Avoid acquiring an electric vehicle until 2026, warns new report – prices are expected to drop significantly.
The expiration of lease contracts will flood the U.S. market with reduced-price electric vehicles.
According to a new study presented in the 2024 E-Vision Intelligence Report, the volume of electric vehicles returned under lease agreements is expected to increase by 230% by 2026. This could lead to the emergence of a large number of second-hand electric vehicles on the market at very affordable prices. It is estimated that nearly 280,000 electric vehicle lease contracts will end in the next two years in the United States. However, some lessees may choose to lease a new vehicle, as recent EV models, or those soon to be launched, are decreasing in price, making the leasing option more convenient than purchasing the current vehicle.
According to the study, the average cost for a lessee of a compact electric SUV to buy out their lease would be $477 per month, while the average monthly payment for a new EV in the same category is only $457. This is because the average purchase price of many compact electric SUVs exceeds $25,000, which is the threshold to qualify for the available tax credit for used electric vehicles.
While this may be beneficial for those considering switching to an electric vehicle, it also creates complications for the used car market in general. The uncertainty over whether the federal tax incentive for electric vehicles will remain, and how long the high manufacturer incentives will last, are concerns that affect the traditional balance of supply and demand. Additionally, the long-term health of batteries and the shortage of used gasoline-powered vehicles also add complexity to the situation.
Regarding depreciation, it has been notable among certain luxury electric vehicles, which poses a challenge for the used car market. Models like the Porsche Taycan, which originally cost $130,000, have seen their value plummet to approximately $35,000 in just three years in some markets. A report indicated that some premium electric vehicles, such as the Mercedes-Benz EQE and the Audi e-tron GT, could lose up to half their value in the first year of use. This phenomenon is due to various factors, including ongoing concerns related to the range of electric vehicles and the rapid advancement of battery technology, leading to older models being replaced more quickly than their internal combustion engine counterparts.
The market for used electric vehicles could become a buyer-friendly market in the coming years, which will be beneficial for those waiting to make the switch to this new technology. However, this is not good news for automakers that rely on new vehicle sales, such as Ford and Volkswagen, to stay afloat.
