- Many car buyers cannot afford a new electric vehicle but are interested in used ones.
- Today’s expensive electric vehicles will one day hit the used car market.
- That could play a role in the used electric vehicle market — and tax credits might not help just yet.
According to the Kelley Blue Book, the average cost of a new electric vehicle in December was $61,448 — well above the $49,507 median price tag a new vehicle with an internal combustion engine. That’s a problem for the car manufacturers in the increasingly urgent race for greater acceptance of electric vehicles.
Many potential electric vehicle buyers are increasingly interested in the used market to drive a cleaner car without such a high price tag.
At first glance, today’s product pipeline may not paint a good picture for the future of the used electric vehicle market. About 77% of all electric vehicle sales in the fourth quarter were at luxury prices, according to consulting firm Anderson Economic Group. The F-150 Lightning, for example, starts at almost $56,000. The GMC Hummer pickup will cost you about $100,000. The Cadillac Lyriq starts at nearly $63,000. Rivian’s R1T starts at $73,000.
Lessons from the used car market
If you look at the world of internal combustion engines, luxury vehicles account for about 17% of the market share, said Kristin Dziczek, policy adviser to the Federal Reserve Bank of Chicago, at the firm’s recent Auto Insights symposium in Detroit.
Prioritize these and more profitable vehicles over market share has consequences for the future used market.
“If what we’ve been producing over the past few years has been a rich mix, if that goes to the used market, that also keeps used prices up,” Dziczek said.
The question is how the EV market will respond to similar dynamics.
Electric car prices are falling
Consumers are seeing the prices of new electric vehicles gradually drop; The December figure was down from the previous month, in part due to anticipation of provisions in the Inflation Reduction Act that put GM and Tesla back in the running for important federal EV tax credits.
Overall falling used car prices also apply in principle to used electric vehicles. the Average price of a used electric vehicleabout $32,750 in December, is down about 14.4% from a peak of $38,500 last July, according to the Recurrent Index of Popular Used EV Models.
If prices for new electric vehicles fall, their used counterparts could fall as well.
“If you shut down the new alternative, you would effectively imagine that used prices for Model 3s and Bolts would also drop quickly,” said Scott Case, CEO of Recurrent. “The huge Tesla price drops in new Tesla prices that just happened out of the blue last week have pretty direct dollar-for-dollar implications used tesla prices.”
Additionally, “impact on automakers’ decision to prioritize high-end EVs won’t be felt in the used market for a while,” Case said.
Don’t rely on the used electric vehicle tax credit just yet
Still, used electric vehicles remain more expensive than used gasoline cars (the average list price for the latter was $27,143 in December). per Cox Automotive). The tax credit for used electric vehicles introduced with the Inflation Reduction Act last summer could be a short-term answer.
Taxpayers are eligible for a credit of up to $4,000 or 30% of the vehicle price as long as the vehicle is at least two years old, less than $25,000 and sold through an authorized dealer. according to the Zero Emission Transportation Association. (The taxpayer must also comply with income caps).
But the majority of used electric vehicles do not yet meet these criteria.
“It looks like fewer than a million of these vehicles will be eligible for this tax credit this year because they cost over $25,000 to buy,” said David Gohlke, an energy and environmental analyst at Argonne National Laboratory the Fed symposium.
Dealers are beginning to feel motivated to drop used EVs priced close to the cap to just below.