What will secondhand prices do?

One of the arguments against buying an electric car right now is that they are expensive. I certainly cannot argue with that. What ever way you look at it you will be paying a premium to buy an EV. Depending on what you buy though, and how you use it, you may or may not be able to justify that premium financially. Everyone is different. However, one thing all current EV owners are concerned about is how much their car will be worth in 1, 2, 3+ years.

Until now we haven’t had much of a clue with leasing companies guessing & suggesting 3 year residuals at about 40-45%. I believe this is a bit less than most petrol/diesel cars. Within the past few months however some Nissan Leafs have been coming on to the secondhand market and we are now starting to get a feel for the facts and at first sight they don’t look great but they aren’t disasterous either

A 1 year old Leaf with 5000 miles seems to be trading from a Nissan dealer at about £19,500. That is 25% down on the new price.

Clearly this is on target for the 40-45% 3 year residual predicted. However, I do not see the secondhand values continuing along that trend.

People often claim that the numbers don’t stack up. People claim that it will be a long time before the premium amount paid when new can be recovered through savings in fuel, road tax, maintenance etc. Whilst this is probably true for many people what is not so obvious is that this assumption changes with secondhand cars.

If you are paying £32,000 for a new Vauxhall Ampera then that is probably a premium of about £10,000 over a similar specced Astra or Focus and it will probably take many years to recover the extra you are paying. The Ampera will only be able to save you a certain amount depending on your use. However, wind the clock forward 5 years. Suddenly things are quite different. The secondhand price of a similar specced 5 year old Astra/Focus would be around £10,000. Applying the same depreciation this would make the Ampera about £15,000… just £5000 more. Now, with the same amount of savings in fuel etc,  it is much more possible for you to recover the extra cost.

In fact, the older the car gets the cheaper it gets to buy and yet the savings possible in fuel etc remain the same. This means that eventually the secondhand value of EVs will plateau and as secondhand cars they will hold their value considerably better than normal ICE cars.

At what level they plateau depends on a lot of factors the biggest one being the petrol price but at todays levels a 5 year old Ampera or Leaf could be worth more than their ICE counterparts in spite of costing a lot more when new.

I don’t think anyone knows what the secondhand value of EVs will be in the years to come but I suspect that after the first couple of years when the big depreciation is taken things will then start to look considerably more rosey.

One thought on “What will secondhand prices do?”

  1. Good article Paul and in line with most of my thinking. My LEAF arrives on 24th August on a 3 year lease. I have the option to buy at the end of that time, but by then the UK built, cheaper LEAF will be on the market so it will be fascinating to see how that affects the current / Japanese LEAFs.

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