Prices for Used EVs Have Started to Fall
By now, we all know the story: the global pandemic and supply-chain shortages have limited production of new cars over the last couple of years, pushing demand, and prices, for used vehicles ever higher. At the same time, increasing gasoline prices also meant surging demand for electric vehicles. If you were considering a used EV, you may have been shocked by prices hovering at, or even above, new-car MSRPs. Fortunately, according to industry watcher Recurrent Auto, prices for used EVs finally started to soften again in September 2022. Compared to July, prices for popular used EVs dropped about 3 percent.
Recurrent’s price index focuses on nine of the best-selling EVs on the used market from model years 2017 to 2019: the Chevy Bolt, BMW 530e and i3, Tesla Model S and Model 3, Nissan Leaf, Honda Clarity, Audi e-Tron, and Volkswagen e-Golf. This set of vehicles dropped to an average selling price of $37,597.77 in September 2022.
The company notes that the average price for all used electric car listings hasn’t yet dropped – still hovering just above $42,000, and flat since March 2022. Many EVs currently on the market are almost-new models, whose prices are much higher than the best-selling vehicles. The average age for used electric cars tends to be about four years old, versus 6.47 years for the overall market.
Still, prices for less expensive EVs have held stronger than higher-priced ones in general. There is a “softening of the higher end of the used EV market – it reflects what’s going on in the broader economy,” said Scott Case, CEO of Recurrent. He notes that “vehicles priced under $25K, however, should hold steady between now and the start of the used EV tax credit in January.”
Used EV Credits Coming
The Inflation Reduction Act, launched in August 2022, but which comes into effect in January 2023, will also affect used EV demand and prices, says Recurrent. In addition to a $7,500 credit on new hybrids, PHEVs and EVs, the Act offers a tax credit of up to 30% of the purchase price of a used EV, up to a maximum of $4,000. There are a number of stipulations, the biggest of which is that only used vehicles costing less than $25,000 will be eligible.
This threshold might mean that used EVs that would normally be priced slightly above $25,000 might be reduced in price to qualify for the rebate. Expect the prices of inexpensive EVs to remain strong. (Note that only 17% of used EV sales in the third quarter of 2022 were under $25,000.)
But the biggest beneficiaries of the used car tax credit in 2023 might actually be plug-in hybrids, many of which exceed the minimum battery capacity requirement of 7 kWh. According to Recurrent, the average price of used PHEVs in the U.S. is under $20,000, which means that the new credit would provide a major price advantage.
If you’re looking to take advantage of the used car credits, you should be aware of other requirements for the buyer. The car must be for personal, and not commercial, use, and each taxpayer is only eligible to claim the credit once every three years. There is also an income cap for buyers: single filers must make under $75,000, while joint filers must have a household income of less than $150,000. Head of household filers must make less than $112,500.
All of these restrictions might make it hard for a number of buyers to take advantage of pre-owned EV tax credits. The current state of the EV market, with average prices hovering close to $40,000, also means that many vehicles won’t be eligible either. But within a few years, with a critical mass of EVs, PHEVs and hybrids available on the used market, the tax credit will apply to way more vehicles – and will help price-shopping EV buyers benefit even more.