There's never been a better time to buy a used electric car – prices drop by 20.5%!

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Have you been thinking about buying an electric car, but don’t know when to start? Are you, like most Americans, on the hunt for used cars? Well, if so, it looks like your time has come! Used electric car prices were down 20.5% in the second quarter of 2024 compared to the second quarter of 2023! And for some context, note that this is compared to an average cost decrease of 5.1% for hybrids (including plug-in hybrids) and an average cost decrease of 6.8% for conventional gasoline or diesel cars. So yes, used electric cars just got a lot cheaper.

There’s one more important point to note before I explain why this likely happened. The second important point is that the average used EV prices now look a lot more like the average used hybrid and ICE (internal combustion engine) car prices. EVs now have an average used car price of $33,787, compared to hybrids which are at $30,416 and 100% fossil fuel cars which are at $27,391. That’s a huge change from the ~$10,000 and ~$13,000 gaps from a year earlier.

When you consider how much more you can save by charging your car with electricity instead of putting expensive gasoline in your car, used electric cars are really popular now. cheaper than in many cases used petrol cars!

Also keep in mind that the average used EV is going to be significantly newer than the average used ICE car or hybrid, as EVs have only started to reach significant sales volumes in the US in the last few years. (The average age of used EVs now is 2.7 years, while the average age of a used car in general (both those EVs and hybrids and pure fossil fuel vehicles) is 4.5 years.) Because of this age difference, used EVs have naturally been driven less. The average for all vehicles combined is 52,478 miles, while the average for used EVs is 29,430. Of course, with over 20,000 fewer miles and being about 2 years younger, EVs are going to cost more! Frankly, the fact that the average price is so similar just makes it clearer that now is the time to buy a used EV over a used gas car.

This age gap begins to tell us why used electric car prices have fallen so much. It’s not just one reason. I think it’s easiest to just list the reasons in a bulleted list (and if I’m missing any, please add them in the comments below):

1. More new Electric cars are eligible for the $7,500 EV tax credit this year, including very popular cars. This immediately reduces the price of comparable used electric cars.
2. Tesla has had to cut prices over the past year to boost sales. Lower prices for new cars mean lower prices for used cars.
3. Second-hand electric cars are older than ever. That puts pressure on prices.
4. Used car prices have fallen across the board as inflation has slowed and the car market has cooled.
5. Teslas may be in lower demand than they were a year ago, for… obvious political reasons.
6. Hertz and some others have dumped many Teslas and other EVs on the used car market. When you add a lot of supply, basic economics tell us you lower the prices.

Please let me know if I'm missing anything.

“This downward trend in values ​​marks an abrupt turn in the direction of the used electric vehicle market, which has seen prices rise with the introduction of competing products. We appear to have reached a point where used electric vehicle values ​​are being destroyed by more mainstream market forces,” Edmundswho collected the data, notes.

The important thing is that for those looking to trade in their EV for a new one, this huge drop in the value of their cars is painful. In fact, it reduces the number of people who Doing trade in their EVs for new ones, which leads to less demand for new EVs, which drives down EV prices, which drives down the value of used EVs. Oh boy, that's quite a cycle!

Returning to price, Edmunds provides more information on the results for different price ranges:

The average price for used electric cars is generally higher than the overall used car market. However, when we look more closely at the highest transaction shares in different price ranges, we see that, as in the rest of the sector, the majority of electric car sales fall in the $20,000 to $30,000 price range.

And yet, while the highest sales volume in the EV market and the industry as a whole fall in the same price range, the EV market has a bit of a long tail for transactions that occur at the higher price points. Transactions over $30,000 account for 51.9% of the used EV market, while that figure drops to 38.1% for the entire used market.

And what about the future? What’s going to happen to used EV prices, and used car prices in general, over the next year or so? Give me a crystal ball and I’ll tell you. The big catalysts, though, will likely still revolve around Tesla (in the US). There are three potential big influencers, but none of them are certain and the timing is very vague:

1. Tesla could release a new, cheaper electric car for $25,000 or so. However, that seems unlikely until late 2025 at the earliest.
2. Tesla could master “Full Self Driving” (FSD) and the value of Teslas with FSD and robotaxi capabilities could increase significantly, which could push up used Tesla prices. Again, Elon Musk has predicted that progress will be much faster than Tesla has achieved in almost a decade, so don’t sell your horses just yet.
3. Tesla could face more serious consumer demand issues than it has seen. I have discussed this extensively, so i will lead you herebut the key takeaways for the US market are that a) Elon Musk is increasingly driving people away from the Tesla brand, especially in California, the company's core market. That's likely been exacerbated recently as Musk endorsed Donald Trump, apparently donated to his campaign, and interviewed him on X (formerly known as Twitter). b) the market for Tesla's two mass-market vehicles and three more niche vehicles may be reaching saturation point, and US sales may decline rather than rise.

We’ll see, but who knows? What we do know is that used electric cars are cheaper than ever and seem like a great buy. As the owner of a 5-year-old Tesla Model 3, I can’t believe I’ve had it for 5 years and it still looks and performs the same as when I bought it in 2019.