CAP Automotive: EVs Depreciate More Than All Other Types of Vehicles

DEC 13 2013 BY ERIC LOVEDAY 19

Cap Automotive Says EVs Depreciate More Than All Other Vehicle Types

Cap Automotive Says EVs Depreciate More Than All Other Vehicle Types

CAP Automotive, a UK-based firm focused on predicting automotive pricing, says that electric vehicle depreciate more over a 3-year period than any other class/segment of automobile out there.

Smart Fortwo ED

Smart Fortwo ED

There are obvious reasons for this.  Incentives play a BIG role, including the UK’s £5,000 Plug In Car Grant, as do the constant price cuts we continue to see on EVs, public perception of electrics and even unfamiliarity with the technology, but the biggest contributor may well be the ever-evolving EV technology.

As CAP Automotive predicts, some EVs may be worth only 20% of MSRP after 3 years of ownership (that’s why we often suggest that leasing is the best option for plug-ins right now).

Rather than examining the nitty gritty details of why CAP predicts that EVs lose so much value, let’s instead look at how CAP says they stack up against other classes/segments of vehicles (% is the average value retained from MSRP after 3 years and price is the average worth or selling price of the vehicles within the specific class after 36 months of ownership):

1. Supercar 53.5% (-£74,081)
2. SUV 53.0% (-£14,367)
3. Luxury executive 52.8% (-£103,980)
4. Sports 49.8% (-£27,342)
5. Convertible 47.2% (-£16,844)
6. Executive 45.6% (-£19,406)
7. City car 44.4% (-£5,973)
8. Supermini 44.3% (-£8,336)
9. Lower medium 42.3% (-£11,455)
10. Upper medium 41.9% (-£15,163)
11. Large executive 40.1% (-£39,797)
12. MPV 39.7% (-£11,994)
13. Coupé Cabriolet 39.3% (-£18,516)
14. Electric 20.2% (-£21,290)

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19 Comments on "CAP Automotive: EVs Depreciate More Than All Other Types of Vehicles"

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David Murray

I’d say the incentives are the biggest issue.. I’m not sure what the incentives are in the UK but here in the US you get at least $7,500 and in many states even more. So if the car is priced at $30,000 we immediately look at the car as a $22,500 car. And we should base our depreciation on this number to get a more realistic answer. BUT… I’m sure these guys base the depreciated value on the original MSRP.

However. It is worth considering that the time will come with the incentives dry up. As such, the resale value of the cars will go up because a new vehicle will cost more money.

ZivBnd

I get a laugh out of these studies, because they are so far from the truth that it is just ridiculous. Maybe it is different in the UK, but here in the States, a 3 year old Volt in fairly decent condition has a KBB value of $19k to $20.5k. It sold for $41k new so it has lost about 50% of its MSRP. But since most people that got a Volt got the tax credit as well, they have gone from $33.5k to $19-$20.5k in the real world, or 37%-43% of their value.
So in the real world, using KBB values not made up numbers, the Volt is holding its value better than every car type on the list. But even if you ignore the fact that the vast majority of Volt buyers got the credit you can see that the Volt, at least, is holding its value exceedingly well.

kdawg

Yeah, KBB lists a 3 year old, standard, Volt with trade-in value of $20k, and a private party value of over $21K.

Not sure where this study is coming up w/their #’s.

ZivBnd

kdawg, the part of this that is most irritating for me is that most people don’t pay enough attention to realize just how fabricated this CAP study is. And this is the third time in less than a month I have seen the same article written, always ignoring the real effect of the tax credit, “to be fair” as one of the articles put it.
5 years ago people were calling the Volt “vapor-ware”, and people on GM-Volt.com were saying that not only would it be built, but withing a few years of the first one being built, the MSRP would drop significantly due to the economies of scale. Well, the GM-Volt people were right, the Volt got built, and less than 3 years later the price has dropped by at least $5,000, which is a great thing.
And many of the recent articles about the price drops have had headlines like, “GM forced to drop price on Chevy Volt!” LOL!

ZivBnd

I just realized that I look at this exactly opposite of the way CAP does. I look at how much the depreciation is, not what the average value retained is. I probably should have said that worst case the Volt’s average value retained is 50%. Worst case, not counting the tax credit. And in the real world, where saving $7500 means something, the Volt average value retained is 57-63%, which is better than any type of car on CAP’s list. And since the Volt is the only real EREV out there, I guess it is a type all unto itself.

Ocean Railroader

The people that made this study have most likely not been looking at Ebay in that right now even a used 2011 Nissan Leaf still goes for $16,000 to $19,000 even with open bidding where people get to bid on it. I have also seen used Nissan Leafs in my area go for $20,000

The only car I have seen go angst this is the Mitsubishi iMev where there was a used one for $18,000 while thanks in large part to the massive $6000 price cut to the Mitsubishi iMev and the $7500 federal tax credit a new one is $15,000 which is really the only car to follow this.

Jouni Valkonen

Nissan Leaf battery must be replaced around after 200 000 km driving or after 8–12 years using. So in practice EV needs at least one battery replacement during its lifetime. And it is difficult to predict how the price of battery evolves by the time battery needs a replacement.

Obviously Tesla is betting that after battery expires, it is cheap enough to replace it. Therefore they are confident with eight year warranty and industry’s highest resale value after three years driving.

Mikael

12 years and 200 000 km…. and you think it will need a battery replacement? After 12 years and 200 000 km a car should be giving way for new cars.

Old wrecks like that belong in a museeum. The safety (and in ICE-vehicules the pollutions and efficiency) has developed so much in that time so that it shouldn’t be on the roads anymore.

Jouni Valkonen

no it is 8–12 years OR 200 000 km. With Electric vehicle it is easily driven one million km. They are not like ICE cars that are uneconomical to maintain after 300 000 km. Only maintenance that EV needs is a battery replacement.

Tesla has proven that aluminium chassis makes sense, so there is not even a rusting problem with electric vehicles.

Ocean Railroader

One of the things to me that does in a car is when the body of the car starts to rust and the paint on it starts to peal and look crappy. I have seen a lot of cars where they have 300,000 or in some cases 400,000 miles but their bodies look horrible but they are still going strong.

Aluminum in the TV show Life After People showed that Aluminum could last a few thousand years meaning that in Planet of the Apes or the Movie Water world there would still be carcasses of Tesla Model S sedans sitting in the woods or laying out in the desert sun as the main characters run around them. Or in the case of Water world sitting miles down at the bottom of the sea on the drowned mountain top highways.

Ocean Railroader

Personally I have had cars last 20 and 25 years and are still going strong. In a lot of cases I have only gotten rid of a car is when something major on it like the transmission dies and the car is pushing past 20 years old. In fact there where several cars that I had that I didn’t want to get rid of but the major cost of replacing the components on it brought about the car’s death.

As for owning a EV if I had a EV that lived past 20 years and it was only the battery and the motor was fine and it didn’t have the massive complexity of the systems a gas car needs to stay on the road I would replace the batteries. In fact if I had a five or six year old car and they came out with say a 300 or 400 mile battery that could replace the existing 80 mile range battery I would jump on it.

Jeff D

I tend to not worry about depreciation as much as others, since I tend to drive a vehicle til it is junk. To me then, an electric car is a better value, because fewer moving parts mean less wear and tear and vehicle will last longer. The only question is the battery which should last 8 to 10 years. Even if they still cost $8,000 to $10,000 for a battery pack, I’ve saved enough money from not buying gas to get another pack and running it for another 8 to 10 years.

MikeJ

If you put the savings back into the car you haven’t really saved anything at all. And you haven’t been able to leave town all this time for why, then? To some degree I am just picking on you. Coz they won’t cost $10k, and maintenance plus gas savings will buy your batteries with some money to spare. Leasing makes the most sense for now. Check back in 2016 when your lease is up and then have a better selection and prices to consider purchasing.

Brian Henderson

CAP doesn’t account for the $7500 (€5000) reduction with leasing an EV due to national incentives. Additionally, over 50% of EVs sold in past 3-years are not yet a year old! Almost 80% were purchased in past 18 months. The fraction of EVs in a 3-year-old study is just less than one percent (0.006%) of EVs on the road today. Ref: A graph of the first 3 years of EV sales in U.S. http://luskin.ucla.edu/blogs/public-policy/plug-electric-vehicles-first-three-years-post-modern-era

Volt fuel savings per year: $1250 ($3750 over 3-years, plus fewer oil changes)
http://www.fueleconomy.gov/feg/Find.do?action=sbs&id=32655

LEAF fuel savings per year: $1550 ($4650 over 3-years, plus 3-5 oil changes per year)
http://www.fueleconomy.gov/feg/Find.do?action=sbs&id=32154

The issue with low “residual value” predictions from studies like CAP is a person wanting to lease today will pay the difference between today’s MSRP and the underestimated future value. (thus over paying)

Note: In 3-years some models may have passed the 200,000 vehicle production level, thus ending incentives. Number of EVs by model currently sold: Volt at 50,000; LEAF at 40,000 (US); and Model S at 20,000. This will increase used prices as new models will cost relatively more. (something a dealer is not likely to factor in to residual value if leasing today)

Darkj

I wonder if they’re included PHEV’s in this.

After manufacturer discounts and incentives, I paid $30,500 USD for my just-bought 2013 Ford Fusion Energi Titanium (with a $44K sticker). For the purposes of depreciation, all I care about is my out of pocket. I find it very very difficult to believe that my car will only be worth $6100.

Rather, I expect to be able to sell it for roughly $15,000, or 50% of what I paid, in 3 years, if I want to. That means it would cost me about $5,000/year in deprecation, or about $416/month. This is actually very similar to the lease pricing I found for leasing.

RedLeafBlueLeaf

For a long time the vast majority of depreciation studies were massively flawed because they are based on MSRP. Yes, that is the simplest method, but it’s also wildly inaccurate. Some cars typically sell for well under list, others are in high demand and often command a premium. By ignoring what people paid on average for the car they are distorting the actual depreciation. Consider that for years the Honda Odyssey was touted as having low depreciation but that was largely because they sold on average for higher than MSRP.

Then along came hybrids with tax credits of $2-3k and – surprise – the same studies found that hybrids have high depreciation. Skip forward to today and $7500 EV tax credits and the problem continues – made worse because of the large anti-EV petrol-head contingent that trumpets any bit of anti-EV news.

Ocean Railroader

I do notice that in a lot of cases with car dealerships a MSRP sticker on a car will say a car is $35,000 but from what I have seen in my area they will knock $10,000 off in some type of super sale or because they feel like it. In that I think this is the way a lot of the Ford C Max plug ins are hitting the road in my area from the dealerships.

Alan Campbell

Anther aspect the study missed is that with plug-in vehicle, the consumer also gets to deduct over $2k annually in fuel cost savings. Which is over $6k for the 3 year period, and continues to add up year after year.

So no matter how much vehicle depreciation there may be on an annual basis, for a plug-in vehicle, there will alway be a fuel ‘appreciation’ of at least $2k annually.

Stephen

What?
If the average 3 year EV is £21,290 is just 20% retained, that means the average new price was over 100k. BS.

On the other hand UK vehicles depreciate way more than US vehicles in general. It has always been this way. Possible reasons are high MSRP because of nearly 20%VAT included in MSRP and costs are generally higher. Most UK new car buyers are corporations and the private buyers search out used bargains as these 3 year cars come off lease and flood the market.