In May 2012, the average trade-in value for a 2011 Nissan Leaf was around $25,000. A year later, that same car’s value had fallen to roughly $15,000.
According to a new report from the National Automobile Dealers Association (NADA), plug-in electric vehicles such as the Chevy Volt and Nissan Leaf depreciate in value at a rate much higher than traditional gas-powered cars, as well as hybrids like the Toyota Prius. NADA trade-in data show that in April 2013, a 2012 Honda Civic retained 73% of its value compared to the original manufacturer’s suggested retail price (MSRP), while a 2012 Prius retained 66% of its value. The 2012 version of the Volt and Leaf, meanwhile, retained just 58% and 51%, respectively, of their value.
These percentages are a bit misleading, however, because virtually no one pays anywhere near MSRP for an electric vehicle. Nearly all buyers qualify for a $7,500 federal tax credit on new EV purchases, and some states offer incentives that effectively knock off an additional $2,500.
Even so, the trade-in values of used EVs have dropped sharply over the past year. Here’s some data from the NADA report that current EV owners may find alarming:
In model-specific terms, the May 2012 edition of the NADA Official Used Car Guide noted that the 2011 versions of the Volt and Leaf carried respective Average Trade-in Values of $31,060 and $24,857. By May 2013, values for each model had fallen by some $10,000 to $21,235 and $14,792, respectively.
By contrast, the value of a 2011 Prius fell by $4,735 and a gas-powered 2011 Ford Fusion dropped by $3,150 in value over that same time span.
Clearly, one big reason EV values have fallen so dramatically is that used EVs are competing for the attention of buyers against their shinier, untouched brethren: new-model EVs. Thus far, 2013 has been marked by aggressive deals on the Leaf and other electric cars, spurring on increased demand for plug-ins among bargain hunters. Now that the base price of the Leaf is under $19,000 once incentives are factored in, and there are an abundance of cheap lease deals for cars like the Fiat 500e, Honda Fit EV, and the Chevy Spark EV, it’s no wonder sellers are being forced to cut prices on older EVs. Who’d buy an old car when the new version costs about the same, or is maybe even cheaper?
What also makes EV depreciation a special case is that consumers worry about “range anxiety”—the limited number of miles a plug-in can be driven before requiring a recharge—even when the vehicles are new. As the vehicles age and the batteries lose their juice, the anticipation is that the driving range purely on battery power will drop over time. Among the many new promotions on EVs, SmartCar has been offering a deal for buyers to rent its electric car batteries for $80 per month, in order to lower the upfront price and also ease concerns about drivers being stuck with a battery that lacks power down the line. (The rent payment covers the cost of a battery replacement, if it’s ever needed.)
There’s also the general concern about the unknown, because EV technology is so new and hasn’t had the benefit of being tested over the course of decades. “Maintenance and longevity as EVs age affect used prices more so than prices for their ICE [internal combustion engine] counterparts,” the NADA report states. “All other influencing factors being equal, this imposes a higher rate of depreciation on electric vehicles, especially early on in the technology’s lifecycle—exactly where plug-in EVs are today.”
On the other hand, the recent price cuts in new EVs have driven up interest in the category of vehicles to the point that in some cases it’s difficult to find one to buy or lease. The consumers languishing on waiting lists for new EVs may start checking out the used market as an alternative—and they may like what they see. “While purchasing a brand new EV is likely out of reach for those shoppers seeking affordable basic transportation, a one-year-old used offering provides a tremendous bargain and should not be overlooked,” Alec Gutierrez, senior analyst at Kelley Blue Book, told the Detroit News.