Used EVs Briefly Beat Gas Cars in Value Retention for First Time
For the first time ever, late-model used electric vehicles (EVs) held their value better than the automotive market as a whole this year, albeit for a brief period — reports Automotive News.
Alex Yurchenko, chief data science officer at Black Book, said this was spurred on in part by higher gasoline prices. However, electric models’ peak in value retention started to subside in July.
Yurchenko said during the Auto Finance Summit on October 28 that this was followed by a “very steep drop” in the percentage of sticker price held by 2- to 4-year-old EVs. Come October, late-model EVs had dropped below the market average in the percentage of value held.
Global EV adoption is quickly accelerating, with the International Energy Agency forecasting annual EV sales to hit 145 million units by 2030. As electric platforms mature and adoption ramps up, EVs are bound to overtake gas-powered vehicles in value retention. As short-lived as it may have been, they did exactly that for the first time this year.
Kristen Lanzavecchia, director of industry solutions at J.D. Power, said the company’s residual value forecast for EVs has “come up a lot,” with prices approaching 50% of the sticker price. “It’s a pretty high number,” she said.
In comparison, J.D. Power’s residual value percentage forecasts for internal combustion engine (ICE) vehicles are in the mid-50. Lanzavecchia added that in the near term, used EVs will also see their value bolstered by the fact that supply continues to lag behind demand.
According to Black Book’s estimates, the average residual value of all 3-year-old vehicles will fall from 73% of the purchase price in October 2022 to 61% in October 2025. Prior to the pandemic, that value had been hovering around 50%.
As for EVs, Black Book estimates that the average 3-year-old EV will hold 55% of its value in October 2025, as compared to 66% in October 2022. Pre-pandemic, EVs never broke 35% of their sticker price in value retention.
In another win for the electric revolution, EV leases are starting to incorporate value retention that is comparable to gas-powered models.
Lanzavecchia added that accounted for approximately 5% of automotive sales this year. J.D. Power expects EVs to double their market share in the next two years. Norway, one of the global frontrunners in EV adoption, is already seeing plug-in electric vehicles take almost 90% of monthly automotive sales with Tesla leading the charge.