Electric Vehicles Becoming More Affordable as Used Car Prices Drop

Posted on Wednesday June 5, 2024

Model Y

Electric vehicles (EVs) are becoming more accessible and affordable, driven by falling prices and increasing inventory. This shift is particularly evident in the used car market, where sales of the Tesla Model Y are surging as prices continue to decline.

Rebecca Lindland, Cars Commerce Senior Director of Industry Data and Insights, highlighted this trend in an email, stating, “Now is a good time to buy a new or used EV. Inventory is up, sending prices down.” As of May 2024, used 2021 Model Ys start at about $30,000 on Tesla’s website, with those having lower mileage typically ranging between $32,000 and $36,000.

Lindland noted that Tesla’s used car demand remains robust, showing a 40% year-over-year (YoY) increase and a 32% year-to-date (YTD) increase. The used Model Y, in particular, has seen a significant spike in demand, with a 119% YoY and 65% YTD increase. This surge is attributed to the continuous price reductions of new Model Ys, which in turn have caused a 32% YoY and 12% YTD drop in average prices for used versions.

The broader EV market is also experiencing a substantial boost in inventory, with new and used EV stocks up 100% and 42% YoY, respectively. This increase in supply has led to a 20% drop in used EV prices over the past year. Lindland explained, “This price adjustment, along with government incentives for new and used EVs, aims to stimulate demand in a segment that is still growing.” New EV sales grew by an estimated 27% YoY in the first quarter of 2024, excluding Tesla, which does not report US-specific sales. Used EV demand is also up by 45% YoY.

Tesla faces challenges as new car prices continue to drop. In the first quarter of 2024, the average transaction price for a Tesla was $52,315, a 13.5% decrease from the previous year. Tesla’s market share of the electric vehicle segment also fell to 51.3% from 61.7% a year earlier, according to Cox Automotive, which publishes Kelley Blue Book. Many automakers have followed Tesla’s lead in cutting prices, resulting in significant drops in used car pricing. For example, the Chevy Bolt EV starts at about $27,000 but can dip below $20,000 after factoring in federal tax credits, driving used Bolt prices to well below $18,000.

Incentive spending on EVs has increased notably over the past year, and leasing has become more popular. In the first quarter of 2024, about 27% of all EVs were leased, more than double from the previous year. Leasing offers advantages, such as lower upfront costs due to steep depreciation on some models and the ability to qualify for the full $7,500 incentive provided by the Inflation Reduction Act.

These trends suggest that the market for electric vehicles, both new and used, is becoming increasingly favorable for consumers. With falling prices, rising inventory, and substantial government incentives, now is an excellent time to consider switching to an electric vehicle.