Why Do Electric Vehicles Depreciate So Much? 

If you hate the thought of reselling your car just because you have to face the fact that it has depreciated so much, then you would hate even more trying to resale an electric car. For some crazy reason, electric vehicles depreciate at an astonishing rate. We’ll try to get to the bottom of why electric vehicles lose their value at such a rapid rate.

So, why do electric vehicles depreciate so much? Electric vehicles depreciate at such a high rate due to the large number of incentives that are given by the government and car manufacturers. Another reason that adds to this is that there still isn’t a high enough demand for electric cars to create a market where electric cars can be resold at higher prices. 

All vehicles will depreciate, as it is inevitable, but electric cars do it at a much faster than normal rate. Electric cars, like conventional cars, still get you from point A to point B. But why such a big difference in how they hold their value? There are multiple factors that add to this depreciation of electric cars and in this article, we will be discussing a few of those. 

Why Electric Vehicles Depreciate So Much

The first thing that needs to be understood for why electric vehicle cars depreciate so much is subsidies. Both the government and manufacturers give large incentives including tax breaks and no interest rates on electric cars for long periods of time. These incentives actually cause a lot of people who are interested in electric vehicles to try to get rid of their electric vehicles quickly and upgrade to a new one before their lease of incentives, like no interest rates, wear off.

In the United States of America, a tax incentive of $7,500 is offered for those who buy new electric vehicles. This incentive, however, isn’t offered to those buying a used electric vehicle. To balance out this lack of incentive prices, the price of an electric vehicle has to be lowered. Many people see this incentive and will pay a bit more money for something brand new than buy something three years old for less. 

 Instead of sticking with an older electric car, they go straight to the newer models, and as fast as electric car technology is changing, this can come with some understandable motivation. Consumers buy the newest electric cars because they love the new technology. With things that limit electric cars, (like range) it is very easy to want the top of the line to get the most out of your electric car.

While worries of miles can be a factor in the drastically low resale value, it is not the biggest one. Yes, a brand new electric car will have a better range than an electric vehicle with 30,000 miles on it, but it is not a big enough difference that that should be one of your worries when looking at an electric vehicle to purchase. Electric vehicles often don’t need maintenance and are in good condition after only 3 years of owning one. As long as you take care of it, it should last for a long time.

Do Electric Vehicles Depreciate Faster Than Conventional Vehicles?

All cars depreciate but electric vehicles depreciate at an abnormally quick rate. According to hotcars.com electric vehicles depreciate at an astonishing 52% after three years, while your conventional Sedan depreciates at only 39%. Conventional trucks are even lower, depreciating only about 34% after three years. 

As illustrated from those examples, you can see that electric vehicles depreciate much faster than your conventional gasoline or diesel-fueled cars do. Another reason for this is because there is still a larger demand for conventional internal combustion-engined cars than for electric vehicles. This larger demand causes conventional vehicles to depreciate at a slower rate than electric vehicles. 

This trend will probably continue for the next few years as conventional cars will remain the most popular mode of transportation. With the popularity, comes the demand, and that demand is a big part of what allows conventional vehicles to maintain their value so much better than electric vehicles. Within 10 years, we might see the trend begin to change and electric vehicles will be able to begin to hold their value better over time. 

Depreciation Of EV’s In The US Vs Other Countries

Now, we have to ask if is this massive depreciation standard is seen around the world or solely in the United States. The first thing we need to remember is that there aren’t too many countries that have a large number of electric cars but there are a few that we will make a comparison with. 

The United Kingdom has a very high percentage of electric cars and is really pushing to make all cars electric. The United Kingdom’s government has even made a goal that all new cars sold in the year 2030 have to be electric vehicles. Seeing that the United Kingdom is further along the electric vehicle journey, much more than the United States seems to be, a comparison could give us good insights into what the United States will be like relating to electric cars in years down the road. This will be of use when it comes to the depreciation of electric vehicles.  

In the United Kingdom, according to the English blog www.jamjar.com/, the average electric car depreciates about 15 to 35 percent after the first year. In three years that climbs to a staggering 60% on average. This isn’t insanely different then what we see in the United States with the average being around 52%. There are many electric cars in the United States that will actually depreciate about 60%. 

As we look into other parts of the world, there seems to be the same common trend of depreciation and all of it is due to similar reasons that were discussed earlier in the article. Electric vehicle sales seem to be on the increase around the world but they are still not high enough to stop a dramatic depreciation in the price of these new cars. 

How Much Can You Expect Your EV To Depreciate Every Year?

 If we are thinking in years, your electric vehicle will lose about $5,700 of its value per year, according to Forbes. Let’s say your electric car cost you $40,000 new. Losing $5,700 a year is almost 15% of its original value. Other sources say about the same thing, but there are sources that say that that number can even get up to 30% in just the first year. 

Autoweek says, when talking specifically about Ford’s Mach E, that about a 25% drop of value after the first year should be expected. The first year usually brings the biggest drop in price but the drop will continue to sharpen until about the third year when the drop in price might begin to slow down a little bit. 

There are, of course, factors like miles and the condition of the car that can influence how much your car depreciates every year. For example, if you drive your electric car 30,000 miles in the first year it is likely you will see a bigger drop in the value if you try to resale it. Another thing that is never good for resale value is if your Interior becomes destroyed from use. 

I do want to mention that there is an exception to the rule when it comes to the depreciation of electric vehicles and that exception is Tesla. Tesla has somehow incredibly done the opposite of what all of the other electric vehicle manufacturers are doing. Most manufacturers have to create amazing deals and incentives to sell their electric vehicles but Tesla actually has a waiting list for their vehicles. 

The electric vehicle that actually maintains most of its value is actually the Tesla Model 3 which according to Autoweek still has 64.3 percent of its original value by the end of its third year. That is double what some electric vehicles have and is actually near the percentage where most conventional cars hold their value. There are also cars like the Audi E-Tron and the Jaguar i-pace that do well in holding their value but Tesla is definitely the best when it comes to holding the highest percentage of its original value. 

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