It’s only a decent time to be in the market for a used car, as prices have continued to come down off of their record highs, but it’s a great time to be buying a used electric car, as prices are dropping rapidly according to a new report. There are lots of reasons that used electric cars are worth less, proportionally, than their gas counterparts and I’ll detail them below. There’s also one big reason why used EV values are likely to only get worse.
Welcome to another week of The Morning Dump, this time with 100% more Serbian car news! We’ll be talking about Serbia this morning because I’m always amused by how tall Serbia’s President is and it dovetails nicely with news of GM’s latest contract to provide vehicles for the U.S. State Department.
And, finally, this global Dump takes us to China, where Toyota continues to face weak sales and Tesla continues to lose ground to BYD.
The Used EV Bloodbath
As you’re probably aware, the used car market has been super weird for the last few years. In 2019, used vehicles still followed a pretty predictable depreciation curve and there were enough off-lease vehicles and post-rental fleet cars to keep values relatively in check.
Then the pandemic happened, roughly concurrent with a few natural disasters, as well as government stimuli, and we entered what I like to think of as the “Carvana times” when a general lack of supply caused used car values to get super whacky. This was the era of people getting offered more for their used cars than what they paid for them.
This was not sustainable, obviously, and the slow return of regular new car inventory and higher interest rates has put downward pressure on prices. You can see the above chart, from Manheim/Cox Automotive, which shows prices quickly declining, though still at levels well above historical norms.
I’m a little jealous because Automotive News got to go to the annual Auto Finance Summit in Las Vegas on Halloween (best party in town!) and has some great insights to share, though I’m not sure why it took so long to file the story. I guess what happens at the Auto Finance Summit stays in… et cetera et cetera.
Here’s the overall look at the market:
Black Book predicts the average 3-year-old vehicle in October 2023 held 66 percent of its original value, down from 73 percent last year but up from 51 percent in October 2019. The company predicts this stat will decline to 56 percent by October 2026.
This means that by October 2026 we’ll be back to almost normal for the used car market as a whole. What about the electric vehicle market?
The average 3-year-old EV, however, only held 49 percent of its original value in October 2023, down from 70 percent last year but up from 33 percent in October 2019. Black Book expected EVs of that age would keep 45 percent of value in October 2026. It also said comparing the future EV market to previous years was difficult “and probably useless” because of the more diverse mix of EV body types in the pipeline.
As Ed Ruscha said: OOF.
A 2020 MY electric car, on average, is worth less than half of what it was sold for three years earlier. That number is going to drop to an even lower number in a few years though, uh, who knows, because in 2020 there were still some Leafs and some Model S/3s and now we’ve got Polestars and Vin-Fasts and all sorts of new stuff.
So why are EVs faring worse than their gas-powered counterparts? Here’s a good list of reasons:
- Well-maintained, a gas-powered vehicle maintains most of its same capability over its lifespan whereas the batteries in electric cars, currently, offer less value over time. [Ed Note: This was definitely the case with early lithium ion-powered EVs like Nissan Leafs and BMW i3s, but newer EVs aren’t expected to see nearly as much battery degradation over their lifespans. -DT].
- Many electric cars are luxury cars, which already face higher depreciation.
- Whispers: Infrastructure
- David Tracy.
- The best-selling EVs over the last few years have been Teslas.
- Tesla has continually and consistently lowered prices, causing the value of used Teslas to drop in turn.
- David Tracy.
- Tesla’s price drops have created a price war that’s caused other automakers to lower their prices.
- EV sales are rising and, eventually, most of those vehicles will become used cars.
Those are all logical reasons why electric car prices have gone down. But why might they go down even more than currently predicted? Again, from Automotive News:
LOL. So companies like Polestar and Hyundai can’t get any tax credit if they sell the car, but those companies can get a partial credit for any leases, which is why so many companies are offering great lease deals on electric vehicles.
That’s all well and good, for now, but in three years there’s going to be a large number of off-lease vehicles suddenly flooding the market, which should only put more downward pressure on used EVs.
So, yeah, if you wanted a Tesla maybe wait a bit and grab a used one?
Serbia To Build EV Fiat Panda
What percentage of this post is me wanting show this picture of Italian PM Giorgia Meloni and Serbian President Aleksandar Vucic? Non-zero, that’s for sure. At 6′ 6″ Vucic is one of the tallest world leaders and, at maybe 5′ 1″, Meloni is one of the shortest.
Serbia and Italy have a long and complicated history, though they’ve generally been allied with one another and are both led by generally conservative executives with equally complicated histories. That’s not worth exploring now, because it sounds like Sebria will be making the new EV Fiat Panda, according to Reuters:
Vucic who spoke after meeting Italian Prime Minister Giorgia Meloni did not give any specific date for the production launch.
Vucic said that the production of electric Panda would boost trade between Italy and Serbia above the current 4.6 billion euros a year.
Serbia has a long automotive history (Viva Zastava!) and currently serves as an important supplier for much of Europe’s car industry. Also, the new Fiat Panda EV is probably gonna rule.
GM Lands 10-Year VIP Protection Gig With Diplomatic Security Service
I helped run the Distinguished Speakers Committee at the University of Texas, which meant sometimes interacting with various law enforcement agencies when high-profile guests came.
One of the higher-profile guests we had was former Israeli PM Ehud Barak. Politics aside, he was a great speaker and very generous with his time. The visit was a headache, though, because we had to deal with Secret Service (Former First Lady Ladybird Johnson graced us with her presence), Mossad agents (two extremely serious young men and one extremely funny slightly older guy), local police, state troopers, and campus police.
The absolute coolest, chillest, calmest and most in control person who showed up was a guy from an agency I’d never even heard of: the Diplomatic Security Service, or DSS. I like to think he was the basis for The Rock’s character DSS agent Luke Hobbs in the Fast and Furious movies.
Even if he wasn’t, I learned a little about the DSS and understand that they’re deployed around the world to keep our country’s many State Department employees safe, as well as support VIPs. They need a tough ride and it looks like GM Defense will be the source of those tough rides for the foreseeable future. From the GM Defense press release:
GM Defense will deliver Original Equipment Manufacturer integrated HD SUVs under the contract with a ceiling value of $300 million. GM Defense was awarded an initial task order through the IDIQ contract for vehicles, training and engineering services valued at approximately $25 million. This contract follows the development and validation contract awarded in 2021 that delivered prototype vehicles for comprehensive testing and evaluation.
The newly designed GM Defense HD SUV incorporates protective armor into the original design and manufacturing process, diverging from current after-market, tear-down and rebuild practices. The new approach provides superior vehicle performance while improving efficiencies in build and lead-time, resulting in faster vehicle delivery to the end user. GM Defense also provides additional benefits through a robust manufacturer’s warranty and extended vehicle lifespan that delivers value as compared to the current multi-stage aftermarket armoring process.
These things look absolutely killer, I gotta admit, and the ground-up construction of these would make me feel better if I was rolling around Karachi or wherever and had a target on my back.
China Is Becoming Tough On Imports
I’m sure Rolls-Royce and Porsche will be fine in China for the foreseeable future, but it ain’t great for the not-super-exclusive luxury/sport set in the country right now as consumers are embracing domestic brands.
First, via Reuters, is news that Toyota is halting some operations in its FAW/Tianjin venture:
“The reason for stopping the production line was to optimize the production system in consideration of aging and changes in the composition of vehicle models such as body types.”
Japan’s Jiji news service said on Friday the world’s largest automaker by sales was suspending some production as part of a major production adjustment in response to weak sales of gasoline-engine cars.
Chinese consumers are embracing EVs. Cool, that explains Toyota. So how is Tesla doing? Also via Reuters:
Sales of U.S. automaker Tesla’s (TSLA.O) China-made electric vehicles (EVs) skidded 17.8% in November from the same month a year earlier, to 82,432 cars, China Passenger Car Association (CPCA) data showed on Monday.
That marked the biggest fall since December 2022 when Tesla’s sales of China-made EVs fell 21% on the year as the U.S. automaker reduced output and cut prices to deal with rising inventories and weakening demand.
By comparison, BYD saw its sales grow 31% year-over-year.
The Big Question?
Would you buy a used EV? Are there any you’re interested in? If you’re David, would you buy a third used EV?
I did get a used EV just about a month ago. 2014 i3 with REX. Hugely inspred by David’s articles about his. Thanks to all the commentary on DT’s articles, I learned a lot about what to look for and this met my needs.
But the only reason I went with it was because the transmission went out on my 99 Camry. Since it was the V6 model, had the most expensive transmission as well. With some other work that needed to be done on it that I don’t have the space or tools to do myself, would have been out nearly $7K. Wife and I decided to replace instead of repair. Looking at most of the used cars in our budget, over 150K miles and listed with issues that would have needed fixing, so more money.
Found the i3 on a dealer’s website (small independent dealer). Anyone in Las Vegas area looking for a used car, I highly recommend F&D Autos in Henderson. We were able to get the i3 for 12K total, including taxes and fees. He was also going to replace the L2 Charger he had at his dealership, so he threw that in for free. Just need to get a 220V outlet installed in the garage if I want to use it. I have free charging at work. 12V battery went wonky after a week, so I did have to replace that and the wiper blades. Right now, after 6 weeks of use- I have put new wiper blades on it and put 1 gallon of gas into the REX tank. Between the insurance increase and the car payment, minus the cost for gas I was spending on the Camry, we are only increasing the monthly budget by just over $100. With the tax credit, we will end up paying about $1000 more than it would have been to repair the transmission on a 24 year old car.
I bought a 2008 Prius in 2018. By 2022 the battery was failing. I’ll never buy a car with more than a 12V battery again.
So you are saying a 15 year old vehicle with what should be on average close to 200,000 miles had to have a part replaced and based on that you would never buy an EV or hybrid again? Based on that logic I would never buy another car with an internal combustion engine because my my 12 year old Saturn SW threw a rod with only 100,000 miles on it.
Then you’re a prime candidate for an EV.
My Toyotas rod bearings went out at 51k… so yeah NIA – Never Ice Again….
Why stop at 12V? Get rid of that pesky battery all together! Crank start, magneto ignition and carburetor all the way baby! Extra points if you have to manually adjust the ignition timing too – you never know when those pesky centrifugal weights or vacuum advance diaphram are going to act up!
You know what, maybe a mule is an even better option – they’ll even mow your grass for free!
Used EV? In this part of the century? Nope. Ask me in 20 years.
Model 3’s are now the beige Camry’s of the EV world and Edmond’s is being kind to EV depreciation. It’s interesting that none of the price/payment/ value conversations here or anywhere never mention there’s an income limit to Federal tax rebates.
Because only 11.9% of the population has over a 200k household income, so that number is going to shrink a lot get to up to 300k.
We bought a 2013 leaf for $7k in 2021. It doesn’t go very far (75mi in the summer 65mi in the winter)but it’s almost free to drive around town where gas is expensive and easy to park and we charge at home. I have a Honda Pilot for big stuff and road trips but the leaf is a perfect second car. We’ll probably keep it for around town until the range becomes unusable or we just need 2 longer range cars. It’s still worth most of what we bought it for and if we keep it for 5 years and sell it for 2-3k it will be under $100/month to own. I think it pencils out cheaper than my e-bike.
If I weren’t at the ass end of the world, EV speaking, I would be interested in a used or even possibly new EV from Cadillac. I won’t live long enough to see a completed infrastructure I will probably continue to prize my CT6 as a forever car.
I bought a 2019 Kia Niro EV with 50k miles two months ago. Paid $21k, getting $9k in incentives, so about $13k out of pocket. It’s saving me $100 a month on gas. I had been looking at 19s, 20s, and 21s and for a few reasons wish I had found a slightly newer one. But I’m not too worried, the plan is to sell in 2-3 years for something else. I’m looking for an i3 REX to follow David’s strategy with, I came across one for $9k, if I can get it down to $8k I’ll probably jump on it, will run about $2k out of pocket at that point.
The Niro was a bit of a wash with getting a good lease deal. The deciding factor was some of the new vehicle incentives drying up($2k MBARD went quickly, and $2k CVRP was not guaranteed and was close to running out.), and realizing that my wife made under the income threshold last year to get an additional $3k for a used EV.
I tend to keep cars for a while (9 to 14 years). The declining capabilities or, God forbid, an eye watering cost of a battery replacement will keep me out of an EV. The middle-long term potential (read ‘likely’) battery replacement costs to me seem to be the main reason EVs will have another depreciation drop at the 8 to 10 years mark. Thus, I’ll stick with an ICE that won’t have those mid-life costs.
Then again, maybe future EV tech advances will push those $10K+ battery replacements out to 15 years and keep the capacity from dropping too much before critical failure points.
Buying an EV now is like buying an iphone 3G. Buying an used EV is like buying an OG iphone. I’ll wait for the 16 Pro Max.
Nice analogy. I jumped in initially at 3G S.
Will you wait 15 years? The 5s was quite good, fwiw.
15 years is about right considering I’m in CA and they want to ban ICE in 12 years.
I’m not ready to buy any EV yet simply because of the infrastructure. Once that’s ready, I’m ready too.
I wouldn’t buy any EV outright right now unless it was a Tracy type situation and I was only dropping a few grand. I absolutely would not, under any circumstances, finance a new or used one. With the off the walls depreciation and interest rates right now it’s honestly one of the dumber things you can do financially this side of crypto and bored apes.
If I were to go EV in 2023 or 24 I’d lease a luxury one. The deals are excellent and to a large extent the massive depreciation will moreso be the dealership’s problem than mine. You can lease AWD/dual motor BMW i4s for $599 a month or if you’re feeling extra fancy/don’t mind tying up money in a mainly Saudi funded startup then Lucid will let you lease an Air for $799 a month. Either are an awful lot of car for how much you’re paying.
I mean, shit…the payment on my Kona N is $600 a month and my wife’s payment on her now paid off CRV was about $450. If you want to dip your feet in the BEV waters you could do a lot worse.
I don’t need anymore reminders how tempting the i4 lease is, been resisting for 1.5yrs. Don’t think I will be able to hold out all of 2024, selling our i3 and getting one seems logical.
Fun fact. Historians have determined that Napoleon was actually taller than Putin is.
Tesla is probably lucky China blocks twix or their sales might be even lower.
Buy a used EV? I already did 3 years ago, and got the new battery done with recall just last year, that’s sure to improve my resale right? Right…?
Part of the EV depreciation not noted is the tax credits applied to them also tend to hit the price, so an EV 3 years ago was getting the $7500 tax credit, so that seems to factor in on top of regular depreciation.
Matt, all of this is quite coincident with the prophecy that 2026/2027 will be the year when the curves cross themselves, Hybrids are at peak volumes, and time after that there are more EV’s than ICE’s. I’d love to see you do a deeper dive into this whole picture, if possible. I enjoy your insight.
You know what won’t be going down in price? Medical care.
Donate to our beloved Jason Torchinsky for his massive medical bills. If you didn’t already know, Jason suffered an aortic dissection and required emergency chest-splitting surgery.
How much have we raised so far?
As much as I paid for my used 500e two years ago. And I don’t regret it for a second. One of the best cars I’ve ever owned.
Note: when I posted this yesterday the total was about $14k. This morning it’s >$23k! So glad to see all the love for Torch!
Right up there with RTFM, may I suggest clicking the link? That’s what I do. 😀
Close to $15k last I checked. Thank you all so much!
The Fiat plant in question is the old Zastava plant, or, rather, a modern facility rebuilt on roughly the site of the old one. It’s 1/3 owned by the Serbian government (hence the involvement of the president in the discussion) and 2/3 by Stellantis.
It’s also where the Fiat 500L was built until last year, the first and last Serbian-built car to be exported to the US after the Yugo, from the same factory
Thank for the explanation. I remember the Yugo (at least the ones exported to the US) were based on the Fiat 126 or 127 but I lost track of what they did after that.
Man Matt get anEconomics or Business Statistics guy. Yeah it sucks at companies but given Car Manufacturers totally eliminated cars and had lower build numbers you can’t use regular models to project used car prices. No rentals for resale over 3 million less units built sways the market.
Now Business pro China lowers sales of outside country built EV S How about everyone else returning the favor to cutting Chinese stolen Tech? They don’t have the money to support growth without sycophants ignoring stolen technology. They are like Porsche and Telafans. Ignore facts to support their ideology.
I’m sorry, but maybe you should speak to Mr Proofreading. I think I get the overall gist of your statements but it’s very confusing.
Sorry I spent 30 years in newspapers but it was in Circulation.
This funny.
Bwahahah. (I also choose to interpret this as you having spent three decades as a newspaper boy).
Newspaper person
Let’s have a beer some day (well, I stopped drinking, but you know).
Always Root Beer I love a float
Buy a used EV? Not now, I’m still waiting on cold fusion.
Also, I’m so relieved GM got that DSS contract. I was really afraid they might have to survive on personal vehicle sales.
The majority of lithium-chemistry batteries do most of their degrading in the first year or so of use. So helpful to know that a used EVs range isn’t likely to decline much from what it is at point of sale.