a lot cheaper
- A peak in recurring leasing volume will peak in 2026
- The market could be flooded with cheap used electric cars, a new report claims
- Uncertainty about tax credits could upset the balance between supply and demand
This is evident from a recent study by JD Power, part of the E-Vision Intelligence Report 2024there will be a 230% spike in recurring EV leasing volume by 2026, potentially opening the floodgates to a slew of low-cost, second-hand EVs.
The report further states that nearly 280,000 EV leases will expire in the United States over the next two years, but thanks to falling prices of recently introduced EV models (or models about to be launched), this means that For many, this makes more financial sense to simply lease a new car instead of purchasing their current lease car.
According to JD Power, it would cost the average returning renter in the electric compact SUV segment $477 per month to buy out the lease, while the average lease payment for a new EV in the same category would be just $457 per month.
This is based on the fact that the average purchase price for most electric compact SUVs is higher than the $25,000 threshold that would qualify for the used EV tax credit.
While this is potentially good news for those in the market to make the switch to an electric vehicle, as there will be plenty of affordable used inventory in two years, it also brings a host of complications for the used car market as a whole.
J.D. Power says uncertainty about whether the federal EV tax incentive will last and how long the high incentives for manufacturers will last, concerns about long-term battery health and a shortage of used gas-powered vehicles are challenging the traditional balance between will complicate supply and demand.
Analysis: Disastrous write-offs don’t help
So far, electric vehicle sales have mainly been focused on the premium segment, with an emphasis on early adopters with deep pockets. For years they were seen as too expensive and out of reach for many mainstream buyers.
While that is now changing, with a slew of more affordable models reaching both the US and Europe, it is already posing a problem for the used car market.
Simply put, the depreciation of some premium EVs has been enormous, with models like the Porsche Taycan falling from $130,000/£120,000 to just $35,000 or around £40,000 for three-year-old examples in some markets.
An investigation by Wired found earlier this year that some premium EVs, including the Mercedes-Benz EQE, Audi e-tron GT and Polestar 2, could lose up to half their value in the first year of ownership.
The reasons for this worrying trend are many, from persistent range concerns among buyers to the fact that battery technology is evolving so quickly that older models are being updated or replaced at a much faster pace than their combustion engine counterparts.
Instead of a mild facelift mid-life, as was the case with older ICE cars, the battery packs of today’s electric vehicles are replaced and improved, offering much greater range and better performance.
It may deter private buyers of new electric vehicles, fearing that their last ride in a few years will be worth a fraction of the cost they paid for it.
The world of used EVs will create a buyers’ market in the coming years, which is great news for those waiting and waiting to make the switch, but not particularly positive for the struggling automakers, like Ford and Volkswagen, who are so desperate to get new cars sell to keep their heads above water.
