September 7th, 2020 by Steve Hanley
iSeeCars is a website that specializes in collecting data about the new and used car markets. In its latest report, it says electric cars in general experience far higher depreciation after three years than conventional cars — 52% versus 39.1% for sedans, 39.7% for SUVs, and 34.3% for trucks. However, Tesla vehicles outperform the market. The Model S depreciates 36.3% at the end of a 3 year lease while the Model X depreciates 33.9.% over the same period.
But what is really astonishing is the Tesla Model 3. According to the study, it depreciates just 10.2% after 3 years. No car is a good investment. They all lose value over time. Yet the iSeeCars report suggests drivers who opt for a Tesla will see less of their money evaporate as their cars age. When it comes to computing the true cost of ownership of a vehicle, depreciation is a big piece of the pie.
As Car and Driver points out, early electric cars suffered from ferocious depreciation. A 2011 Nissan LEAF was worth only 11% of its original sticker price 5 years later. The federal tax credit also plays havoc with used car valuations. Three years ago, almost every electric car was eligible for that special tax treatment and the used car market responded by immediately wiping $7,500 off the resale value of all of them. That made those cars very attractive to people looking for a low cost, emissions free car. Within the CleanTechnica community, the LEAF has been the vehicle of choice for joining the EV revolution without breaking the bank.
Why do Teslas hold their value better than other electric cars? One reason is over the air updates. My 2015 LEAF is using the same software baked into it more than 5 years ago. A 2015 Tesla Model S or Model X has been updated multiple times since it left the factory. In some respects, they are better cars today than they were when they were built. The prospect of owning a used car with all the latest software enhancements of newer cars is a powerful incentive.
Range is also a big factor in the value of used electric cars. Except for Tesla, most 3 year old electric cars have a useful range of less than 100 miles. I can live with that for my own personal needs given my driving needs but for many folks the idea of owning a car that needs recharging after 70 miles or so is a non-starter.
So what accounts for the stunning performance of the Model 3? Supply and demand, mostly. “The Tesla Model 3 is still very much in high demand since it started production in 2017,” a spokesperson for iSeeCars tells Car and Driver. “Even though it doesn’t present a bargain compared to its new car price, it offers consumers a more affordable option for owning a Tesla.”
According to Plug In America, the primary factor in the value of a used electric car is the quality of the battery, just as the primary factor in the value of a used conventional car is the quality of the engine and transmission. “Since battery electric vehicles have 10 times fewer moving parts than gas cars, the only major concern in purchasing or leasing a used EV is the quality of the battery,” it says.
Cars like Hondas and Toyotas, which are known for lasting 200,000 miles or more, have high resale values. Other cars known to be less reliable do not. Nissan is still cursed by the shadow of battery failures in some early cars but as the years and miles go by, Tesla’s reputation for having the best batteries in the business gives used EV shoppers confidence that a Tesla will not suffer from battery failure as soon as the check clears.
The market is always changing. The Model 3 will see competition from the Model Y. Three years from now, the Model 3 may become the affordable used car option while the Model Y will be the next low depreciation champ. Then again, the newer electric cars coming from Volkswagen, Ford, and GM may tip the balance away from Tesla. Guessing what any used electric car will be worth 3 years from now is fraught with variables and what we now call known unknowns. Only one thing seems certain — if it says Tesla on the back, it will probably be worth more at trade in time than any other electric car.
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