This quarter we’ll go through three of the key forces shaping the used EV market:
- Used EV prices find a ceiling and begin to decline, though slower than all used cars.
- The Inflation Reduction Act’s used EV tax credit is about to reshape the used EV market.
- Government policy and fuel prices continue to push EV affordability
Let’s dig in!
1. Used EV Prices Begin to Decline… Slowly
The overall used car market, after a year of steady price increases, is finally softening. September used car prices are almost back to last year’s levels (although last September also saw record-high prices, up 27% from September 2020).
How does the used EV market fare in the face of falling used car prices? The short answer is that EV prices have remained more resilient.
The Recurrent Price Index – our own tracking set of popular used EV models from 2017 to 2019 -- has seen a modest decline since July: around 2.9% down at $37,597.77. However, the average price for all used EV listings has not yet dropped and is $42,700 after hovering just above $42K since March. This difference can be explained by the continuing presence of “new used cars” in the used EV market. The average price for a used combustion engine car is $33,957, but the average age when resold is also 6.47 years. Meanwhile, used EVs tend to be much newer, with the average age for resale at just 4 years.
The chart below shows the Recurrent Price Index since January 2022, along with the price trends for four all-electric, under $25K models that are likely to be affected by the used EV credit in the Inflation Reduction Act (details below).
The Recurrent Price Index currently tracks based on average prices of the models that reflect the core of the used EV market. We update this mix annually.
- 2017 Chevy Bolt
- 2017 BMW i3
- 2017 Tesla Model S
- 2018 BMW 530e
- 2018 Nissan LEAF
- 2018 Honda Clarity
- 2019 Audi e-tron
- 2019 Tesla Model 3
- 2019 VW e-golf
The index has decreased in price more sharply than the lower priced models in this example, which reflects a trend that the entire used car market has been seeing. Earl Hesterberg, CEO of Group 1 Automotive, reports a “demand shift to lower price points,” with the highest market demand for vehicles between $10,000 and $15,000.
“I’m not surprised to see the 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. “Vehicles priced under $25K, however, should hold steady between now and the start of the used EV tax credit in January.”
2. Looming Impact of Inflation Reduction Act
The Inflation Reduction Act of 2022, signed by President Biden on August 16, is a sweeping bill that adds prescription drug caps to the cost of medication for seniors, renews the affordable care act, imposes a minimum corporate tax, and reinvigorates incentives for and investment in clean energy. Estimates put the contribution of this Act at one billion tons of carbon avoided over the next ten years.
In addition to updates to the existing $7,500 new EV tax credit, the Inflation Reduction Act is the first tax credit for used EVs since federal EV incentives began in 2010. It offers a tax credit up to 30% of the purchase price of a qualifying used vehicle with a maximum credit of $4,000.
There are eligibility stipulations that need to be met for both the vehicle and the purchaser. While some of these are straightforward, others present situations that will affect how the used EV market grows and changes.
One of the simpler vehicle requirements is that the battery for propulsion must be at least 7 kWh. This is key because it allows virtually all the plug-in hybrids on the road today to qualify. Some popular examples include:
- Chevrolet Volt has a 16 kWh to 18.4 kWh battery.
- Ford C-Max has a 7.6 kWh battery.
- Honda Clarity has a 17 kWh battery.
Just 12% of Used EVs Would Qualify for Tax Credit
The price cap for tax credit eligibility is $25,000. Only 17% of used EV sales from last quarter were under $25K and just 12% of inventory is currently listed below $25K.
Going into 2023, we expect that many vehicles on the cusp of the $25,000 eligibility level will be nudged down to attain tax credit eligibility, growing this market percentage.
Used Plug-in Hybrids Will Lead Tax Credit Eligibility Next Year
The biggest beneficiaries of the used EV tax credit in 2023 may not be those vehicles that most people think of as EVs. Fifty percent of the cars that meet the price requirement for the used tax credit are plug-in hybrids (PHEVs). Used PHEVs overall in the market today have an average price of $18,486. 31% of all used PHEVs are currently priced below $25K, compared to just 7% of fully battery electric EVs.
As a snapshot of the low-priced EV market, here are all the models with mean price at or below $27,500. This threshold is a bit above the tax credit limit of $25,000, since we are building in room for market effects and price negotiation. Also, there are always individual models priced below (and above) the average price.
2017 and Older EVs Are Most Likely to Receive Tax Credits
Last quarter, we focused on the relatively new practice of “car flipping,” or reselling used cars that are less than a year old. The IRA’s used tax credit guidelines stipulate that all eligible used EVs must be at least two model years old, meaning that when they go into effect in 2023, only 2021 and earlier model years will be eligible. In the current market breakdown, 14% of vehicles in used inventories would be excluded by this rule.
In practice though, the 2-year-old model guideline won’t have much of an effect because it’s nearly impossible to find a used EV for under $25K that is less than 2 years old. Here’s the breakdown of tax-credit eligible vehicles (under $25K) by model year:
Additional Restrictions Apply
In addition to having restrictions on the vehicle for tax credit eligibility, there are also requirements for the buyer. The obvious ones include that the car must be purchased for personal, non-commercial use, and that each taxpayer is only eligible once every three years. These requirements, combined with the income cap, help direct this tax credit towards a certain demographic of EV buyer: income-limited shoppers.
The income cap for buyers is based on adjusted gross income and is half of what the income cap is for new EV purchases. Single filers must make under $75K AGI, joint filers $150K, and head-of-household filers must make under $112,500.
All of the requirements combined may make it seem hard to actually use the pre-owned EV credits. And, when the law goes into effect in January, 2023, only people with specific driving habits and charging availability will really benefit. However, within a few years, economy-priced used EVs will flood the market and be eligible for this tax credit. Starting in 2024, the credit should also a point-of-sale rebate, helping income limited shoppers (who may not get the full year-end tax benefit) even more.
3. EV Adoption Accelerates, California and Nationwide
While the Inflation Reduction Act is being heralded as a cleantech omnibus that will reinvigorate US investment, research, and development, a second piece of legislation out of California may also have a profound effect on EV adoption. They’re both part of the factors causing EV adoption to accelerate more quickly than industry experts have been predicting.
California Gas Ban
California already leads the nation in EV sales for both new and used cars. Year to date in 2022, the new vehicle share of EVs in California was 16%, compared to a nationwide average of 6%. And now, it is the first state to officially ban gas-powered cars. Following 2020 Executive Order N-79-20, Governor Gavin Newsom codified the phase-out of new combustion engine cars by 2035, pending an updated waiver from the EPA. Each year, auto makers must meet minimum percentages of new electric vehicles sold, as seen in the chart below from the California Air Resources Board, which administers emissions regulations in the state.
“We should focus less on the 2035 phaseout for now, and more on the early targets. The 2026 threshold of 35% EVs means another more than doubling of a market that is already way ahead of the rest of the country, in the next few years,” said Scott Case, CEO of Recurrent, “When you add on other states to this near-term target, we’re talking about a seismic shift in a very short period of time.”
This new rule is interesting for many reasons, including that it puts the onus for compliance on car manufacturers, not dealers or purchasers. And, the penalties are harsh: $20,000 per vehicle sold that violates it.
The law in California will also trigger similar laws in other states that follow the Air Resource Board’s emissions recommendations. Massachusetts, New York, Oregon, Vermont, Washington and Virginia have already committed or plan to soon (although contested in Virginia). Overall, this single regulation might affect up to 40% of the vehicles in the nation.
Although used cars will not be affected by this rule, California’s law also offers incentives that will directly feed into used EV supply: “California’s new rule gives automakers extra credit toward meeting their sales quotas if they offer new electric models that cost less than $20,275 or sell discounted cars coming off lease.”
OPEC Production Cuts
In a reversal of policy, the group of Oil Producing and Exporting Countries (OPEC +) decided last week to cut November’s oil production by 2%. This is the first production cut since the beginning of the pandemic slashed demand. This move comes when the US and Europe are already feeling the effects of high oil and gas prices, and is in direct opposition to requests to increase production.
“Russia and OPEC are strengthening the financial case to switch from gasoline to electric vehicles, ultimately accelerating their own irrelevance on the world stage,” said Scott Case.
As gasoline prices remain high, the cost of ownership parity point between gas cars and comparable EVs becomes shorter, without even considering the expected long-term cost reductions in upfront EV cost. The chart below shows the difference in total cost of ownership of used ICE cars vs. used EVs per miles owned. As the price of gas goes up, or as the used tax credit is applicable, the breakeven point between the two gets shorter.
To wrap up, keep in mind that almost every year since 2018, Boston Consulting Group (BCG) has released a thorough market projection for EV adoption. In the few years since the first projection was released, the numbers have continually been revised to increase the rate of adoption.
Recurrent published this chart on US-specific market projections from BCG’s global EV projections. It shows that over the course of four years – from 2018 to 2022 – US EV sales projections for 2030 more than doubled, growing from an estimated 21% to 53%.
Perhaps even more exciting is that this latest report was released in June, ahead of the Inflation Reduction Act, projected gas price increases, and recent state commitments to emission-free vehicles.
Each quarter we publish a new report with the latest industry data. Browse this section to review previous reports and their findings. Each image links to the full report!
Q3 2022 Report
According to our inventory data, derived from over 50,000 car dealers, roughly one third of the estimated 158,689 total EV sales in Q1 2022 were used cars – official Q2 numbers are still pending. In fact, after new Tesla sales, used EVs make up the second largest portion of EV purchases.
Some other quick stats before we dive into the theme of the quarter:
- The average price of used EVs in July 2022 was $40,714, well above the newly proposed $25,000 used EV tax credit limit.
- 17.9% of used EV sales in the past 90 days were under $25,000.
- The average minimum listing price for used EVs that Recurrent tracks (including lots of like-new 2022 "used" cars) is $29,400.
Q2 2022 Report
- Higher used EV prices are the new normal
- The rise of the "new" used car
- Chevy Bolt battery replacements prove that calendar age matters
- The Tesla Model 3 takeover is here
Q1 2022 Report
- It’s still a seller’s market for used EVs
- Used EV prices are continuing to rise
- Used EV prices still higher than used ICE prices
- New Tesla price hikes in 2021 are causing used Tesla prices to soar
- People are talking a lot about Tesla battery replacements
Q3 2021 Report
- Compares climbing used EV prices to all used cars
- Revisits the state of the used EV market six months after our first report
- Determines the percent of used EV values below an important $25,000 price point
- Monitors a significant contraction in used EV inventory by state
In July, both Recurrent sales data and national analyses suggested that used car prices were starting to level off. The past two months of price data is further evidence that the market has stabilized. For used EVs, we saw a 2.32% price increase in from July to August, and a 0.39% increase going into September. Meanwhile, the overall used car price index saw a decline of 1.5% from August to September, meaning that used EVs pricing outpaced the used combustion engine market. We will continue to track this trend after this year of anomalous pricing.
Despite the used car market leveling off, the ongoing semiconductor shortage is still affecting US automakers. Last week, GM announced that most US production would pause after Labor Day, and many other auto manufacturers foresee temporary layoffs and production slow downs. This suggests that although used EV prices may have stabilized, they will not go back down to pre-summer levels anytime soon. An EV can require ten times more semiconductors than an ICE car, so expect electric inventory to remain limited as buyers looking for new EVs compete with buyers in the used markets.
Our methodology to calculate the used EV price index is to use a representative sample of popular vehicles and compare national averages for retail prices. The models we included in our bundle are: 2017 BMW i3, Chevy Bolt, Tesla Model S; 2018 BMW 530e, Honda Clarity, 2018 Nissan LEAF; 2019 Audi e-tron, Tesla Model 3, VW e-Golf.
In March, Recurrent released its first used EV buying guide to highlight the growth of the market and report on trends that were not being covered by other automotive sources. Six months later, we have seen meteoric price increases, drastic inventory contractions, and a shift in what model years are most popular in inventory.
As of September 2021, over 48% of all used EVs in the US are under $25,000 and nearly 30% are under $20,000. The $20-$25K price range is the target for auto manufacturers looking to produce a mass market EV to win over everyday, budget-conscious drivers, as rumors of a Tesla Model 2 or Volkswagen ID.2 suggest. New EVs available for around $25K will inject the used market with a supply of reliable electric cars priced around $10-$15K in a few years, and attract new drivers to the electric market.
As reported in March, there had been an almost 50% increase in used EV inventory since summer 2020. However, since that report, the inventory number has dropped 21% despite a modest increase in the last 2 months. Supply has dropped at least 35% in top EV states since March. Both Oregon and Virginia lost over 63% of their inventory in six months. The only state that remained near constant was Tennessee, losing only a handful of total inventory since March. These numbers are consistent with the overall used car market, which saw unprecedented low inventory this summer.
Refreshing the used EV stock has been incredibly difficult with inventory shortages around the country, and dealerships are struggling to find cars to sell. This inventory shortage has several causes.
In part, it is due to the global semiconductor shortage, which is causing significant production delays in new cars. That has pushed shoppers to consider the used market. Since EVs require ten times the number of semiconductors as ICE cars, this is a strong effect in the used EV market.
Secondly, the market is still reeling from the pandemic: dealerships that initially scaled down their supply or offered deep discounts to move cars off their lots are now scrambling to replenish a fleeting inventory that is not being filled by rental car sellers or fleet vehicle turnover.
We can expect inventory to remain very tight through the end of 2021.
August 2021 Report
- Who sells the most used Teslas? The answer would depend on which model you’re interested in.
- How have the ongoing Chevy Bolt recalls impacted the market for used Bolts?
- How do lease rates for new EVs impact the availability of used EVs?
July 2021 Report
- Used electric car retail prices in June continued to climb, but at a slightly slower pace, which could indicate the beginning of a market equilibrium being reached.
- We looked at different brands to determine the most popular EV by state. Overall, Tesla continues to be the most popular used electric car brand, with 26% of the used market nationally.
- The Chevy Bolt and Tesla Model 3 are two of the most popular all-electric vehicles on the road today. We did a Bolt vs Model 3 comparison to learn how their individual battery is aging across makes, models, years and climates.
June 2021 Report
- Chevy Volt has found its way to the top of the used electric list by selling more than any other EV model. Combined with new Bolt sales in 2021, GM is having a very big year. Although there could be a surge in Model 3 inventory soon.
- Used EV prices are still climbing. We recorded another 9% increase in average prices over the last 30 days.
- Used Teslas sell faster than any other used EV. We reviewed the number of vehicle sales for various brands compared to the number in dealer inventory to arrive at a relative proxy of used car turnover. Tesla is way ahead.
May 2021 Report
- Used EV prices have been soaring by $1000’s over the last few months -- driven up by high demand and the same chip shortages that are hindering the new vehicle market.
- There’s incredible price volatility from state to state. We’re seeing $3000 - $6000 price differences for the same vehicles across state lines.
- The used Tesla ecosystem is such a big part of the overall used EV market that it makes sense to look at how that’s evolving. Tesla.com itself is a player, but it only represents 7% of the used Tesla inventory, a far cry from its complete control of new Tesla sales.
Like many things, used EV prices vary from state to state. There isn’t a hard and fast rule about where EVs are more expensive, including the biggest EV states like California, but there is a very wide range in the prices for popular models state to state. It’s common to see a $5,000 spread between the least and most expensive states.
Does the direct-to-consumer sales model hold for pre-owned Teslas? We found that only 7% of today’s used Tesla listings are on tesla.com.
April 2021 Report
- From last month, the overall trend in the used EV market is a decrease in inventory - in particular, GMs, Teslas, and Fiats are being bought up faster than their stock can be replenished. Dealerships across the country are noting inventory shortages on used vehicles in general -- as an indirect result of slower-than-expected new vehicle manufacturing.
- Despite these recent decreases, March inventory is still 37% higher than July 2020 signaling increased interest in used EVs.
- 2018 models have now surpassed 2017 models as the most popular used EVs on the market.
BMW Leads Used EV Market
Last month, we saw Teslas hold their place as the most common used EV on the market. However, the used stock of almost all EVs decreased through March - except for BMW. Perhaps it’s anticipation for the forthcoming i4, or delivery of new i3s, but there has been an increase in the availability of used 530e’s, 330e’s, and the X5 - xDrive40e. If you’ve been keeping your eye on one of these models, it may be a good time to check prices, as the average has dipped slightly in the past month. Used i3’s, on the other hand, continue to retain their value and even showed slight price increases, with 2018s being the best represented year in the market and 2017s at their heels.
Examining Cost per EPA Range Mile
One way to look at used EV prices is by comparing cost per range mile using EPA estimated range. One thing to keep in mind is that EPA range specifies how far your EV will go when the battery is new. EV batteries degrade based on age, how they have been driven, and how they have been stored. To really understand the value of an EV, it is critical to understand the battery in its current state, after several summers in the driveway or several hundred charging cycles.
March 2021 Report
Seasonality exists in used car sales and due to COVID-related economic changes, but this trend is real. Used car sales follow a predictable time delay, peaking at 3-4 years after being sold new. This pattern exists in electric vehicles as well: Six months ago, the most common model year for sale in used EVs was 2017 by far. Now, there are nearly as many 2018 model year used EVs for sale as 2017’s.
The Most Popular Used Electric Cars in March
- Used Tesla Model S, Model 3 and Model X are a large and growing part of the used electric market.
- BMW EVs are a surprisingly strong part of used EV inventories, but it’s not the i3’s that are growing in supply. Instead, there’s been a surge of the availability of BMW’s plug-in hybrids (5-Series 550e, 3-series 330e and the X5 xDrive40e) in the last 6 months.
- Despite the Nissan Leaf being one of the most recognizable EVs on the road for years, it’s only the 4th most popular used EV for sale today.
How do older EV batteries hold up?
EV owners and shoppers perceive that EV batteries last just seven years (Cox Automotive study), but the reality is generally better. A lot of factors play into the battery life of each EV over its life, including manufacturing variances, pack layouts and cooling systems, calendar age, use, temperature history, charging behavior. In our data analysis of 1000’s of EVs on the road, we’ve found that odometer reading alone isn’t particularly helpful in understanding each vehicle’s battery life.