New electric cars are grabbing all the headlines, but Americans buy far more used cars than new cars. When will sales of used electric vehicles pick up?
They already have.
A new analysis from Kelley Blue Book parent company Cox Automotive shows that used EV sales grew by 32% in the first three months of 2023. It’s likely just the start of an accelerating trend.
“Every new vehicle eventually becomes a used vehicle,” says Cox Automotive chief economist Jonathan Smoke. “Our data sets indicate used EV sales will begin increasing rapidly from here, following a clear path set by new sales.”
New EV sales likely to hit 1 million this year
Cox Automotive expects Americans to buy more than 1 million new electric cars for the first time in 2023.
In 2021, about 3.2% of the new cars Americans bought were electric. By the end of 2022, that number had reached 5.8%. It’s accelerating rapidly. Analysts are still tallying first-quarter sales, but Cox Automotive economists believe that 7% of the new cars Americans bought in Q1 were electric.
Adoption won’t be linear. It snowballs as automakers introduce new electric models of all types, giving more shoppers electric options. Studies have also shown that Americans grow more likely to buy an electric car when they start seeing them in their neighborhoods.
But used EV sales begin their rise sometime after new EV sales. It takes time for used EVs to begin reaching the market and for Americans to understand concerns about battery aging.
New research shows that expensive battery replacements – a fear that holds back some potential used EV shoppers – are rare.
Also see: Americans are warming up to electric cars, but still divided over them
Used EVs reaching auction market
Cox Automotive also owns Manheim, the world’s largest operator of wholesale auto auctions. Used car dealers obtain many of the cars they sell through auctions.
Through Q1, Manheim operating locations across the country processed nearly 9,800 used EVs – an increase of 40% from the same period in 2022. That’s still a small percentage of total vehicles – Manheim facilitated more than 900,000 vehicle sales that quarter. But a 40% increase in one quarter is remarkable.
Changing tax laws driving some used EV sales
Some of the increase doubtless comes thanks to a recent change in tax law. Congress altered the federal EV tax rebate system last year. New rules that began Jan. 1 allow Americans to claim a tax credit on a used electric vehicle.
The Inflation Reduction Act created a federal tax rebate of up to $4,000 on the purchase of a qualifying used EV. While the act introduced strict limitations on which new cars can qualify for a tax credit, used EVs are subject to looser rules.
Buyers must still fall under certain income caps. But rules requiring cars to be built in North America and contain battery minerals mined in the U.S. or certain partner countries don’t apply to used EVs.
The IRS is in the process of adopting stricter rules that will further limit the list of new EVs qualifying for a federal discount.
Used EVs growing less expensive
Tax incentives may be helping push down the cost of used EVs. So are price cuts to new EVs. Tesla
TSLA,
has enacted several recent rounds of price cuts, which can depress the value of Teslas already on the road.
See: Used car values are dropping. Here’s when forecasters expect prices to normalize
Cox Automotive reports that the average retail listing price for a used EV was around $43,400 in the first quarter – down 4% from a year before and well below the average new EV price, which is closer to $59,000.
This story originally ran on KBB.com.
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More drivers are turning to the second-hand electric car market, according to a powerful new study by industry leader Kelley Blue Book. The research has shown that the convenience and cost savings associated with used electric cars are leading to increased demand in the US, as the number of available vehicles on the market continues to rise.
The study found that over the past year, the share of used vehicle sales that were electric vehicles rose to 2.5%. This is an impressive jump from the less than 1% of electric vehicle sales in the same period a year earlier. These findings are welcome news for the automotive industry, as electric cars make up a growing chunk of the national car market, drawn in by the environmentally-friendly benefits associated with electric cars over traditional gas vehicles.
Kelley Blue Book’s data shows that 44% of electric vehicles sold from October 2019 to September 2020 were over three years old. This indicates that more people are looking for used electric cars due to the lower sticker price as well as the potential for more money off with used cars.
Furthermore, the survey found that 35% of buyers said convenience was their primary motivation for their electric car. The availability of used electric vehicles is seen as a great way to make electric vehicle ownership more accessible and convenient to the general public. According to the survey, 70% of used electric vehicle buyers replaced a gas-powered car.
The survey found that interest in used EVs was split between those looking for their first electric car and those who had already purchased an electric vehicle in the past. This confirms that the electric vehicle transition is beginning to shift gear from luxury to mainstream vehicles.
As the number of used electric vehicles on the market continues to grow, Kelley Blue Book predicts that the sales of electric vehicles will increase. This is good news for both motorists and the environment, as the transition to greener transportation solutions continues to pay dividends.
