LAS VEGAS — The depressed values of used electric vehicles present an attractive solution to cost-conscious consumers seeking transportation, business leaders said at the 2024 Auto Finance Summit here.
Used EVs were “the biggest, first best-kept secret out there” for consumers, John Possumato, CEO of EV rent-to-own company DriveItAway, said during a summit panel Oct. 8.
“As that starts to circulate, people start to get them,” he said. “That’s where your adoption rates will go up because it’ll be a second or third car, but it will be priced so cheaply you almost can’t say no.”
The recommendation of used EVs as a low-cost means of transportation comes amid industry issues of vehicle affordability, higher interest rates and consumers underwater with negative equity.
A Cars Commerce executive made a similar point at the Northwood University Center for Automotive & Mobility Studies Industry Summit in Midland, Mich., on Oct. 3.
“I think used EVs are a huge opportunity,” Brian Kramer, Cars Commerce executive vice president and general manager of Accu-Trade, said at the event. “There’s a lot of availability of those vehicles at the auctions, lot of people not going after them. And it’s a great vehicle.”
Kramer said Cars.com web traffic indicates 8 percent of the site’s visitors were looking for a used EV, but 12 percent of shoppers there bought a used EV. The difference suggests consumers who enter the site in search of an internal combustion engine model wind up purchasing an EV, he said. The shopper “doesn’t know that they want [an EV] yet, but they do know that they can afford one.”
Switching a customer who visits a dealership to an EV “is something that every dealership needs to think about right now,” Kramer added.
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September data from consumer vehicle information site Edmunds reveals used EVs in some 25,000-mile-increment brackets still retailed for more than their ICE counterparts. However, the average used EV with 25,000 to 49,999 miles cost $27,639 compared with $30,261 for a used ICE model in that range — nearly 9 percent cheaper. The average used EV with 50,000 to 74,999 miles sold for $23,840 compared with $24,521 for a similar used ICE model.
Sorting the September Edmunds data by transaction price instead of mileage makes used EVs look even more attractive. For example, the average used EV selling for $15,000 to $19,999 had 38,649 miles. The average used-ICE vehicle in that price range had 63,525 miles.
“It’s a very tempting and enticing [price]-versus-mileage kind of decision that people are going to have to make right there,” Ivan Drury, Edmunds director of insights, told Automotive News on Oct. 16.
Drury said he thought purchasing an inexpensive used EV makes sense for buyers with experience driving an EV and for consumers without sufficient credit quality to capitalize on the “absurdly cheap” EV leasing offers today. He also proposed used EVs could be added as low-cost commuter vehicles for consumers who don’t want to part with a less fuel-efficient vehicle but have been ordered to return to the office for work.
A variety of factors have driven down the price of used EVs.
Hertz’s sale of what it said in January would amount to about 20,000 EVs beginning in December 2023 and continuing through 2024 “created a massive shock to the market” and crashed the price of a used Tesla Model 3 to $20,000, Scott Painter, CEO of EV subscription company Autonomy, said at an Oct. 9 Auto Finance Summit panel.
Peter Glenn, co-CEO of EV financing company EV Life, made a similar point on a panel discussion Oct. 8, though he put the price of a used Model 3 at $25,000 following Hertz’s move. Either price meets the government’s $25,000 ceiling to claim the up to $4,000 tax credit available for buying a used EV.
Glenn, who participated on the same Auto Finance Summit panel as Possumato, said that when he first heard of Hertz’s move, his reaction was, “Oh, no, not another bad-news EV story.” But there turned out to be an upside.
“I think our customers and millions of other Americans at home said, ‘I can get [a] Tesla Model 3 for under $25,000, and I might be able to apply a $4,000 used-EV tax credit,’ ” he said.
The best solution to the need for personal transportation today “really isn’t a 200,000-mile ICE unit,” Possumato said. “It’s a 2-year-old or 3-year-old EV.”
EV Life didn’t finance used EVs at the time of Hertz’s decision, but “within weeks of our customers beating down our door,” it introduced used-EV loans, Glenn said. Many customers were able to finance used Model 3s for less than $400 a month between the $25,000 vehicle price, the $4,000 tax credit and other incentives EV Life applied to deals, he added.
Used EVs lose value faster than used gasoline-powered vehicles, Jonathan Gregory, senior manager of economic and industry insights at Cox Automotive, said at another Oct. 8 Auto Finance Summit panel. In addition to Hertz’s move, automaker price cuts on new EVs have quickly driven down used EV prices, Gregory said.
As the new-EV market became more crowded, industry leader Tesla turned to price cuts to be more competitive, triggering lower prices and higher incentives from other automakers, said panelist Kristen Lanzavecchia, director of industry solutions at J.D. Power.
“We have also seen other automakers have to react to this,” she said. Now, “we have seen price cuts [on EVs] from other automakers and we have seen higher incentives.”
The government’s tax credits for consumer and lessor purchases of new EVs might further affect used-vehicle values, Drury said, by creating deals for new models and a future influx of used off-lease vehicles.
“As we think about the millions and millions of cars, especially EVs, coming off-lease, I think the kind of deals that we’re going to see are the best marketing for driving electric,” Glenn said.
He predicted “a real surge of middle-class Americans” recognizing the cost-of-ownership benefit when experiencing lower fueling expenses combined with the price of a used EV.
Drury also pointed out that automakers are planning to introduce new EVs with lower sticker prices.
“What does that do when you’re saying, ‘Look, we’re going to have brand-new, very cheap ones out there’? The used ones are just going to take another nosedive.”
Glenn estimated the average used-EV price today is near the average used-vehicle transaction price. He said there might even come a time “where it crosses over and gets cheaper to buy a used electric vehicle than a used gas car, which is really exciting.”
Possumato believes that time has come. “I think we’re there now,” he said.
Paige Hodder contributed to this report.
Source: autonews.com
