NADA: Used Plug-In Vehicles Burdened With Highest Depreciation of All Vehicle Segments

4 years ago by Eric Loveday 16

Not a Plug-Ins Friend Though

Not a Plug-Ins Friend Though

“Values for used plug-in electric vehicles are expected to decline nearly 30% this year–the highest depreciation out of all vehicle segments.”

As a percentage of MSRP, the Volt retained only 49%

As a percentage of MSRP, the 2011 Volt retained only 49% by May 2013

That’s according to the NADA Used Car Guide in its latest report, “Plug-in Electric Vehicles: Market Analysis and Used Price Forecast.”

We should stop here, because all of NADA’s analysis provides a depressing outlook for used plug-ins, but in the interest of fairness, we’ll let NADA tell its story.

Jonathan Banks, executive automotive analyst for the NADA Used Car Guide, adds all of this to the depressing conversation:

“The steep rate of depreciation for used plug-in electric vehicles can be attributed to limited range, manufacturer incentives and federal tax credits intended to offset the higher prices of new plug-in electric vehicles.”

“Generous tax credits can certainly promote more new sales than would have been achieved otherwise, but they also have a negative impact on future resale values for one basic reason — few consumers are willing to purchase a credit-ineligible, used plug-in electric vehicle for more than they would pay for a new one, less the federal tax credit.  So at a minimum, late-model used plug-in electric vehicle prices must logically max out below the manufacturer’s suggested retail price minus the credit.”

And then NADA drops this bomb in:

As a percentage of MSRP, the 2011 Leaf retained 42% of its value by May 2013.

As a percentage of MSRP, the 2011 LEAF retained 42% of its value by May 2013.

“For example, in the May 2012 edition of the NADA Official Used Car Guide, average trade-in values for the 2011 Chevrolet Volt and Nissan Leaf were $31,060 and $24,857, respectively. In May 2013, values for the Volt and Leaf had fallen by a combined average of nearly $10,000, to $21,235 and $14,792, respectively. As a percentage of MSRP, the Volt retained only 49% of its value and the Leaf retained 42%.”

How did non plug-ins fair?  NADA says, “By comparison, average trade-in values for a 2011 Toyota Prius hybrid fell by $4,735, to $16,490 over the same period.

The future looks bleak, too.  According to NADA, “the annual rate of depreciation for used plug-in electric vehicles will improve little over the next two years, with annual losses going from 31.5% in 2012 to 29.7% in 2013 and 27.4% in 2014.”

And finally, there this last bit of plug-in depreciation info:

“In terms of U.S. dollars, a plug-in electric vehicle worth $20,000 in 2012 is predicted to lose $9,792 of its value by the end of 2014, while similarly priced gasoline and hybrid vehicles over the same period are expected to lose $5,573 and $6,455, respectively.”

 

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16 responses to "NADA: Used Plug-In Vehicles Burdened With Highest Depreciation of All Vehicle Segments"

  1. David Murray says:

    That’s okay, when the $7,500 credit goes away, that will reverse dramatically.

  2. AceVolt says:

    I just checked the value of my 2012 Volt after a year and a half and 20K miles. Its at $26.5K which is what I paid for it after all the incentives. Thats no depreciation after a year and a half!!

  3. Brian says:

    You cannot have decreasing prices on new vehicles in one hand and low depreciation in the other. I would rather see high depreciation over the next few years than have EV prices stay so high.

  4. MTN Ranger says:

    Well, I looks like choosing a lease is working out better than expected.

  5. kdawg says:

    From the article:
    “The steep rate of depreciation for used plug-in electric vehicles can be attributed to limited range, manufacturer incentives and federal tax credits intended to offset the higher prices of new plug-in electric vehicles.”
    ————–
    So how does the range affect the depreciation? The range of a new EV is the same as the range of a used one. Nothing has changed here.

    Also, if the used car already received the tax incentive, then that money is already baked into the lower price. I don’t see how this makes a difference.

    Wow, NADA really cherry picked their data too. I can also do that.

    From Forbes:
    “New cars typically lose about 20% of their value the moment they’re driven off the lot, and about 65% after five years. But some models fare much worse, like the Mercedes-Benz S-Class S65. After five years, this luxury sedan loses 84% of its purchase price.”

    And more from Forbes (assuming only $2.60/gal):

    “Residual value matters because depreciation is the largest single cost of owning a car. Take the Lexus IS250. It costs $33,015 to buy, but loses more than $18,000 of that to depreciation over five years, according to data from Vincentric, an auto-industry analysis firm in Bloomfield Hills, Mich. Compared with the secondary costs of fuel ($10,035), insurance ($7,442) and maintenance ($2,734), depreciation eats a big chunk of driver expenses each year. (Vincentric assumes15,000 miles driven per vehicle annually, and a price of $2.60 for regular fuel, $2.86 for premium and $2.75 for diesel. It also applies an inflation rate for the fuel prices, since the calculations predict costs over five years.)”

  6. Future Leaf Driver says:

    From the article:“The steep rate of depreciation for used plug-in electric vehicles can be attributed to limited range, manufacturer incentives and federal tax credits intended to offset the higher prices of new plug-in electric vehicles.”
    ————–
    I think the idea from the article is that once newer EVs start arriving with longer ranges, used first gen model prices will drop below the $20K price point if not lower.

    Wait until the vast amount of leased EVs come off lease in 2014 and see the price drop fast which will allow for more people to afford EVs!!!

    1. Anthony says:

      Yeah, the big depreciation hit for PHEVs is that the manufacturers are lowering the price. I cant expect my Volt to sell for normal depreciation if GM slashes the price by $4000 – my car’s value will go down commensurately.

  7. bloggin says:

    This is what Ford was talking about when they stated they would not drop the sale price of the current Focus Electric which would impact resale values for consumers/devalue the brand. Instead, Ford dropped the sale price by only $2k, but offered $11k off the lease price, wanting to push more consumers into a lease, instead of a purchase.

    The $6k price drop Nissan did for the 2013 Leaf caused 2010-2012 Leaf owners to take an immediate $6k depreciation on their vehicle. At the moment good for the 2013 Leaf consumer, bad for 2010 – 2012 owners.

    Ford instead will either launch a lower trim model, or wait for the next gen to offer the price drop, which has less impact on the current 2012/2013 model.

    EVs are Technology. Like smartphones. Quickly upgrading and updating, where the older model drops in value quickly. Which is why the only smart move is to lease an EV, this way deprecation is governed/locked-in by the lease price.

  8. Tesle-it ! says:

    NADA is acting on behalf dealers. That’s why they released this report.
    1. Its a known fact that Electric cars have very little maintenance compared to ICE.
    Its also known that dealers make their money from SERVICE……. ( can you connect the dots)……!!!..The whole purpose of the report is to discourage consumers from adopting EVS..
    If there is widespread adoption of EVS then lots of dealers will go out of business…Its that simple folks!!!!
    2. Tesla has already served notice. There will be no going back. Where Tesla/Musk wins this fight with dealers or not …..The dealership model will not survive…at least as we know it today…( getting fleased). The only dealers to survive will be those that offer excellent service…but all other scum- bags & un- desirerables will be VANQUISHED!!

    1. Bonaire says:

      As they say at the firehouse…. BINGO!

  9. GeorgeS says:

    NADA

    isn’t that what Tesla is fighting AGAINST.

  10. Foo says:

    Sure, it’s all “doom and gloom” that an EV (at least today) might depreciate faster than an ICE. But, let’s not forget that an ICE, on average, costs about 2000 *additional* dollars per year to operate than an EV. (The ICE needs to constantly be refilled with expensive gasoline and oil, a cost which is also historically likely to go up significantly.)

    So, if you buy an EV today and keep it for, say, 5 years, using it for most of your driving, you can expect to have $10,000 more dollars in your pocket than if you had driven an ICE instead. That kind of savings alone may possibly even *more* make up for the depreciation discrepancy.

  11. Depreciation on EVs is a bit of a red herring, other than for tax purposes and balance sheet.

    In economic (if not financial) terms, the value if an EV is very little diminished over time.

    Since an EV can do something no liquid-fuel ca can – dramatically lower operating costs through fuel savings – the real value to consumers/drivers is very little diminished over time.

  12. I’ll be one of the first in line to buy one of those “rapidly depreciating” Tesla Model S sedans.

  13. Bonaire says:

    NADA are a strong-arm organization.

    Resale prices are ridiculous anyway. It’s all in who can bargain the best. I was offered between $2500 (Carmax) and $4700 (Car Sense) for the same exact car for a dealer trade-in. Dealership of the vehicle who sold it offered $4500.

    The more NADA rails against EVs – the more I hope Tesla’s sales model succeeds.

  14. Interesting how NADA chooses to define depreciation. They’re pricing the new EVs $7500 more than the net cost to consumers. So my i-MiEV lost 25% the moment I drove it off the lot. Maybe, but that $7500 of ‘depreciation’ became cash in my pocket!